- July 10, 2020
On June 30, 2020, the Supreme Court decided Espinoza v. Montana Dept. of Revenue, holding that the application of the Montana Constitution’s “no-aid” provision to a state program providing tuition assistance to parents who send their children to private schools discriminated against religious schools in violation of the Free Exercise Clause. In 2015, the Montana Legislature enacted a scholarship program for children attending private schools that grants a tax credit to any taxpayer who donates to a participating “student scholarship organization.” The donations are used to award scholarships to children for tuition at a qualified private school, including religious schools. Shortly after the program was created, the Montana Department of Revenue promulgated a rule—known as “Rule 1”—that prohibited families from using scholarships at religious schools. The Department explained that Rule 1 was needed to reconcile the scholarship program with the no-aid provision of the Montana Constitution, which bars government aid to sectarian schools.
In 2015, mothers of students attending a Montana Christian school filed suit in Montana state court, arguing that Rule 1 violated the free exercise clauses of the Montana and U.S. Constitutions. In May 2017, the district court issued a permanent injunction against enforcement of Rule 1, concluding that the tax credit program was constitutional because the tax credits did not “involve the expenditure of money that the state has in its treasury.” Because the district court narrowly focused its analysis on the tax credits themselves, it did not further address the constitutionality of Rule 1. In December 2018, the Montana Supreme Court reversed the district court ruling and held that the entire tax credit scholarship program, unmodified by Rule 1, aided religious schools in violation of the Montana Constitution’s no-aid provision. Consequently, the court invalidated the entire scholarship program because the program provided “no mechanism” for preventing aid from flowing to religious schools.
The U.S. Supreme Court reversed this decision by a 5-4 vote, holding that if a state subsidizes private education, it cannot disqualify schools solely because they are religious. Relying on its analysis in Trinity Lutheran Church v. Comer, the court concluded that disqualifying an entity from a public benefit “solely because of [the entity’s] religious character” can impose “a penalty on the free exercise of religion.” However, as Douglas Laycock, (the Robert E. Scott Distinguished Professor of Law at the University of Virginia) and Thomas Berg (the James L. Oberstar Professor of Law at the University of St. Thomas) note, Trinity Lutheran left open whether to allow provisions that more specifically bar uses of funds for religious purposes - a bar that did not apply to the playground-resurfacing aid involved in Trinity Lutheran. If the distinction between status and use were valid, a state might argue that a religiously affiliated K-12 school could benefit from aid if its classes are nonreligious in content but not if they are imbued with religious doctrines or perspectives.
Pursuant to the Montana Constitution’s no-aid provision, “a school must divorce itself from any religious control or affiliation” to be eligible for government aid, which “inevitably deters or discourages the exercise of First Amendment rights.” In Espinoza, the majority held that the discrimination rested on religious status, broadly forbidding any aid to schools that were religiously affiliated. By analyzing that broad prohibition as status-based, Chief Justice Roberts, writing for the majority, was able to avoid the question of whether strict scrutiny also extends to discrimination against religious uses. Similarly, Justice Neil Gorsuch wrote a concurrence questioning the distinction between religious use and status and that the exercise of religion plainly covers particular actions, not just status or identity, such as being a religious school.
Laycock and Berg raise an additional point that religious schools typically teach the same secular subjects as other schools, such as math, science and history. “If a state denies otherwise-available funds for classes on secular subjects because the school also offers these religious elements, then it goes beyond not funding religion [and] imposes a penalty on secular educational activity...penaliz[ing] the school and those it serves because of its religious identity, its religious functions and some of the uses to which the money is put.”
In a dissenting opinion, Justice Ginsburg contended that the majority’s reliance on Trinity Lutheran was misplaced. Ginsburg argued that past decisions, including Trinity Lutheran, “have entailed differential treatment occasioning a burden on a plaintiff’s religious exercise.” Because the Montana Supreme Court invalidated the entire tax credit program, Ginsburg concluded that religious students and schools are not subject to differential treatment—"[t]here are simply no scholarship funds to be had.”
In 2017, Illinois enacted the Invest In Kids Scholarship Tax Credit Program (35 ILCS 40/1), which is substantially similar to the program enacted in Montana. Both programs allow income tax credits for taxpayers who make authorized contributions to a student scholarship organization. Like the Montana program, the Illinois program expressly provides that scholarship funds may be used for tuition at a “qualified” non-public school, which includes religious schools.
Similar tuition tax credits have survived legal challenges in Illinois. For example, in Toney v. Bower, an Illinois appellate court concluded that the tax credit had a clear secular legislative purpose of “ensuring that Illinois children are well educated,” as well as satisfying the State interest in “maintaining the financial health of private schools, because those schools relieve the taxpayers of the burden of educating these private school students.” The Toney court determined that the statute was “facially neutral” because the credit was available to “all parents of public and private school children.” Moreover, the statute did not run afoul of the Establishment Clause because the “public funds became available to schools only as the result of private choices made by individual parents.” Consequently, it is likely that the tax credit scholarship program in Illinois would have survived a challenge on constitutional grounds even before the Supreme Court’s holding in Espinoza.
The holding in Espinoza is in line with recent Supreme Court jurisprudence, which makes clear that a government tax credit scholarship program “is not readily subject to challenge under the Establishment Clause” if it is (1) “neutral with respect to religion” and (2) “provides assistance directly to a broad class of citizens who, in turn, direct government aid to religious schools wholly as a result of their own genuine and independent private choice.” E.g., Zelman v. Simmons-Harris, 536 U.S. 639, 640 (2002) (emphasis added); Mueller v. Allen, 463 U.S. 388 (1983). The Espinoza decision is likely to impact similar tax credit scholarship programs in Maine and Vermont because both states currently bar religious schools from participating in their programs.
 Montana is one of 38 states that have “no-aid” rules that bar distribution of public funds to religious entities. In Illinois, the no-aid provision is found in Article X, Section 3 of the Illinois Constitution.
 Laycock and Berg, Espinoza, funding of religious service providers and religious freedom, Accessed July 9, 2020.