Montana’s Universal Tax-Credit Scholarship Bill Simplified

UPDATE – December 11, 2015 

This universal tax-credit scholarship has officially been launched in Montana. For the most up-to-date information on the program, including rules and regulations, click here to visit the program page.

UPDATE – May 12, 2015

Montana Gov. Steve Bullock let SB 410, a universal tax-credit scholarship bill, become law without his signature. The Montana Constitution specifies that the governor must sign or veto a bill within 10 days or it becomes law without signature, and Gov. Bullock chose that route in this case. This legislative development makes Montana the 27th state to enact its first school choice program.

Friedman Feedback

This tax-credit scholarship program is a starting point, but the state has a very long way to go before it becomes a robust program. Capped at only $150, the total tax credit that each taxpaying donor can receive is unlikely to incentivize significant donations to school scholarship organizations (SSOs). Additionally, the formula utilized to determine scholarship amounts, unfortunately, is convoluted and handcuffs SSOs from granting equitably-funded scholarships to students. Finally, the reporting requirements for schools have the potential to disincentivize schools from  participating in the program and inhibit SSOs’ ability to work directly with schools, all of which may further burden the program.

The Friedman Foundation supports school choice programs that have the ability to grow and expand. This program is an extremely small seed and one that will need a great deal of cultivating. It is our hope that one day it may blossom into something much more expansive.

Two years ago, Gov. Bullock vetoed a similar proposal without the $150 cap on donation credits.


Senate Bill 410 started its path to the governor’s office by passing the Montana Senate 27-23 with no Democrats supporting the bill and a few Republicans voting in opposition. That bill then passed the Montana Education committee and found its way to the Appropriations Committee. There the bill was amended before it was passed by the full House on a 59-41 vote. The amendments were enough to go back to the Senate for a concurrence vote. That concurrence vote actually failed 40-10, which then necessitated the appointment of a “free” conference committee. A conference committee is only able to work on amendments passed by the other chamber, where a free conference committee can work on the entire bill. The free conference committee came to the legislation outlined below. The free conference committee’s report was adopted by the House by a 58-42 vote and the Senate adopted the bill by a bipartisan 28-22 vote.


The Montana Department of Revenue will administer this tax-credit scholarship program. When a business or individual wishes to make a donation to an eligible student scholarship organization (SSO), the organization will contact the Department of Revenue for approval to receive the tax credit. The SSO will then accept the donation and provide documentation to the donor to allow for the credit to be received against their income tax. The credits will be awarded on a first come, first served basis. The amount of the credit will be 100 percent of the donor’s contribution. The cap on total tax credits will be set at $3 million with a 110 percent escalator for each subsequent year. No taxpayer may receive a credit larger than $150.

The scholarship amounts students may receive can be no larger than 50 percent of the average state per-pupil funding in public schools, and the average scholarship value for any one particular SSO may not be larger than 30 percent of the state per-pupil aid.

These scholarships are funded by private donations, and no state funds of any kind are given to the SSOs to provide scholarships to students.


All students between the ages of five and 19 years old in Montana are eligible.


Government-approved student scholarship organizations must:

  • be a certified 501 c 3,
  • allocate at least 90 percent of their donations to scholarships,
  • pay out all donations in 3 years,
  • not restrict scholarships to a particular school or types of schools,
  • keep separate accounts for scholarship and administrative money,
  • complete an annual review,
  • not allow earmark any donation to a particular family, child, or school,
  • report donations and expenditures to the department,
  • not limit gifts to specific pupils, and
  • keep records pursuant to the educational environment of the student.


Each school that receives scholarships shall:

  • administer a nationally norm-referenced test,
  • provide test results to parents,
  • provide the overall test scores of students in grades eight through 11 to the Montana Department of Public Instruction or on the school’s website,
  • be accredited, and
  • comply with all health and safety laws as required by the state of Montana.


The bill also creates a tax credit for donations to Innovative Education Programs as administered by the superintendent of public instruction. These programs help augment and supplement public schools.