Montana Supreme Court Invalidates Tuition Tax Credit Program

In Espinoza v. Montana Department of Revenue, (MT Sup. Ct., Dec. 12, 2018), the Montana Supreme Court in a 5-2 decision held that Montana's tax credit program for contributions to student scholarship organizations is unconstitutional under Montana Constitution Art. X, Sec, 6 which prohibits state aid to sectarian schools. The majority said in part:

Montana’s no-aid provision is unique from other states’ no-aid provisions. Article X, Section 6’s prohibition of “any direct or indirect appropriation or payment from any public fund or monies, or any grant of lands or other property for any sectarian purpose or to aid any . . . school . . . controlled in whole or in part by any church” make it a broader and stronger prohibition against aid to sectarian schools than other states. Even other states whose no-aid provisions also contain “indirect” language only prohibit aid in the form of the direct or indirect taking of money from the public treasury....  Such language is distinct from and less stringent than Montana’s prohibition on any type of aid, whether it be a “direct or indirect appropriation or payment from any public fund or monies, or any grant of lands or other property.” Mont. Const. art. X, § 6(1). 

The majority also held that the Department of Revenue's attempt to cure the program's unconstitutionality by Rule was invalid because the Department exceeded its rule making authority. The court left the student scholarship organization provisions in force, but without the accompanying tax credit for contributions.

Justice Gustafson filed a concurring opinion concluding that the tax credit program also violates the federal Free Exercise and Establishment clauses. Justice Sandefur joined this concurring opinion and also filed a separate concurrence.

Justice Baker, joined by Justice Rice dissented saying in part:

The creation of the credit is a government’s determination not to collect tax revenues. The statute diverts the funds before they ever become public monies. This well may result in an indirect impact on the “public fund or monies,” but it is not an indirect payment,,,,

The Court today holds that a tax credit—granted to a private individual for a donation that may or may not be directed to a religious entity—violates the State Constitution, even though it is clear under the law that a direct tax exemption by the State to a church does not.

Justice Rice also filed a separate dissent. The Missoulian reports on the decision,