Moms in Montana are suing the State Department of Revenue over newly established rules that prohibit parents from using tax credit scholarships to attend religious private schools.
Lawyers from the Institute for Justice, representing Kendra Espinoza, Jeri Anderson and Jaime Schaefer, argue in a complaint filed this week that the rules violate the moms’ constitutional rights to freedom of religion and equal opportunity.
“The rule also violates both the state and federal Constitutions because it allows scholarship recipients to attend any private school except religious ones,” Erica Smith, an attorney with the institute, said in a press release. “That’s discrimination against religion.”
The complaint comes as the Treasure State implements a new school choice law passed earlier this year. Its attack on prohibitions to the use of scholarships at religious schools echoes recent appeals to the U.S. Supreme Court by religious schools and their supporters — cases in which the institute is also involved.
Montana’s program offers corporate and individual donors a tax credit worth up to $150 for donations to scholarship organizations. The program is capped at $3 million in tax credits per year.
The state Department of Revenue finalized rules for the tax credit scholarship program earlier this week, that make religious private schools ineligible to accept the scholarships. The department claims allowing parents to use the scholarships at religious schools would violate of the state constitution.
During public comments back in November, the Department repeatedly told school choice supporters criticizing the proposed rules that it had the power to “require the exclusion of such direct or indirect monetary benefits as targeted tax credits.”
The so-called Blaine Amendment in Montana’s constitution does prohibit “direct or indirect appropriations” to religious organizations, but no court has ever ruled that a tax deduction, tax exemption or even a tax credit is an actual appropriation.
Critics, including Llew Jones (R-Conrad), the primary sponsor of the bill creating the program, charge the department’s interpretation oversteps its constitutional authority.
The state Attorney General’s office seems to agree. In a November 17th letter, Solicitor General Dale Schowengerdt wrote to department director Mike Kadas that a tax credit under the law was not a direct or indirect appropriation by the state to a religious entity. The letter further contends the “Montana Constitution did not authorize or require the wholesale exclusion of private schools.”
In a landmark 2011 ruling, the U.S. Supreme Court ruled in Arizona Tuition Organization v. Winn, that plaintiffs suing the state’s tax credit program lacked standing because tax credits were not an appropriation by the government. A more recent, Montana-specific case, MEA-MFT v. McCulloch, also determined tax credits were not appropriations.
Of the 28 other corporate tax credits and 25 individual tax credits offered by Montana, the school choice tax credit might be the only one specifically prohibiting religious institutions from participating. In fact, the College Contribution Tax Credit offers donors a $500 tax credit for contributions to public and private college endowments, and the Department of Revenue has no rules prohibiting tax credits for donations to one of three private religious colleges in the state.
Smith, the Institute for Justice attorney, believes the department has not shown why one program is constitutional but the other is not. “The state legislature wanted to give parents choices” said Smith in an interview. “Now the state’s Department of Revenue wants to take those choices away.”
