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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 have been permitted since tax year 2016. The tax credit program has several reporting requirements that are detailed in statute.  In April of 2022, the Montana Legislative services division submitted a report to the Legislative Revenue Interim Committee on the Student Scholarship/Organization Credit Program which included information required of private schools with students receiving scholarship proceeds, such as:

  • 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)

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 appealed the decision to the Montana Supreme Court. Briefs in the appeal were filed by both parties, with several amicus briefs submitted in favor of both positions. Oral arguments were held on April 6, 2018. The Montana Supreme Court rendered a favorable decision on December 12, 2018, finding 15-30-3111 MCA (the tax credit for donations to private schools) was unconstitutional. Attorneys for Espinoza petitioned the U.S. Supreme Court to review the decision, and briefs have been filed by appellants and appellees. The U.S. Supreme Court has accepted the case (granted a writ of certiorari) for the upcoming term beginning October 1, 2019. Oral argument was held January 22, 2020. Opinion released June 30, 2020, finding for Espinoza. Affirmed by the Montana Supreme Court on August 12, 2020 and remanded to Flathead County District Court finding in favor of Plaintiffs. (Updated August, 2020)

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. appealed the dismissal to the U.S. Ninth Circuit Court of Appeals. Oral arguments were heard on March 6, 2018, and the Court rendered a decision in July, 2018 affirming the dismissal. (Updated July, 2018)

MQEC v. State of Montana and Montana Department of Revenue: The case was filed in Lewis & Clark County District Court and summonses have been served on both parties. Amended complaint filed September 2, 2020 to reflect U.S. Supreme Court decision in Espinoza. (Updated September, 2020)

MQEC v. State of Montana and Department of Revenue Timeline

8/3/2022: State responds to the Montana Quality Education Coalition’s request for Summary Judgment in the case Montana Quality Education Coalition v. State of Montana and Montana Department of Revenue. 8 /3/2022. Read state’s response to MQEC’s motion for summary judgement here.

5/31/2022: Montana Quality Education Coalition files a motion for Summary Judgment in the case Montana Quality Education Coalition v. State of Montana and Montana Department of Revenue. Read motion for summary judgment.

9/2/2020: Amended complaint filed in Lewis & Clark County District Court reflecting Espinoza decision. Read the amended complaint here.

6/8/2020-6/9/2020: Summonses served on the State of Montana and the Montana Department of Revenue. Defendants have 42 days after service to either respond to the complaint or file a motion in the matter.

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.

News Articles and Related Links

 

Espinoza et al. v. Montana Department of Revenue Timeline

8/12/2020: Montana Supreme Court remands Espinoza v. MT Department of Revenue to Flathead County District Court, finding for Espinoza. Read the order here.

6/30/2020: Supreme Court of the United States issues opinion in Espinoza v. MT Department of Revenue, finding for Espinoza. Read the decision here.

1/22/2020: Oral argument held at Supreme Court of the United States. Read the transcript here and listen to the recording here.

11/15/19: Amicus briefs supporting the Montana Department of Revenue are files. See the briefs here.

11/8/19: The U.S. Supreme Court schedules oral argument for Wednesday, January 22, 2020.

11/8/19: The Montana Department of Revenue files their brief on the merits of the matter. Read the brief here.

9/18/19: Amicus briefs supporting the Espinoza position are filed. See the briefs here.

9/11/19: Attorneys for Espinoza file their brief on the merits of the matter. Read the brief here.

6/28/19: The U.S. Supreme Court grants the Petition for Writ of Certiorari. Read the order here.

5/28/19: Attorneys for Espinoza file their response brief on the matter. Read the brief here.

5/15/19: The Montana Department of Revenue files brief opposing the Petition for Writ of Certiorari with the United States Supreme Court. Read the brief here.

3/13/19: The Institute for Justice files a Petition for Writ of Certiorari with the United States Supreme Court. Read the petition here.

12/12/18: The Montana Supreme Court issues a favorable decision in Espinoza et al., finding 15-30-3111 MCA (the tax credit for donations to private schools) unconstitutional. Read the decision here.

4/6/18: The Montana Supreme Court hears oral arguments in Espinoza et al. Watch the video here.

2/15/18: The Montana Supreme Court schedules oral arguments in Espinoza et al. for April 6, 2018. Arguments will be heard en banc. Read the order here.

2/12/18: MT Department of Revenue files reply brief - read the brief here.

1/19/18: Attorneys for Espinoza et al. file appellee's brief to the Montana Supreme Court. Read the brief here.

1/17/18-1/19/18: In a flurry of activity, the Montana Supreme Court grants motions for leave to participate and file amicus curiae briefs to the following: United States Department of Justice; Agudath Israel of America; Becket Fund for Religious Liberty; Pride School Atlanta, Inc.; Alliance for Choice in Education (ACE) Scholarships; EdChoice.

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.

1/19/17: Montana Department of Revenue files Motion for Substitution of Judge and Motion to Vacate Hearing. View the Motion to Substitute and the Motion to Vacate here.

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.

5/20/16: MQEC files Motion to Intervene in Espinoza. View the motion, brief, and affadavit 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.

2/1/16: MT Department of Revenue files motion to dismiss Espinoza. View the motion and supporting brief, as well as the plaintiffs' response.

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.

Armstrong et al. v. Mike Kadas/Gene Walborn Timeline

8/2/18: The Montana Department of Revenue files brief regarding the Association of Christian Schools and the application of the Federal Tax Injunction Act. Read the brief here.

8/1/18: The Pacific Legal Foundation files brief regarding the Association of Christian Schools and the application of the Federal Tax Injunction Act. Read the brief here.

7/19/18: The U.S. Ninth Circuit Court of Appeals determines that based on the Federal Tax Injunction Act, the Court lacks subject matter jurisdiction regarding the claims of Kathy and Jerry Armstrong and affirm the dismissal of their claims in Helena Federal District Court.  The remaining plaintiff, the Association of Christian Schools International (ACSI), and the MT Department of Revenue are ordered to brief the U.S. Ninth Circuit Court of Appeals on the application of the Federal Tax Injunction Act to the ACSI's claims of religious discrimination. Read the decision and the order here.

3/6/18: Oral arguments are heard by the U.S. Ninth Circuit Court of Appeals (Judges Rawlinson, Christen, and Bencivengo). Watch the proceedings here.

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 response 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: Armstrong et al. 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 file motion for preliminary injunction requesting the Court temporarily enjoin the Department of Revenue from enforcing the Religious School Ban. View the brief here.

2/9/16: MT Department of Revenue files motion to dismiss the suit. View the brief and supporting affadavit.

12/28/15: Two plaintiffs (Armstrong et al.) 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.

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