Espinoza v. Mont. Dep't of Revenue

• Decision Date: 30 June 2020
• Docket Number: No. 18-1195,18-1195
• Citation: 207 L.Ed.2d 679,140 S.Ct. 2246
• Parties: Kendra ESPINOZA, et al., Petitioners v. MONTANA DEPARTMENT OF REVENUE, et al.
• Court: U.S. Supreme Court

140 S.Ct. 2246

207 L.Ed.2d 679

Kendra ESPINOZA, et al., Petitioners

v.MONTANA DEPARTMENT OF REVENUE, et al.

No. 18-1195

Supreme Court of the United States.

Argued January 22, 2020

Decided June 30, 2020

Steven W. Fitschen, The National Legal Foundation, Chesapeake, VA, for Petitioners.

Michael Bindas, Institute for Justice, Seattle, WA, Timothy D. Keller, Institute for Justice, Tempe, AZ, Erica J. Smith, Richard D. Komer, Institute for Justice, Arlington, VA, William W. Mercer, Holland & Hart LLP, Billings, MT, for Petitioners.

Daniel J. Whyte, Brendan Beatty, Nicholas J. Gochis, Special Assistant Attorneys General, Helena, MT, Anthony Johnstone, Johnstone PLLC, Missoula, MT, Adam G. Unikowsky, James Dawson, Jenner & Block LLP, Washington, DC, Raph Graybill, Chief Legal Counsel, Governor Steve Bullock, Helena, MT, for Respondents.

Chief Justice ROBERTS delivered the opinion of the Court.

The Montana Legislature established a program to provide tuition assistance to parents who send their children to private schools. The program grants a tax credit to anyone who donates to certain organizations that in turn award scholarships to selected students attending such schools. When petitioners sought to use the scholarships at a religious school, the Montana Supreme Court struck down the program. The Court relied on the "no-aid" provision of the State Constitution, which prohibits any aid to a school controlled by a "church, sect, or denomination." The question presented is whether the Free Exercise Clause of the United States Constitution barred that application of the no-aid provision.

I

A

In 2015, the Montana Legislature sought "to provide parental and student choice in education" by enacting a scholarship program for students attending private schools. 2015 Mont. Laws p. 2168, § 7. The program grants a tax credit of up to $150 to any taxpayer who donates to a participating "student scholarship organization." Mont. Code Ann. §§ 15–30–3103(1), – 3111(1) (2019). The scholarship organizations then use the donations to award scholarships to children for tuition at a private school. §§ 15–30–3102(7)(a), –3103(1)(c).¹

So far only one scholarship organization, Big Sky Scholarships, has participated in the program. Big Sky focuses on providing scholarships to families who face financial hardship or have children with disabilities. Scholarship organizations like Big Sky must, among other requirements, maintain an application process for awarding the scholarships; use at least 90% of all donations on scholarship awards; and comply with state reporting and monitoring requirements. §§ 15–30–3103(1), – 3105(1), – 3113(1).

A family whose child is awarded a scholarship under the program may use it at any "qualified education provider"—that is, any private school that meets certain accreditation, testing, and safety requirements. See § 15–30–3102(7). Virtually every private school in Montana qualifies. Upon receiving a scholarship, the family designates its school of choice, and the scholarship organization sends the scholarship funds directly to the school. § 15–30–3104(1). Neither the scholarship organization nor its donors can restrict awards to particular types of schools. See §§ 15–30–3103(1)(b), – 3111(1).

The Montana Legislature allotted $3 million annually to fund the tax credits, beginning in 2016. § 15–30–3111(5)(a). If the annual allotment is exhausted, it increases by 10% the following year. Ibid.

The program is slated to expire in 2023. 2015 Mont. Laws p. 2186, § 33.

The Montana Legislature also directed that the program be administered in accordance with Article X, section 6, of the Montana Constitution, which contains a "no-aid" provision barring government aid to sectarian schools. See Mont. Code Ann. § 15–30–3101. In full, that provision states:

"Aid prohibited to sectarian schools. ... The legislature, counties, cities, towns, school districts, and public corporations shall not make any direct or indirect appropriation or payment from any public fund or monies, or any grant of lands or other property for any sectarian purpose or to aid any church, school, academy, seminary, college, university, or other literary or scientific institution, controlled in whole or in part by any church, sect, or denomination." Mont. Const., Art. X, § 6 (1).

Shortly after the scholarship program was created, the Montana Department of Revenue promulgated "Rule 1," over the objection of the Montana Attorney General. That administrative rule prohibited families from using scholarships at religious schools. Mont. Admin. Rule § 42.4.802(1)(a) (2015). It did so by changing the definition of "qualified education provider" to exclude any school "owned or controlled in whole or in part by any church, religious sect, or denomination." Ibid. The Department explained that the Rule was needed to reconcile the scholarship program with the no-aid provision of the Montana Constitution.

The Montana Attorney General disagreed. In a letter to the Department, he advised that the Montana Constitution did not require excluding religious schools from the program, and if it did, it would "very likely" violate the United States Constitution by discriminating against the schools and their students. See Complaint in No. DV–15–1152A (Dist. Ct. Flathead Cty.), Exh. 3, pp. 2, 5–6. The Attorney General is not representing the Department in this case.

B

This suit was brought by three mothers whose children attend Stillwater Christian School in northwestern Montana. Stillwater is a private Christian school that meets the statutory criteria for "qualified education providers." It serves students in prekindergarten through 12th grade, and petitioners chose the school in large part because it "teaches the same Christian values that [they] teach at home." App. to Pet. for Cert. 152; see id. , at 138, 167. The child of one petitioner has already received scholarships from Big Sky, and the other petitioners' children are eligible for scholarships and planned to apply. While in effect, however, Rule 1 blocked petitioners from using scholarship funds for tuition at Stillwater. To overcome that obstacle, petitioners sued the Department of Revenue in Montana state court. Petitioners claimed that Rule 1 conflicted with the statute that created the scholarship program and could not be justified on the ground that it was compelled by the Montana Constitution's no-aid provision. Petitioners further alleged that the Rule discriminated on the basis of their religious views and the religious nature of the school they had chosen for their children.

The trial court enjoined Rule 1, holding that it was based on a mistake of law. The court explained that the Rule was not required by the no-aid provision, because that provision prohibits only "appropriations" that aid religious schools, "not tax credits." Id. , at 94.

The injunctive relief freed Big Sky to award scholarships to students regardless of whether they attended a religious or secular school. For the school year beginning in fall 2017, Big Sky received 59 applications and ultimately awarded 44 scholarships of $500 each. The next year, Big Sky received 90 applications and awarded 54 scholarships of $500 each. Several families, most with incomes of $30,000 or less, used the scholarships to send their children to Stillwater Christian.

In December 2018, the Montana Supreme Court reversed the trial court. 393 Mont. 446, 435 P.3d 603. The Court first addressed the scholarship program unmodified by Rule 1, holding that the program aided religious schools in violation of the no-aid provision of the Montana Constitution. In the Court's view, the no-aid provision "broadly and strictly prohibits aid to sectarian schools." Id. , at 459, 435 P.3d at 609. The scholarship program provided such aid by using tax credits to "subsidize tuition payments" at private schools that are "religiously affiliated" or "controlled in whole or in part by churches." Id. , at 464–467, 435 P.3d at 612–613. In that way, the scholarship program flouted the State Constitution's "guarantee to all Montanans that their government will not use state funds to aid religious schools." Id. , at 467, 435 P.3d at 614.

The Montana Supreme Court went on to hold that the violation of the no-aid provision required invalidating the entire scholarship program. The Court explained that the program provided "no mechanism" for preventing aid from flowing to religious schools, and therefore the scholarship program could not "under any circumstance" be construed as consistent with the no-aid provision. Id. , at 466–468, 435 P.3d at 613–614. As a result, the tax credit is no longer available to support scholarships at either religious or secular private schools.

The Montana Supreme Court acknowledged that "an overly-broad" application of the no-aid provision "could implicate free exercise concerns" and that "there may be a case" where "prohibiting the aid would violate the Free Exercise Clause." Id. , at 468, 435 P.3d at 614. But, the Court concluded, "this is not one of those cases." Ibid.

Finally, the Court agreed with petitioners that the Department had exceeded its authority in promulgating Rule 1. The Court explained that the statute creating the scholarship program had broadly defined qualifying schools to include all private schools, including religious ones, and the Department lacked authority to "transform" that definition with an administrative rule. Id. , at 468–469, 435 P.3d at 614–615.

Several Justices wrote separately. All agreed that Rule 1 was invalid, but they expressed differing views on whether the scholarship program was consistent with the Montana and United States Constitutions. Justice Gustafson's concurrence argued that the program violated not only Montana's no-aid provision but also the Federal Establishment and Free Exercise Clauses. Id. , at 475–479, 435 P.3d at 619–621. Justice Sandefur echoed the majority's conclusion that applying the no-aid provision was consistent with...