KANSAS TAX CREDIT SCHOLARSHIP House K-12 Education Budget Committee January 20, 2021 History • Full title: Tax Credit for Low Income Students Scholarship Program • Provides scholarships to some students to attend nonpublic schools • Scholarships are funded by tax credit eligible donations • Enacted by 2014 Senate Sub. for HB 2506 • Amended by: • 2015 Senate Sub. for HB 2109 • 2017 SB 19 • 2019 House Sub. for SB 16 • Statute: KSA 2020 Supp 72-4351 through 72-4357 Student Eligibility To qualify a student must: • Be defined as an at-risk student under KSEEA (KSA 72-5132) • At-risk students are those that qualify for free lunch • Includes students who have been eligible under the program that have not graduated high school or reached 21 years of age • Reside in Kansas; and • Be enrolled in a public school identified by the State Board as one of the lowest 100 performing, or eligible to be enrolled and be under the age of 6. “Qualified School” • Nonpublic school that desires participation and receives students with the scholarships • The school must: • Notify the State Board; and • Be accredited by the State Board or a national or regional accrediting agency recognized by the State Board Tax Credit Eligibility • Income tax: individuals and corporations • Privilege tax: National banking associations, state banks, trust companies, or savings and loan associations • Premiums tax and privilege fees: Insurance companies • Tax credit = 70% of donation to scholarship granting organization Max: $500,000 per tax year • Excess tax credits roll over to succeeding years • Maximum tax credits per tax year: $10.0 million Scholarship Granting Organizations • Receives donations from individuals & businesses • Provides scholarships to eligible students • Max: $8,000 per student per year • Must be audited by CPA each year • Audit submitted to State Board • Required to disburse at least 90% of donations as scholarships within 36 months of receiving such donations • Scholarships may be made payable to both the parent and the nonpublic school • Must submit annual report to State Board Current Status: USDs • 1,053 eligible students in 13 USDs • KCK: 441 • Wichita: 421 • Topeka: 121 • Other: 70 Current Status: Scholarship Organizations Eligible Students by Percent • 10 registered SGOs 0.8% 0.5% 0.4% 0.4% • Catholic Education 3.1% Foundation: 571 eligible 8.5% students • Support for Catholic Schools: 339 eligible students 54.2% • Christian Faith Centre, Inc.: 32.2% 89 eligible students • ACE Scholarships SGO: 33 eligible students Catholic Education Foundation Support for Catholic Schools Christian Faith Centre, Inc. ACE Scholarships SGO, Kansas LLC The Independent School Prime Fit Youth Foundation Renewanation Success for Kansas Students By the Numbers: Scholarships & Tax Credits Other States 16 states have a tax credit scholarship program Iowa: • Oklahoma: • School Tuition Organization Tax Credit • Oklahoma Equal Opportunity Education • Credit of 65 percent available to individual Scholarship Act taxpayers and individuals who are shareholders • Provides a tax credit up to 50 percent of the of a corporation that elects to have the tax total amount of contributions, not to exceed credit passed to individual shareholders. specific limits by entity. • A student may qualify for a scholarship if the • Available to students with household student’s family income is not more than four incomes less than 300 percent of the times the most recent federal poverty amount required to qualify for the federal guidelines. free or reduced lunch program or who are • School must adhere to federal eligible to attend a school designated for nondiscrimination provisions and be accredited improvement under No Child Left Behind. by the Iowa Department of Education or by • School must be a private school in Cognia (formerly AdvancEd), the American Oklahoma, and: Montessori Society, the Association of Christian • Be accredited by the Oklahoma State Board of Schools International, Christian Education (State Board) or any accrediting SchoolsInternational, the Independent Schools association approved by the State Board; Association of the Central States, or the • Be in compliance with all applicable health and National Lutheran School Accreditation. safety laws and codes; • Have a stated policy against discrimination in admissions based on race, color, national origin, or disability; and • Ensure academic accountability to parents and guardians of students through regular progress reports. NORMA VOLKMER Fiscal Analyst [email protected] Room 68-West—Statehouse Topeka, KS 66612-1504 Phone: (785) 296-3181 kslegislature.org/klrd 68-West–Statehouse | 300 SW 10th Ave. | Topeka, Kansas 66612-1504 (785) 296-3181 [email protected] kslegislature.org/klrd January 20, 2021 To: House Committee on K-12 Education Budget From: Norma Volkmer, Fiscal Analyst Re: Scholarship Tax Credit Programs SCHOLARSHIP TAX CREDIT PROGRAMS Scholarship tax credit programs (tax credit programs) allow individuals or corporations to allocate a portion of their owed state taxes to private nonprofit organizations that issue private school scholarships to K-12 students.1 The individual or corporation donates to such organization and receives a tax credit for the donation. The organization uses donations to provide scholarships to students. Sixteen states have scholarship tax credit programs: Kansas, Alabama, Arizona, Florida, Georgia, Indiana, Iowa, Louisiana, Nevada, New Hampshire, Oklahoma, Pennsylvania, Rhode Island, South Carolina, South Dakota, and Virginia.2 These laws address qualifications of the taxpayer, students, and schools as well as amounts authorized for tax credits. Kansas The Tax Credit for Low Income Students Scholarship Program (Program) provides scholarships through scholarship granting organizations of up to $8,000 per school year to eligible students to attend schools of their parents’ choice.3 A student must be defined as at-risk and attending a public school, or was eligible to receive a scholarship and has not graduated from high school and is under 21 years of age; a Kansas resident; and enrolled in a public school in the previous school year or eligible to be enrolled in any public school if the student is under 6 years old. Additionally, the Program requires the students’ public school to be identified by the Kansas State Board of Education (State Board) as among the lowest 100 performing elementary schools in student achievement among all elementary schools for the current school year. 1 National Conference of State Legislatures, Fiscal Impact of Vouchers and Scholarship Tax Credits, November 28, 2013, https://www.ncsl.or-/research/education/fiscal-impact-of-school-vouchers-and- scholarship-tax-credits.aspx. 2 Id. 3 KSA 72-4351 to 72-4357 To receive scholarships from a scholarship granting organization, a school must be nonpublic, providing education to elementary and secondary students, notify the State Board of its intention to participate in the Program, and comply with all Program requirements. As of July 1, 2020, such schools must be accredited by the State Board or a national or regional accrediting agency recognized by the State Board for the purpose of satisfying the teaching performance assessment for professional licensure. Scholarships may be used for tuition, fees, expenses, and transportation (if applicable). Taxpayers may claim a nonrefundable tax credit equal to 70 percent of the amount contributed to a scholarship granting organization. A taxpayer may contribute up to $500,000 per tax year, and Kansas law caps the total amount of tax credits that may be claimed per year at $10 million. A taxpayer may carry over any unused portion of the tax credit to succeeding tax years until the total amount of the tax credit has been used. Alabama Alabama provides a tax credit in an amount equal to 100 percent of the taxpayer’s total contributions to a scholarship granting organization for educational scholarships during the taxable year the tax credit is claimed.4 The taxpayer can claim a tax credit for up to 50 percent of their tax liability, not to exceed $50,000 per individual taxpayer or married couple filing jointly. Students must qualify for the federal free and reduced lunch program, be under the age of 19, and be zoned for a public school designated as failing in order to qualify for a scholarship. To receive student scholarships, a school must be either a public school outside of the student’s resident school district that is not considered failing or a qualifying nonpublic school. Such schools must notify the Alabama Department of Revenue of their intention to participate in the scholarship program. To qualify, a nonpublic school must be accredited by one of the six regional accrediting agencies or by the National Council for Private School Accreditation, AdvancEd, the American Association of Christian Schools, or one of such agencies’ partner accrediting agencies. A non- accredited nonpublic schools may qualify if it: ● Has been in existence for at least three years; ● Has daily attendance of at least 85 percent over a two-year period; ● Has a minimum 180-day school year (or the hourly equivalent); ● Has a day length of at least 6.5 hours; ● Requires all students to take the Stanford Achievement Test (or its equivalent); ● Requires all candidates for graduation to take the American College Test before graduation; 4 25 Ala. Code § 16-6D-1 et. seq. Kansas Legislative Research Department 2 Tax Credit Programs – January 20, 2021 ● Requires students in grades 9 through