Montana’s scholarship tax credit (STC) law was already crippled and now bureaucrats are attempting to issue the coup de grâce.
Montana’s STC law offers individuals and corporations tax credits in return for donations to nonprofit scholarship organizations that help families send their children to the school of their choice. All Montana students are eligible to apply for a tax‐credit scholarship and the value of the scholarships is capped at half the statewide average per‐pupil expenditure at the district schools (just over $5,300).
The only catch is that donations are capped at $150 per donor, far lower than in any other state. That means it would take at least 34 donors to fund a single $5,000 scholarship–a monumental task for scholarship organizations seeking to fund thousands of students.
But even if the scholarship organizations manage to raise the requisite funds, families may not be allowed to use the scholarships at their preferred school due to Montana Department of Revenue’s proposed rule barring the use of tax‐credit scholarships at religious schools.
The proposed regulations would bar schools from participating in the program if they’re “owned or controlled in whole or in part by any church, religious sect, or denomination.”
The proposed regulations also note schools are barred if their accreditation comes from a faith‐based organization. […]
Republican state Sen. Kristin Hansen, who supported the bill, said the department was out of bounds.
“It’s the opposite of the intent of the legislation,” she said. “When we drafted the bill, we intentionally drafted a substantial definition of who qualified, so there wouldn’t be any questions about who would be eligible. I think the department has exceeded its authority by adding its own interpretation … when the Legislature was very clear. Absolutely, I think this proposed rule exceeds the department’s authority on more than one level.”
The bureaucrats claim they’re just following the state constitution’s historically anti‐Catholic Blaine Amendment, which prohibits the appropriation of “any public fund or monies” to churches, religious schools, and other religious institutions. However, as the U.S. Supreme Court and several state supreme courts have held, tax‐credit scholarships constitute private funding, not public funding, because the funds never enter the state treasury. Constitutionally, tax credits are no different than tax deductions or tax exemptions. Has the Montana Department of Revenue prohibited donors to churches from receiving charitable tax deductions? Has it prohibited the churches themselves from taking property tax exemptions? If not, why is it treating the tax credit law differently?
The department will hold a hearing on its proposed rules on November 5th. Hopefully the bureaucrats will see the error of their ways and change course. If not, they are inviting a lawsuit–one they are likely to lose.