Montana Supreme Court strikes down tax credit that aids religious schools

Posted at 4:10 PM, Dec 12, 2018
and last updated 2018-12-12 20:45:17-05

HELENA – The Montana Supreme Court Wednesday struck down a state tax credit for donations that fund scholarships for students at private schools, calling it a form of unconstitutional aid to religiously affiliated schools.

In a 5-2 decision, the court said the $150 income-tax credit is clearly meant to aid private schools in Montana – and that most of those schools are affiliated with a religion.

The state constitution forbids any direct or indirect payment of public money or aid to any school controlled by a church or religion, and therefore the the tax credit is unconstitutional, the court said.

“The (tax credit) permits the Legislature to subsidize tuition payments at religiously-affiliated private schools,” Justice Laurie McKinnon wrote for the majority. “That type of government subsidy in aid of sectarian schools is precisely what the (constitutional) delegates intended (the constitution) to prohibit.”

Justices Beth Baker and Jim Rice dissented, saying the majority not only overstepped its authority by striking down the law but also misinterpreted the law and the constitution.

Rice said a tax credit should not be considered “public funds” and that donations to help private-school scholarships is a voluntary program that benefits students, not the school.

“Any benefit of the scholarship program flowing from the private donor’s voluntary contribution …. and then, if the student and family so chose, to a qualified religiously-affiliated schools is incidental and attenuated,” he wrote.

Wednesday’s decision came in a closely watched case that involved the state, U.S. Justice Department, civil-rights and education groups, and advocates for “school choice,” which usually means some form of state aid or tax credits that aid private schools.

The Institute for Justice, a Virginia-based law firm that specializes in school-choice and other conservative causes, said Wednesday it will appeal the ruling to the U.S. Supreme Court. The institute is helping to represent Kalispell parents who filed the lawsuit, saying their children attending religious schools would be denied a scholarship.

“This decision takes scholarships away from needy families across the state,” said Erica Smith, an attorney for the institute. “Not only is the court misinterpreting the Montana constitution, but it is ignoring important provisions in the federal Constitution.”

In a statement, one of the plaintiffs, Kendra Espinoza said the ruling essentially means her daughters can’t get a private-school scholarship.

“The court’s ruling discriminates against religious families and every Montana child who is counting on these scholarships,” she said.

Others hailed the decision.

“We are thankful our Supreme Court has read our constitution for what it says,” said Eric Feaver, president of the Montana Federation of Public Employees, a labor union representing public-school teachers. “The Montana public-education community is united in our opposition to public-school privatization for religious or profit-taking purposes.”

Alex Rate, legal director of the American Civil Liberties Union of Montana, called the decision a “victory for Montana’s taxpayers and schoolchildren.”

“Montana’s students and parents have the right to choose a religious education, but it is unconstitutional for taxpayers to foot the bill for private, religious schools,” he said.

The 2015 Montana Legislature enacted the tax credit, which is for donations to private “student scholarship organizations” that would give scholarships to students attending private schools.

The the state Revenue Department later issued a rule that said none of scholarships could go to religiously-affiliated schools, because that would violate the constitutional ban on indirect or direct payment of public money to such schools.

The parents of several children who attended private, religious schools sued over the rule, saying it violated their rights. A state district judge in Kalispell ruled in their favor and blocked the state from enforcing the rule.

The state appealed that decision to the Montana Supreme Court, which on Wednesday said the Revenue Department rule is irrelevant because the tax-credit itself is unconstitutional.

McKinnon, writing for the majority, said the state constitution forbids any public aid going to sectarian, religious schools – and that the tax credit, as written, is clearly a form of aid for those schools.

“The tax credit encourages the transfer of money from a taxpayer donor to a sectarian school because the taxpayer donor knows she will be reimbursed, dollar-for-dollar, for her donation to a (scholarship organization),” she wrote. “The Legislature indirectly paid $150 of that student’s tuition by permitting is or her parents to claim a tax credit instead of paying that amount of tuition to the (school).”