SB 410, passed by the 2015 Legislature, established a tax credit for individuals wishing to contribute to K-12 public schools and K-12 private, non-parochial schools. The bill calls for the program to be established in accordance with Article V, Section 11(5) and Article X, Section 6(1) of the Montana Constitution, which prohibit the direct or indirect appropriations or payment from any public fund to any sectarian or religious purpose. Accordingly, the Department of Revenue adopted rules that manage the program and exclude church-affiliated schools from participation.
The Department of Revenue rules were challenged in both Federal District Court (Armstrong et al. v. Mike Kadas) and State District Court (Espinoza et al. v. Montana Department of Revenue). MQEC has also filed suit in this matter (MQEC v. State of Montana and Montana Department of Revenue).
Donations to both public and private K-12 schools were permitted in tax years 2016 and 2017. The tax credit program has several reporting requirements that are detailed in statute. Big Sky Scholarships, the only student scholarship organization in Montana at this time, conducted and documented an annual financial audit for 2016. However, much of the information required of private schools with students receiving scholarship proceeds is not yet available to the public including:
- A listing of all qualified education providers that accepted scholarship funds from each student scholarship organization (15-30-3106(1)(b) MCA);
- Evidence of accreditation/accreditation efforts (15-30-3102(7)(b) MCA);
- Administration of standardized assessments for all 8th and 11th grade students (15-30-3102(7)(d)(ii) MCA);
- Publication of overall assessment scores either via OPI or another website (15-30-3102(7)(d)(ii) MCA);
- A statistical compilation of the information received from each student scholarship organization (15-30-3105(2)(a) MCA)
Summary information on donations to public K-12 schools during tax year 2016 can be viewed on the interactive map.
Synopsis and Current Status of SB410 Litigation (follow links for detailed case information):
Espinoza et al.: The case was heard in Flathead County District Court. Judge Heidi Ulbricht ruled in favor of the plaintiffs, permitting the tax credit to be applied toward private, parochial education. The Department of Revenue has appealed the decision to the Montana Supreme Court. Briefs in the appeal are due to the Court by Wednesday, November 22. There is no timeline for the court to rule on the appeal. MQEC has been active in this case and has filed briefs in support of the Department of Revenue. (Updated November, 2017)
Armstrong et al.: The case was filed in Helena Federal District Court at the same time that Espinoza was filed. Judge Sam Haddon dismissed the case without prejudice, anticipating the resolution of Espinoza could address the Armstrong arguments. Armstrong et al. has appealed the dismissal to the U.S. Ninth Circuit Court of Appeals. Briefs have been filed by both parties and the appeal is awaiting scheduling for oral arguments, tentatively in February-April 2018. MQEC is closely monitoring this case. (Updated November, 2017)
MQEC v. State of Montana and DoR: The case was filed in Lewis & Clark County District Court. The case is inactive at this time, pending resolution of Espinoza and/or Armstrong.
News Articles and Related Links
- 12/8/17: Do tax credits count as state spending? Courts may enter new territory with school choice appeal (Billings Gazette)
- 12/4/17: Montanans not lining up for school choice tax credit, even though some could make a buck (Billings Gazette)
- 8/18/17: Montana appeals school choice tax credit ruling allowing religious schools (Billings Gazette)
- 6/1/17: State to appeal School Choice ruling (KTVH News, Helena)
- 6/5/17: Judge OKs using state tax credits for religious schools (Daily Interlake)
- 5/13/16: Montana officials defend stand in School Choice battle (Education Week)
- 4/2/16: Montana judge rules against state in
School Choice lawsuit (Washington Times)
- 12/29/15: Lawsuit challenges religious schools' exclusion from program - Armstrong et al. v. Kadas (Helena I.R.)
- 12/17/15: Kalispell Lawsuit Challenges Religious Schools’ Exclusion from Program - Espinoza et al. v. MT Department of Revenue et al. (Flathead Beacon)
- Institute for Justice, representing Plaintiffs in Espinoza et al. v. MT Department of Revenue et al.
- 12/16/15: Rules excluding religious schools from tax credit program become official (Billings Gazette)
- 11/30/15: Panel OKs results of legislative poll (Great Falls Tribune)
- 11/19/15: AG’s office opposes rule on tax credit program (Great Falls Tribune)
- 11/6/15: Lawmakers Polled on Barring Religious Schools from Program (Flathead Beacon)
- 10/13/15: MT Department of Revenue says tax credit can't help faith-based schools (KTRV.com)
- January 2013: Tax Credit Scholarships:A Threat to Montana-Based Education Solutions (Montana Budget and Policy Center)
12.7.17: The Montana Supreme Court grants an extension to Espinoza et al. re: submission of brief in the appeal. The new deadline is January 19, 2018. Read the order here.
11.22.17: MT Department of Revenue files appellant's brief to the Montana Supreme Court in Espinoza et al. Read the brief here.
11.22.17: MQEC files amicus curiae brief supporting the MT Department of Revenue's appeal to the Montana Supreme Court in Espinoza et al. Read the brief here.
11.21.17: The American Civil Liberties Union, the ACLU of Montana, Americans United for Separation of Church and State, and the Anti-Defamation League file amicus curiae brief supporting the MT Department of Revenue's appeal to the Montana Supreme Court in Espinoza et al. Read the brief here.
10/11/17: The Montana Supreme Court grants MQEC's unopposed motion to file amicus curiae brief in Espinoza et al. Read the order here.
8/17/17: The Montana Department of Revenue files Notice of Appeal to the Montana Supreme Court re: Espinoza et al. Read the notice here.
5/23/17: Judge Heidi Ulbricht rules in favor of Plaintiffs' Motion for Summary Judgement, leaving in place the ability for Student Scholarship Organizations to distribute funds to sectarian schools. Read the ruling here.
3/7/17: Motions for Summary Judgement are heard by Judge Heidi Ulbricht in Flathead County District Court.
11/29.16: MQEC files Amicus Curiae Brief in Flathead County District Court. View the brief here.
11/10/16: Judge David Ortley grants MQEC's Motion for Leave to File Amicus Curiae Brief in Espinoza et al. Judge Ortley sets a submittal deadline of November 29, 2016. View the order here.
10/31/16: MQEC files Motion for Leave to File Amicus Curiae Brief in Espinoza et al. View the motion here.
10/27/16: The Montana Supreme Court denies MQEC's Petition for Writ of Supervisory Control and is in unanimous agreement that MQEC should be permitted to file an amicus brief at the District Court level. View the decision here.
9/26/16: The Montana Department of Revenue responds to the Petition for Writ of Supervisory Control, supporting MQEC's request for intervention. View the response here.
9/23/16: The Institute for Justice responds to the Petition for Writ of Supervisory Control, stating that intervention by MQEC will delay resolution of the proceeding. View the response here.
9/15/16: Judge David Ortley informs the Montana Supreme Court that he does not intend to respond to the Petition for Writ of Supervisory Control and that his original order sufficiently states his reasons for denying our motion to intervene. View the communication here.
8/25/16: The Montana Supreme Court orders (1) that all interested parties file a response to MQEC's Petition for Writ of Supervisory Control, and (2) that all proceedings in Espinoza et al are stayed (suspended) until the Petition for Writ of Supervisory Control is decided. View the order here.
8/19/16: MQEC files a Petition for Writ of Supervisory Control with the Montana Supreme Court, asking that Judge Ortley's decision be overturned and MQEC be allowed to intervene in Espinoza et al. View the petition and exhibits here.
8/4/16: Flathead District Court Judge David Ortley denies MQEC's Motion to Intervene in State suit (Espinoza et al.), finding "there is no basis [to] conclude that MQEC is either entitled to intervene or should be allowed to do so." View the order here.
7/6/16: Montana Department of Revenue responds to Plaintiffs' Motion for Summary Judgment, opposing the motion. The Department also files a Cross-Motion for Summary Judgment to enforce the Religious School Ban and dismiss the case. View the response, the cross-motion, and exhibits here.
6/7/16: MQEC files response to Plaintiffs' response re: Motion to Intervene. View the response here.
6/1/16: Plaintiffs file response to MQEC Motion to Intervene, stating no opposition to the motion provided intervention does not delay resolution of the proceeding. View the response here.
5/13/16: Plaintiffs file Motion for Summary Judgment to permanently prevent enforcement of the Religious School Ban and dismiss the case. This would permit religious schools to receive distributions from student scholarship organizations. View the motion and brief here.
5/11/16: Montana Department of Revenue Answers Plaintiff's' Complaint. View the document here.
3/31/16: Preliminary injunction issued preventing enforcement of the Religious School Ban. This is a setback for the Department of Revenue. View the order here.
3/8/16: Hearing scheduled in re: motion to dismiss.
1/28/16: Plaintiffs file motion for preliminary injunction requesting the Court enjoin the Department of Revenue from enforcing Rule 1 re: exclusion of church-affiliated schools. View the motion and supporting brief, as well as the DoR's response.
12/16/15: Three plaintiffs file suit in Flathead County District Court against the MT Department of Revenue and Director Mike Kadas. Plaintiffs are represented by the Institute for Justice (Arlington, VA) and Holland & Hart, LLP (Billings, MT). View the complaint here.
12/15/15: Department of Revenue adopts final rules regarding administration of SB 410 tax credits. Parochial schools are not permitted to receive funds from school scholarship organizations. The adoption notice includes DoR responses to public comment from the November 5 hearing.
12/1/15: Results of Legislative Poll released. 89 legislators stated the proposed rules are contrary to legislative intent and 51 legislators stated the proposed rules are consistent with legislative intent.10 legislators did not respond to the poll. Individual votes on the poll are available here.
11/17/15: Montana Attorney General's Office writes letter to Department of Revenue opposing the proposed administrative rules.
11/10-11/24/15: The Revenue and Transportation Interim Committee conduct a poll regarding whether the proposed Department of Revenue rules to implement SB 410 is consistent with or contrary to legislative intent. This background material on SB 410 was provided to all Legislators.
11/5/15: Public hearing held on proposed administrative rules. MQEC, MEA-MFT, MTSBA, and SAM, among others, testify in support of proposed rules.
10/5/15: Montana Department of Revenue releases proposed administrative rules pertaining to implementation of SB 410, specifically regarding tax credits for contributions to qualified education providers and student scholarship organizations. The rules define a "qualified education provider" in accordance with Art. V, Section 11(5) and Art.X, Section 6(1) of the Montana Constitution, which prohibits the direct or indirect appropriations or payment from any public fund to any sectarian or religious purpose. The Department of Revenue rules exclude church-affiliated schools from "qualified education provider" status.
12/5/17: The Montana Department of Revenue summarizes the status of the case to the Revenue and Transportation Committee. Read the summary here.
8/24/17: U. S. Ninth Circuit Court of Appeals notifies parties that oral arguments will be heard. Possible court dates are February-April, 2018.
11/8/16: Armstrong's reply brief is filed. View the brief here.
10/26/16: Montana Department of Revenue files answering brief. View the answering brief here.
8/29/16: Armstrong appeals dismissal to U.S. Ninth Circuit Court of Appeals, submits initial brief. View the initial brief here.
5/18/16: Federal Judge Sam Haddon affirms dismissal of Armstrong suit. View the order here.
4/20/16: Federal suit (Armstrong) is dismissed without prejudice. This is not unusual when both a State suit and Federal suit address the same issue. The federal suit can be refiled if deemed necessary, after conclusion of the State suit. View the order here.
2/12/16: Plaintiffs in Federal suit (Armstrong) file motion for preliminary injunction requesting the Court temporarily enjoin the Department of Revenue from enforcing the Religious School Ban. View the brief here.
12/28/15: Two plaintiffs (Armstrong) file suit in U.S. District Court against MT Department of Revenue Director Mike Kadas. Plaintiffs are represented by the Pacific Legal Foundation (Sacramento, CA). View the complaint here.
6/26/17: MQEC files suit against the State of Montana and the Montana Department of Revenue challenging SB 410 based on Article V, Section 11(5) and Article X, Section 6 of the Montana Constitution. The suit is filed in Lewis & Clark County District Court and is assigned to Judge Mike Menahan. Read the complaint here.