Tax Credits for Contributions to Student Scholarship Organizations
- Tax-Credit Scholarship
- Enacted 2015
- Launched 2015
The Montana Tax Credits for Contributions to Student Scholarship Organizations program allows individuals and corporations to claim a 100 percent tax credit for contributions to approved student scholarship organizations (SSOs)— nonprofits that provide scholarships for private school and tutoring. The total amount of tax credits awarded statewide is limited to $1 million in 2022 and $2 million in 2023 and each year beyond, though the limit can increase 20 percent if the cap is met. No taxpayer may receive a credit larger than $200,000. Beginning in the 2016–17 school year, SSOs in Montana started providing scholarships to students to attend private school or receive tutoring. Learn more about the program’s details on this page, including eligibility, funding, regulations, legal history and more.
We do not administer this program.
Students Participating (Fall 2020)
of Students Eligible Statewide
Scholarship Organizations (2020–21)
Average Scholarship Value (2016–17)
Average Value as a Percentage of Public School Per-student Spending
All Montana K–12 students are eligible for scholarships through the Tax Credits for Contributions to Student Scholarship Organizations program
Scholarship amounts are determined by 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).
All students between the ages of five and 18 in Montana are eligible.
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 was only $500, which is just 4 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.
In order 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.
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)
- 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
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 found that the department of revenue had made a mistake of law, that the Blaine Amendment could only apply to appropriations, not tax credits; the court ruled in favor of parents. 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 ACSTOA 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)