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Nevada Supreme Court Rules Against Families Challenging Reduction in Tax Credits for Scholarships

Nevada Supreme Court holds the Legislature did not violate the state constitution when it reduced tax credits that supported scholarship program

LAS VEGAS—Today, the Nevada Supreme Court ruled against families in their constitutional challenge to a law that reduced the amount of tax credits available for donors to the Nevada Educational Choice Scholarship Program. Three mothers of scholarship students, a scholarship granting foundation and two donors to scholarship programs were represented by the Institute for Justice (IJ) in the suit, which was filed in August 2019.

“The court’s holding that the bill ‘does not increase public revenue’ is a huge let-down for low-income Nevadans depending on the Scholarship Program,” said IJ Attorney Joshua House. “There is no question that AB 458—which guts Nevada’s Scholarship Program—was an unconstitutionally passed revenue bill: The bill’s sponsor repeatedly stated it was intended to increase tax revenues, it was debated in the Revenue and Taxation committees, and the State labeled it a ‘revenue item,’ projecting it would increase revenues by millions.”

The 2019 law, Assembly Bill 458, endangered the Scholarship Program’s long-term funding by removing its “escalator provision,” which provided additional tax credits every fiscal year in order to grow the Scholarship Program with Nevada’s needs. The Supreme Court held that Assembly Bill 458 was not a revenue-raising measure, which the Nevada Constitution requires to be passed by a two-thirds supermajority in both the Nevada Assembly and Senate. The bill did not receive a supermajority vote in the Senate, yet the court ruled that tax credits are spending appropriations and not subject to the constitutional requirement. Without the automatic annual increase created when the law was passed in 2015, the scholarship program could fail to keep up with growth and inflation, limiting the number of Nevada families who can access scholarships.

To accommodate the state’s growing population and increasing educational costs, the 2015 law that established the Scholarship Program increased the number of tax credits available by 10% annually. By removing this provision in AB 458, the Legislature both increased revenue to the state and limited the growth of the scholarships, leading at least one scholarship organization to reject qualified applicants out of concern that funds will dry up.

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