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Montana Department of Revenue Challenges Tax Program

November 15th, 2017


The Montana Department of Revenue is fighting a program whereby public money is used to pay for the education of students in religious schools.

The Montana Department of Revenue is fighting a program whereby public money is used to pay for the education of students in religious schools.

The Montana Department of Revenue has announced that it will continue to fight against a court ruling that money from a tax credit program can benefit religious schools. The most recent action in this case is that the Montana Department of Revenue has filed an appeal with the Montana Supreme Court. In 2015, a bill created a program which limited its annual tax credits to $3 million. The program is expansive in nature and allows public money to be used to pay for the education of students in nonpublic schools.

Responses to the Decision

The program in question grants both individuals and corporations a 100% tax credit for donations to the scholarship program. As a result of this program’s incentives, various entities have begun to offer scholarships, which include grants that allow children to attend religious schools. Legislators who support the bill were upset when the department announced a law banning religious schools and parents from obtaining these credits. Parents of children who attend a religious school, Stillwater Christian School in Kalispell, and the Institute for Justice group responded to this law by challenging the regulation.

Prior Case History

In December of 2015, Montana residents initiated a lawsuit against the school district for failing to uphold the intent of the legislation. These parents argued that private scholarships, which represent approximately 30 to 35% of the tuition for the plaintiff’s children to attend religious schools, allow the children to attend these educational centers. The parents were joined in this lawsuit by the Institute for Justice. The Department of Revenue argued that only donations that support non-religious private school scholarships are eligible for the tax credit and that allowing these donations to go to religious schools would violate the separation between church and state. While the Montana Constitution prohibits appropriations directly from state funds to aid religious schools, the state’s Constitution does not discuss tax credits. The Montana Supreme Court has previously held that appropriation refers only to the authority given to the legislature to spend money from the state treasury. The Judge in this case granted a preliminary injunction to prevent the department from implementing this law. The department argued that an institution controlled by any church or religious group could not be considered a qualified education provider. Additionally, the department argued that the state’s decision to let appropriations to fund religious schools is “indefensible.” A District Judge in May of 2017 ruled that the Department of Revenue incorrectly excluded religious schools from the program.

The Future of This Case

The laws concerning the separation between church and state originate in the United States Constitution. Each year, however, there are various developments concerning this body of law. By following the Universal Life Church’s blog, individuals can remain up to date about the most recent developments in this area of law.

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