Religious Schools Excluded From New Tax-Credit Scholarships

Proposed rule says no church or religious-group schools may receive scholarship money

By Molly Priddy

HELENA — The state is proposing to exclude religious schools from benefiting from a new law that allows people to take tax credits for donating to public or private schools, prompting the bill’s sponsor to accuse state officials of rewriting legislation with which it disagrees.

The Department of Revenue’s proposed rules for the law that goes into effect Jan. 1 permits tax credits for donations of up to $150 to scholarships for private schools or innovative educational programs at public schools. However, no institution owned or controlled by any church, religious group or faith-based program may receive scholarship money through the tax-credit program, according to the proposed rules.

The rules were written to keep in line with the Montana Constitution, Department of Revenue Director Mike Kadas said Wednesday. “Public funds may not be used for religious purposes,” he said.

There are more than 145,000 students in public schools and an estimated 7,200 in private schools in Montana. Many of the private schools have religious affiliations, are not required to register with the state and the state has no jurisdiction over them.

The sponsor of the legislation, Republican Sen. Llew Jones of Conrad, said the proposed rules would exclude approximately 60 percent of private schoolchildren from receiving benefits from the tax-credit program, and that is not what his bill aimed to do.

“Those rules don’t reflect legislative intent,” Jones said. “Nor is Mr. Kadas a court to determine what is constitutional and what is not.”

The executive branch should not undermine the Legislature by using the administrative rulemaking process to rewrite laws with which it doesn’t agree, he said.

“I want the focus to be on enhancing student opportunities,” Jones said. “It’s not about giving an advantage to one or another.”

The legislation says the tax credit program must be administered in compliance with Article V and Article X of the Montana Constitution.

Those are the articles the revenue department cites in its proposed rules. Article V prohibits appropriations for religious purposes, while Article X says government entities may not make any direct or indirect appropriations or payment from public money to aid any religious organizations.

But ultimately, it may be a question for the courts to decide, he added. “It would not surprise me that, regardless of how these rules are framed, this issue is going to end up before the Montana Supreme Court,” Kadas said.

The current legal precedent is by a district judge from a 2012 lawsuit who found that tax credits are not appropriations because it was not money that went into the state treasury, Jones said. He agreed with Kadas that the issue will likely end up in a courtroom.

Jones also is considering asking a legislative committee to poll state lawmakers on whether they believe the rules follow the intent of the legislation. If 51 percent agree with him that they don’t, that provides a strong statement for any court proceedings, Jones said.

A public hearing on the rules will be held on Nov. 5, and comment will be taken through Nov. 17. Revenue officials will be open to arguments that including religious schools in the tax-credit program is constitutional, Kadas said.