Student Funding

Scholarship amounts are determined by student scholarship organizations (SSOs). The maximum scholarship is 100 percent of the average per-pupil expenditure for the second most recently completed fiscal year ($12,563 for 2019–20).  

(Last updated December 18, 2023) 

Student Eligibility

All students between the ages of 5 and 18 in Montana are eligible. 

(Last updated December 18, 2023) 

EdChoice Expert Feedback

Montana’s tax-credit scholarship program currently only helps a small number of participating students, but policymakers recently fixed several design flaws that should allow for significantly greater participation. 

All Montana students are eligible to participate but fewer than 1 percent of students statewide actually use a scholarship. The main limiting factor was a tax credit cap of only $150 per donor, but that has been lifted to $200,000 per donor. 

The average scholarship size is about $2,200, which is about 18 percent of the average expenditure per student at Montana’s district schools, though the cap on scholarship values is somewhat higher (30% of the average per-pupil expenditures at district schools, or about $3,300). However, the law’s recent changes, including raising the maximum scholarship size from 50 percent to 100 percent of the state’s per-student funding, should result in higher scholarship values. Still, only $2 million in tax credits are available in 2023, which is equivalent to only 0.16 percent of Montana’s total K–12 revenue. The program does have an automatic escalator provision, which increases the credit cap by 20% if 80% of available credits were issued in the prior year. This will go a long way toward meeting parent demand. 

To expand access to educational choice, Montana policymakers should dramatically increase the available tax credits and eliminate the cap on credits per donor. The program could also be converted into an education savings account to ensure that all students have access to the education that’s the right fit for them, whether private school or a customized course of education. 

Montana’s tax-credit scholarship program generally avoids unnecessary and counterproductive regulations. 

(Last updated December 18, 2023) 

Rules and Regulations

• Income Limit: None 
• Prior Year Public School Requirement: None 
• Geographic Limit: Statewide 
• Enrollment Cap: None 
• Scholarship Cap: 100 percent of the statewide average per-pupil expenditure ($12,563 for 2019–20) 
• Testing Mandates: None 
• Credit Value: 100% 
• Per Donor Credit Cap: $200,000 
• Total Tax Credit Cap: $1 million in 2022; $2 million in 2023 (escalator) 

SSO Requirements

• Be a certified 501(c)3
• Refrain from spending more than 10 percent of its donations on the administration of the fund
• Must keep separate accounts for scholarship and administrative money
• Report donations and expenditures to the state department of revenue
• Pay out all donations in three years
• Not limit gifts to a single school or type of school
• Complete an annual review
• Prevent any donation from being earmarked for a particular family, child or school
• Not limit gifts to specific pupils
• Keep records pursuant to the educational environment of the student

(Last updated December 18, 2023) 

Governing Statutes

https://leg.mt.gov/bills/mca/title_0150/chapter_0300/part_0310/sections_index.html

(Last updated December 18, 2023) 

Legal History

On December 7, 2018, the U.S. Court of Appeals for the Ninth Circuit in Armstrong v. Kadas dismissed a case brought by the Association of Christian Schools International (which included ten religiously affiliated member schools in Montana). The Association asserted that the federal Tax Injunction Act did not bar their claim requesting the federal court to accept jurisdiction over the Association’s challenge to Montana’s regulation prohibiting religious school participation in its tax-credit scholarship program. The Court concluded that the comity doctrine applied; a case alleging that a state benefits program is unconstitutional should first proceed in state court. The Court therefore found no need to rule on whether the Tax Injunction Act barred the Association’s claims. Armstrong v. Kadas, No. 16-35422 (2019).  

On June 30, 2020, the U.S. Supreme Court in Espinoza v. Montana Department of Revenue ruled in favor of parents seeking the right to choose religious schools for their children participating in Montana’s tax credit scholarship program, overturning a prior decision of the Montana Supreme Court striking down the program. The U.S. Supreme Court held that Montana’s Supreme Court erred in applying their state constitution’s no-aid provision (AKA Blaine Amendment restricting state funding of religious entities) to the tax credit scholarship program.  

The case began in 2015 when Montana parents sued the Montana Department of Revenue for imposing a regulation on the program that prohibited parents from choosing a religious school for their children using tax credit scholarship funding. The trial court ruled in favor of the parents, finding the Department of Revenue had made a mistake of law and thus the Blaine Amendment could only apply to appropriations, not tax credits. On December 12, 2018, the Montana Supreme Court overruled the lower court. Espinoza v. Montana Dept of Revenue, 2018 MT 306. The Court found that the department of revenue exceeded its authority by adopting a rule to exclude religious schools but reasoned that Montana’s constitutional provision restricting state aid to sectarian schools is permissibly broader than the federal constitution, and therefore, did not give deference to the U.S. Supreme Court decision upholding the constitutionality of tax-credit scholarship programs in ACSTO v. Winn (see ARIZONA).   

The U.S. Supreme Court agreed to take the case in June 2019. The Question Presented to the Court: “Does it violate the Religion Clauses or Equal Protection Clause of the United States Constitution to invalidate a generally available and religiously neutral student-aid program simply because the program affords students the choice of attending religious schools?” Answer: yes. The Court opined that if a state adopts a school choice program, it cannot block a parent from using funding from the program to access “some private schools solely because they are religious.” The Court stated further, “That ‘supreme law of the land’ condemns discrimination against religious schools and the families whose children attend them.” Espinoza v. Mont. Dep’t of Revenue, 140 S.Ct. 2246, 207 L.ED.2d 679 (2020).  

On December 8, 2022, the Montana First Judicial District Court, Lewis and Clark County, held in MQEC v. State of Montana that Montana’s tax-credit scholarship program does not violate the state constitution’s prohibition against appropriations for educational purposes to any entity not under control of the state. The Court held that tax credits decrease funds entering the general fund; these funds never reach the state treasury, so there can be no appropriation. Therefore, this provision of the state constitution does not apply. Tax credits are not appropriations. MQEC v. State of Montana, MT First Judicial District Court, Cause No. ADV-2017-487.  

On June 26, 2017, the Montana Quality Education Coalition (MQEC) (composed of public school superintendents, MT Federation of Public Employees, and several school administrative associations) filed MQEC v. State of Montana, alleging that Montana’s tax-credit scholarship program violates the state constitution. Espinoza v. Montana Dept of Revenue (above) was being actively litigated. After one of MQEC’s primary claims against the program was denied by the U.S. Supreme Court in Espinoza, on September 2, 2020, MQEC filed an amended complaint withdrawing that claim; the state filed a response on September 21, 2020. The case did not move until May 31, 2022, when MQEC filed a motion for summary judgment and the state filed a cross-motion for summary judgment on June 24, 2022. The questions remaining in this case after Espinoza were, a) whether MQEC has standing to sue (they do), and b) whether tax credits are appropriations (they are not). This case may be appealed. 

(Last updated December 6, 2023)