School tax credit case goes to Montana high court

Today, the Montana Supreme Court will hear arguments involving three Flathead Valley parents and the Montana Department of Revenue on whether or not tax credits may be applied to donations for scholarships benefiting religious K-12 schools.

In 2015, the Montana Legislature passed a law to provide a $150 tax credit to donors supporting scholarships for private schools. A group of parents — Kalispell residents Kendra Espinoza and Jeri Ellen Anderson, in addition to Bigfork resident Jaime Schaefer — wanted scholarships supported by the $150 tax credit for their children to attend Stillwater Christian School. The parents are represented by the Institute for Justice.

The group initially filed a lawsuit against the Montana Department of Revenue in December 2015 contending that it was not upholding the tax-credit program as the Legislature intended, but restricted eligibility to donations for scholarships that supported non-religious, private schools. Nearly 90 percent of the otherwise eligible private schools in Montana have a religious affiliation. The plaintiffs argue that the department’s rule unconstitutionally discriminates against religious schools under the Montana and United States constitutions.

The department contended that allowing those tax credits to incentivize donations to religious schools would violate the Montana Constitution’s prohibitions on funding religious organizations, but in May 2017, Flathead County District Court Judge Heidi Ulbricht ruled in favor of the parents, finding that the state erred in its implementation of a 2015 law establishing the tax-credit program. Ulbricht cited previous rulings that define an “appropriation” as money that is distributed directly from state funds, a standard which does not apply to tax credits.

Espinoza said in an interview last year that private scholarships cover about 30 to 35 percent of the tuition for her two daughters to attend Stillwater Christian School in Kalispell.

“Originally, I had gotten involved [in the lawsuit] because I wouldn’t have been able to continue to keep my girls at Stillwater School without assistance from scholarships, and I know that’s the case with many families there. The assistance means a lot,” she said. “Knowing that we got justice on our end, that this is a fair ruling on the local level for now, I think it’s going to make a big difference if the department does appeal and take it to the next level.”

The state did appeal, and the Supreme Court agreed to hear the case. Several interest groups from Montana and across the nation have filed briefs in the case as amici curiae, or friends of the court. The Department of Revenue is represented by its own team of lawyers because Attorney General Tim Fox has said that the state’s interpretation of the 2015 legislation is legally “indefensible.”

The case was eventually selected by the Supreme Court for its annual visit to the University of Montana, so oral arguments will be heard at 9:30 a.m. today in the university’s Dennison Theatre in Missoula. An introduction to the hearing begins at 9 a.m. with Professors Pippa Browde and Anthony Johnstone, both of UM’s Alexander Blewett III School of Law. The hearing is expected to last an hour and a half. The public is invited to attend, along with students.