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The Supreme Court Will Consider Whether a State Can Deny a Tax Credit for Scholarship Contributions Solely Because Some Are Later Provided to Religious Schools

The U.S. Supreme Court this term will hear Espinoza v. Montana Department of Revenue, a case that puts the state’s “Blaine Amendment” in the dock.  That provision of Montana’s constitution (substantially replicated in over thirty other states) forbids direct or indirect payment of state funds to “sectarian” (religious) schools.  The Montana legislature set up a system it thought avoided the Blaine Amendment by providing a tax credit for individual contributions to a private scholarship fund, with the fund then distributing the private contributions to various schools, some secular and some religious, on non-religious bases.  The Montana Supreme Court held that, by providing the tax credit, the state indirectly provided public funds to religious schools.

The nub of the problem that the U.S. Supreme Court will consider is this:  when Montana’s program is facially neutral, qualifying all contributions to a private scholarship fund for a tax credit, does it violate the Free Exercise Clause to eliminate that benefit just because some of the contributions will help parents who send their children to religiously affiliated schools?  That it does violate the clause would seem to follow logically from the Supreme Court’s 2016 decision in Trinity Lutheran Church v. Comer that a state violated the clause when it refused to fund a resurfacing of a school playground solely because the school was religiously affiliated.

The Montana Supreme Court’s reasoning that, by giving a tax credit, it is indirectly paying state funds to religious schools is deeply troubling on another level.  The underlying assumption of that reasoning, as pointed out by dissenting Justice Rice, is that the state owns whatever it has the ability to tax and somehow is spending its own money when it provides a tax credit or deduction.  To the contrary, a state does not get ownership of funds by not taxing them, never having them vesting in the treasury as proper tax receipts.  Fortunately, the U.S. Supreme Court has repeatedly held that, when, like in the Montana legislative program, private individuals make decisions about how to spend or distribute funds, that breaks any causal link to the government, even when direct funding to the individual is involved, such as the government providing school vouchers to parents to use wherever they wish to send their children to school.

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