HELENA — A bill vastly increasing a state income-tax deduction to fund scholarships for students attending private schools in Montana emerged Thursday from a Senate committee – but with an amendment that could scale it back, under certain circumstances.
House Bill 279 increases the maximum tax deduction from $150 per taxpayer to $200,000 for donations to a “student scholarship organization” that helps pay tuition and costs for children attending private schools. It allows taxpayers to spread that deduction over three years.
The bill also allows the tax deduction for donations to public schools or school districts for “innovative educational programs.”
The Senate Finance and Claims Committee endorsed the bill on a 12-7, party-line vote, with Republicans in favor, sending it to the Senate floor.
But the panel attached an amendment that could ratchet the maximum credit back to $150 if the federal government determines the tax credit violates the COVID-19 relief-funding bill passed in March and thus jeopardizes Montana’s share of those funds.
Under the amendment, if the feds determine HB279’s higher tax credit violates the COVID relief rules, the state budget director would have the power to set the maximum credit at $150 instead of $200,000.
The COVID relief bill forbids the state from using any of the federal funds to finance tax cuts.
But if the tax credit remains intact, a fiscal analysis of the bill estimates it will cost the state treasury nearly $6 million over the next two years.
While HB279 increases the maximum per-taxpayer credit to $200,000, it caps the total allowable credits at $1 million statewide this year, for each private- and public-school program, and $2 million the following year.
Thereafter, if that total is reached, the allowable aggregate amount of tax credits will climb 20% a year.
The move to increase the tax credit comes less than two years after the U.S. Supreme Court, in a landmark ruling, reinstated the Montana tax credit after it had been struck down by the Montana Supreme Court, because it was available to religious private schools.
The bill has already passed the Montana House.