Oklahoma Passes School Choice Tax Credit Law

Last Friday the Oklahoma legislature completed passage and sent to the governor for his signature HB1934, the Oklahoma Parental Choice Tax Credit Act (full text). The bill creates a tax credit against Oklahoma state income tax for tuition and fees paid for private school education. The credit varies from $5000 to $7500 depending on the household income.  It also provides a $1000 tax credit for home school expenses. The bill imposes annual caps on the amount of credits the state will recognize, which increases from $150 million to $250 million in 2026. Governor Kevin Stitt issued a press release celebrating the legislature's passage of the law.

Transcript of Today's Arguments in Espinoza v. Montana Dept. of Revenue Now Available

The transcript of today's oral arguments in the U.S. Supreme Court  in Espinoza v. Montana Department of Revenue is now available. Amy Howe at SCOTUS blog discusses the oral arguments, saying in part:

This morning the Supreme Court heard oral argument in the latest chapter of the battle over the use of public funding for religious schools. Supporters of such funding argue that the government should not be allowed to discriminate against religious families and schools, while opponents warn that requiring the government to allow public funds to be used for religious schools could harm public education. Both of those issues were at the forefront of today’s oral argument, as was the question of whether the lawsuit should continue at all. By the time the justices left the bench, it appeared that the outcome could hinge on the votes of Chief Justice John Roberts and Justice Stephen Breyer.

Supreme Court Will Hear Arguments Today In Montana Religious School Aid Case

The U.S. Supreme Court will hear oral arguments this morning in Espinoza v. Montana Department of Revenue.  In the case, the Montana Supreme Court 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. (See prior posting.) The Solicitor General will  participate in oral argument, contending that Montana's "no-aid" provision violates the U.S. Constitution's free exercise clause.  SCOTUS blog has a preview of today's arguments. Here is SCOTUS blog's case page with links to all the filings in the case and to additional discussion of the issues involved. I will post the transcript of the oral arguments later today when it becomes available.

Cert. Filed In Montana Scholarship Tax Credit Challenge

A petition for certiorari (full text) was filed with the U.S. Supreme Court on March 12 in Espinoza v. Montana Department of Revenue.  In the case the Montana Supreme Court 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. (See prior posting.)  The petition for review asks the U.S. Supreme Court to decide whether it violates the 1st or 14th Amendments for a state court to invalidate a generally available and religiously neutral student-aid program because the program includes students attending religious schools.  Institute for Justice issued a press release announcing the filing of the cert. petition.

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,

Georgia Supreme Court Dismisses On Standing Grounds Challenge To Tax Credit Scholarship Program

In Gaddy v. Georgia Department of Revenue, (GA Sup. Ct., June 26, 2017), the Georgia Supreme Court held that plaintiffs in the case lack standing as taxpayers or otherwise to challenge the constitutionality of Georgia's education tax credit program.  Under the program, taxpayers receive a dollar-for-dollar tax credit (up to specified limits) for contributions to student scholarship organizations set up to provide scholarships to students in private schools, both secular and religious.  The suit contended that the program violates the ban in the Georgia Constitution on providing public funds to aid any church, religious denomination or sectarian institution. The suit also alleged violations of other state constitutional and statutory provisions. Atlanta Journal Constitution reports on the decision.

Court Enjoins Montana Rule Excluding Religious Schools From Tax Credit Program

In Espinoza v. Montana Department of Revenue, (MT Dist. Ct., May 26, 2017), a Montana state trial court enjoined the enforcement of a rule that bars religiously affiliated schools from participating in the state's program providing tax credits to Student Scholarship Organizations.  The Department of Revenue took the position that allowing religious schools to participate would violate state constitutional provisions barring appropriations or payments of public funds to aid sectarian schools.  the court held that the Department had incorrectly interpreted the constitutional provisions:

Non-refundable tax credits simply do not involve the expenditure of money that the state has in its treasury; they concern money that is not in the treasury and not subject to expenditure.  Since the plain language of Article V, Section 11(5) and Article X, Section 6(1) of the Montana Constitution prohibit appropriations, not tax credits, the Department's Rule 1 is based on an incorrect interpretation of law.  The court concludes that the term "appropriation" used in Article V, Section 11(5) and Article X, Section 6(1) does not encompass tax credits.

According to Daily Inter Lake, the state plans to appeal to the Montana Supreme Court. (See prior related posting.)

Suit Challenges New Rule Excluding Religious Schools From Montana Scholarship Tax Credit Law

The Montana Department of Revenue in a notice (full text) certified to the Secretary of State on Dec. 14 that it has adopted, as proposed, Rule 1 (full text) that excludes religiously affiliated schools from participating in the state's new School Contributions Tax Credit law. (See prior posting.)  On Dec. 16. three mothers sued the state challenging the new rule.  The complaint (full text) in Espinoza v. Montana Department of Revenue, (MT Dist. Ct., filed 12/16/2015) claims that the exclusion of religiously affiliated schools is inconsistent with the intent of the legislature in enacting the scholarship tax credit law, and contends that the exclusion violates the free exercise, establishment and equal protection clauses of the Montana and U.S. Constitutions.  Institute for Justice announced the filing of the lawsuit.

Montana has a procedure for committees of the state legislature to weigh in on whether they believe that a particular proposed rule is consistent with legislative intent.  Using that procedure, the relevant committees of the Montana House and Senate voted that the proposed rule is inconsistent with legislative intent. (Notice of Legislative Poll).  The results of this legislative poll are admissible in evidence in the suit challenging the new rule.

The Great Falls Tribune reported yesterday:

Montana Solicitor General Dale Schowengerdt submitted comments while the rule was still in draft form that said a judge would likely decide it is unconstitutional to categorically exclude religious entities from a neutral benefits program without reason.

“The Attorney General believes that it would not be defensible,” Schowengerdt wrote of Montana Attorney General Tim Fox.

But Fox will have to defend the rule in the lawsuit and another expected to be filed in federal court. The Department of Justice is the attorney for the state when an agency is sued.

Proposed Montana Rules Will Exclude Religious Schools From Tax Credit Program

Last month, the Montana Department of Revenue issued proposed rules (full text) to implement the state's recently-enacted School Contributions Tax Credit law (full text) (background).  Under the law, a state income tax credit of up to $150 is available for contributions to student scholarship organizations that provide scholarships for students at a "qualified educational provider."  One of the proposed new rules would precluded religious schools from participation in the program.  Proposed Rule I provides:

(1) A "qualified education provider" has the meaning given in 15-30-3102, MCA, and pursuant to 15-30-3101, MCA, may not be:

(a) a church, school, academy, seminary, college, university, literary or scientific institution, or any other sectarian institution owned or controlled in whole or in part by any church, religious sect, or denomination; or

(b) an individual who is employed by a church, school, academy, seminary, college, university, literary or scientific institution, or any other sectarian institution owned or controlled in whole or in part by any church, religious sect, or denomination when providing those services.

(2) For the purposes of (1), "controlled in whole or in part by a church, religious sect, or denomination" includes accreditation by a faith-based organization

A hearing on the proposed rules will be held on Nov. 5. Written comments on the proposed rules may be submitted until Nov. 17.  Montana Watchdog raises constitutional questions about the exclusion of religiously sponsored educational institutions.

N.H. Supreme Court Dismisses Challenge To Education Tax Credits On Standing Grounds

In Duncan v. State of New Hampshire, (NH Sup. Ct., Aug. 28, 2014), the New Hampshire Supreme Court vacated and remanded a trial court decision that invalidated New Hampshire's Education Tax Credit program. The trial court held that the program was a violation of the state constitution's ban on compelling any person to support sectarian schools. (See prior posting.) In yesterday's decision, the state Supreme Court did not reach the merits of the argument, but instead dismissed on standing grounds.  The Court summarized its holding:

We do not reach the merits of the petitioners’ declaratory judgment petition because we conclude that: (1) the 2012 amendment to RSA 491:22, I, which allows taxpayers to establish standing without showing that their personal rights have been impaired or prejudiced, is unconstitutional; and (2) absent that amendment, the petitioners have no standing to bring their constitutional claim.

AP reports on the decision.