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New Montana tax credits for private-school scholarships hit $1M cap

Two groups get $840K in donations
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Posted at 11:38 AM, Jan 31, 2022
and last updated 2022-01-31 20:54:07-05

HELENA — An expanded state income-tax credit for donations to private-school scholarships has hit its $1 million cap for the 2022 tax year – less than three weeks into the year.

State revenue officials told MTN News the cumulative $1 million cap for the credits was reached Jan. 19, with 60 donations from individuals and nine donations from businesses taking advantage of the credit.

The donations went to seven nonprofit student-scholarship organizations that help children attending private K-12 schools in Montana – many of them religion-affiliated.

The two biggest recipients of donations are ACE Scholarships of Montana, at $486,000, and Missoula Catholic Schools, at $352,000.

Those making the donations can take a state income-tax credit of up to $200,000 for this year. The cumulative limit of all eligible tax breaks for the student-scholarship organizations is $1 million for this year. Next year, that cap increases to $2 million.

Last year, the Republican majority at the Montana Legislature increased the maximum per-person tax credit from $150 to $200,000. No Democratic lawmakers voted for the bill, arguing the greatly expanded credit would essentially drain public money away from public schools, to benefit private schools.

However, the law also allowed up to $1 million in tax credit for donations to public schools, to finance “innovative educational programs” – and that cap for 2022 was reached on the first working day of this year, in less than six minutes.

Twenty-three donors gave money to 10 public schools in nine Montana cities and towns, to reach that cap on Jan. 3.

The other private-school scholarship organizations that had donations qualifying for the tax credit, and their amounts are:

  • St. Matthew’s Catholic School in Kalispell, $69,000.
  • Holy Spirit Catholic School in Great Falls, $61,000.
  • St. Mary’s Catholic School in Livingston, $12,500.
  • Intermountain Children’s Services of Helena, $12,000.
  • The Way Christian School in Livingston, $7,000.

After student-scholarship organizations accept donations, they then must seek “pre-approval” of the amount from the state Revenue Department, as eligible for the tax credit.

State revenue officials said the $1 million cap was reached at 6:20 p.m. on Jan. 19, with 69 donations pre-approved.

The tax credit was expanded from a maximum of $150 to $200,000 in the wake of a landmark 2020 U.S. Supreme Court decision, which upheld the tax credit’s use to benefit religion-affiliated schools. The Montana Supreme Court had struck down the entire tax credit, saying it was an unconstitutional use of state funds to aid religious organizations. But the nation’s high court overruled that order with its 5-4 decision.