Montana Supreme Court Strikes Down Tax-Credit Program for Private Schools

By Mark Walsh — December 13, 2018 2 min read
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Montana’s highest court has struck down a tuition tax-credit program which, as enacted by that state’s legislature, allowed tuition scholarships to benefit students at private religious schools as well as secular schools.

The program, which provides a tax credit of up to $150 per year to individuals and corporations that donate to tuition scholarship organizations, violates the state constitution’s provision barring government aid to “sectarian schools,” the Montana Supreme Court ruled 5-2. The program could not be saved by a rule adopted by the state department of revenue that excluded private religious schools from participation, the court further held.

The state high court ruled that the Montana Constitution “more broadly prohibits ‘any’ state aid to sectarian schools and draws a more stringent line than that drawn by” the U.S. Constitution’s prohibition against government establishment of religion.

“Therefore, the sole issue in this case is whether the Tax Credit Program runs afoul of Montana’s specific sectarian education no-aid provision, Article X, Section 6,” Justice Laurie McKinnon wrote for the majority on Dec. 12 in Espinoza v. Montana Department of Revenue. “The legislature’s enactment of the Tax Credit Program is facially unconstitutional and violates Montana’s constitutional guarantee to all Montanans that their government will not use state funds to aid religious schools.”

Writing in a dissent joined by one other member of the court, Justice Beth Baker said the scholarship funds never truly become public funds because they are donated to private scholarship organizations, and thus the inclusion of religious schools as beneficiaries does not violate the state constitutional bar against indirect aid to religion.

A legal organization representing religious school families who would have benefited from the tax-credit program as enacted by the legislature vowed to appeal to the U.S. Supreme Court.

“Not only is the court misinterpreting the Montana Constitution, but it is ignoring important provisions in the federal Constitution,” Erica Smith, a lawyer with the Arlington, Va.-based Institute for Justice, said in a statement. “The U.S. Supreme Court has been clear that the First Amendment of the U.S. Constitution prevents the government from discriminating against religious individuals in awarding public benefits. We plan to immediately appeal.”

Those families, in their suit that challenged the revenue department rule that sought to save the tax-credit program by barring religious schools, allege that there was anti-Catholic sentiment behind the inclusion of the no-aid-to-sectarian-schools provision in Montana’s 1889 Constitution. (The state in 1972 adopted a new constitution, which kept language barring direct and indirect aid to religious institutions.)

The U.S. Supreme Court has recently been skeptical of state programs that exclude religious institutions from general aid programs, but it has left open the question of how it would analyze such aid to religious schools.

A version of this news article first appeared in The School Law Blog.