Education Tax Credit Program Ruled Unconstitutional in New Hampshire

The New Hampshire Superior Court ruled this week that the state’s new education tax credit program is unconstitutional, writes John DiStaso in the New Hampshire Union Leader.

In an opinion that ruled for the New Hampshire Civil Liberties Union and Americans United for Separation of Church and State, the organizations that filed the lawsuits, Judge John M. Lewis said that the state constitution expressly forbids any government funding for religious education — even if it is in the form of tax credits for donations to scholarship organizations.

The law attracted a legal challenge almost as soon as it was passed by New Hampshire’s Republican legislature last year. The bill won enough support to overcome the veto of John Lynch, New Hampshire’s former Democratic governor.

His successor Maggie Hassan, also a Democrat, expressed support for the ruling, calling it a victory for public education.

During an April hearing, Alex Luchenitser, associate legal director of Americans United For Separation of Church and State, argued, “This program uses the tax system to deliver funding for the program. If there was no business profits tax, this program could not exist. The only way we can run this program is if a business owes the tax and chooses to divert some of the tax to this program.”

Richard Head of the Attorney General’s Office countered that because the tax is retained by the business and never paid to the state, it should not be considered public money.

In a statement praising the outcome, Hassan said that the tax credit program would divert millions of dollars in public education funding to institutions that would use it for religious teachings. She called it a “wrong policy” that violated New Hampshire’s commitment to the separation of church and state.

Rep. Bill O’Brien, R-Mont Vernon, championed the bill as House Speaker last year. Also an attorney, he represents seven former and current legislators who sponsored the bill and filed a brief supporting it.

O’Brien said the ruling “does not address why it is permissible for the state to allow tax breaks for religious organizations through college scholarships, but it is not permissible when it’s a tax credit of this nature.”

The program allows up to $3.4 million in tax credits to be claimed in its first year and up to $5.1 million in the second. It provides for additional increases in tax credits for subsequent years.

The argument that the decision to donate to the organizations was solely in the hands of the companies involved didn’t convince Judge Lewis that tax credits did not constitute public money. Proponents of the tax credit program are expected to appeal the decision.