State Representative Carl Bearden (R-St. Charles) has introduced legislation designed to expand educational opportunities for students residing in the public school districts of the City of St. Louis, Kansas City and Wellston.
HB 1783 offers a state income tax credit to individuals or businesses that contribute to organizations like the St. Louis Today and Tomorrow Foundation or the Kansas City Central City Schools Fund that offer K-12 scholarships to allow financially needy students to attend public schools outside their school district or nonpublic schools such as Catholic schools.
Eligible Student:
The proposed “Missouri Student Success Scholarships Tax Credit Program” would offer assistance to students that meet the following criteria:
- A member of a household whose parents’ total annual income in the year before a scholarship is received is no more than one hundred and thirty-five percent of level that would make the student eligible for a reduced price lunch pursuant to the National School Lunch program. For a family of three that would be an annual income of no more than $40,185;
- A grade point average that is 2.5 or lower on a four-point scale;
- Eligible to attend a public school in the semester before an educational scholarship is received, or is starting school in Missouri for the first time. Additionally, first-time scholarship recipients receving scholarships for grades 1-12 who resided in Missouri in the previous semester must have attended a public school for part of that semester. In subsequent years the student may continue to receive a scholarship even though he or she continuously attended a nonpublic school; and
- Resides in the City of St. Louis, Kansas City or the school district of Wellston. (A revision to the bill is expected to clarify that in Kansas City the student must reside in the Kansas City school district rather than in one of the many other school districts located within Kansas City. HB 1783 targets these three districts because they are not fully accredited by the state of Missouri and students in these districts score significantly below students in other districts on statewide assessments).
After receiving an initial scholarship a student would remain eligible for scholarships in subsequent school years regardless of family income, until the student graduates from high school or reaches twenty-one years of age.
(See Section 135.650. 2. (4) and Section 135.652. 1. (5)).
Qualified School:
In order to accept scholarship students a school must be a “qualified school,” as is defined in Section 135.650. 2. (7) as “either a public elementary or secondary school in this state
that is outside of the district in which a student resides, or a nonpublic elementary or secondary school in the state that complies with all requirements of the program,” which are as follows:
- Comply with state laws relating to criminal background checks for employees and exclude from employment any person prohibited by state law from working in a nonpublic school. (Current state law requires all state certified teachers and administrators, including those employed in nonpublic schools, to undergo criminal background checks; however, there is no criminal background check requirement made by the state of Missouri for non-state certified employees serving in nonpublic schools).
- Adminster the statewide assessment of students required of public schools or a nationally recognized norm-referenced assessment (such as the Iowa Basic Skills Test). This requirement is waived for students with disabilities that have an individual education plan specifying that such assessments would not be appropriate. The assessment results shall be provided to the parents of scholarship students;
- Comply with all health and safety laws or codes that apply to nonpublic schools;
- Hold a valid occupancy permit if required by its local municipality;
- Certify it will not discriminate in admissions on the basis of race, color, national origin, religion or disability; and,
- Provide academic accountability to parents by regularly reporting on the student’s progress.
(See Section 135.653 and Section 135.652. 2 (4)).
Scholarship Granting Organizations:
An organization that wishes to be considered a “scholarship granting organization” must meet several requirements, the most significant of which are as follows:
- Notify the Missouri Department of Economic Development (DED) of its intent to participate in the program;
- Be exempt from federal income tax pursuant to section 501(c)(3) of the Internal Revenue Code;
- Provide a DED approved receipt to taxpayers for contributions made to the organization;
- Ensure that at least ninety percent of its revenue from contributions is spent on educational scholarships;
- Ensure that one hundred percent of first-time recipients of scholarships were not continuously enrolled in a nonpublic school during the previous semester, or are eligible for kindergarten;
- Distribute the scholarship payments four times a year;
- Upon request of DED provide criminal background check information on all employees and board members and exclude from employment or goverance any individual that might reasonably pose a risk to the appropriate use of contributed funds;
- Ensure that the scholarships are portable during the school year and can be used at any qualified school that accepts the eligible student according to a parent’s wishes. If an eligible student moves to a new qualified school during the school year, the scholarship may be prorated;
- Submit an annual audit to the DED;
- Ensure that qualified schools accepting scholarship students meet applicable requirments; and,
- Not provide scholarships to any eligible student to attend any school with paid staff or board members, or relatives in common with the scholarship granting organization.
Before a scholarship organization may raise contributions for scholarships, it must demonstrate to DED an ability to receive applications and have identified potential vacancies in qualified schools.
(See Section 135.652).
Each scholarship granting organization shall provide individual scholarships that do not exceed an average of five thousand dollars each, which amount shall annually be adjusted for inflation based on the Consumer Price Index to the nearest fifty-dollar increment.
(See Section 135.653. 6)
Claiming the Tax Credits:
For all tax years beginning on or after January 1, 2006, an individual taxpayer or a business taxpayer may claim a state income tax credit for up to one-hundred percent of the contribution made to a scholarship granting organization. For example, a $500 tax credit may be claimed for a contribution of $500. A tax credit may not be claimed for any contribution made by the taxpayer on behalf of the taxpayer’s dependent. The credit may not exceed the taxpayer’s state tax liability for the tax year for which the credit is claimed. However, the credit may be carried forward for three subsequent taxable years.
The cumulative amount of tax credits that may be awarded annually shall not exceed forty million dollars, which amount shall be adjusted annually for inflation based on the Consumer Price Index. DED is required to develop a procedure to distribute the tax credits among taxpayers “in the order in which the claim for the tax credit was received by the department.”
DED shall certify to each scholarship granting organization the amount of eligible tax credits that it can market to taxpayers interested in making a contribution to their organization.
(See Section 135.651)
Study of program:
HB 1783 authorizes a six year study to be conducted by qualified researchers to assess: parental satisifaction: student satisfaction: the overall impact of the program on public school students and on the resident school districts and the schools from which students transferred; the impact of the program on public and private school capacity, availability, and quality of service; and each participating student’s performance on annual assessment instruments before and after entering the program. The joint committee on legislative research is authorized to contract with qualified researchers to conduct the study. The general assembly may require periodic reports from the researchers.
(See Section 135.655).
For more information:
The full text of HB 1783, the fiscal note, the bill’s current status and additional information may be reviewed by visiting the Missouri House of Representatives web-site at the following address: www.house.state.mo.us/bills061/bills/HB1783.HTM.
Other scholarship tax credit bills:
State Rep. Jane Cunningham (R-Chesterfield) has also filed a somewhat different bill relating to authorizing scholarship tax credits. Refer to HB 1479. State Senator Luann Ridgeway (R-Smithville) has filed SB 962, which is very similar to HB 1783.
Understanding the difference between tax deductions and tax credits:
A tax deduction reduces a person’s taxable income before application of the applicable tax rate. In contrast, a tax credit is claimed after the taxable income has been computed and reduces taxes by the face value of the credit. For example, if the tax credit is for $500, then $500 is subtracted from the taxes due. If the tax credit exceeds the state tax liability, HB 1783 allows the taxpayer to carry over the remaining credit for three subsequent taxable years. |
