Minnesota would join a federal tax credit program for scholarships

Minnesota would elect to participate in the federal scholarship tax credit program. Minnesota’s income-tax definition of the federal tax code would also include that federal section. Participation would follow section 70411 of Public Law 119-21. Both sections would take effect the day after final enactment. Incorporated federal tax changes would apply retroactively from their federal effective dates.

Qualifying nonprofits would award scholarships to at least ten students and spend at least 90 percent of their income on student scholarships. Covered organizations would be charitable nonprofit corporations exempt from federal income tax under section 501(c)(3). Organizations would follow federal Treasury rules, keep qualifying contributions in separate accounts, and check household income and family size. They would prioritize returning students and current recipients’ siblings. They could not earmark funding for specific students. They would avoid transactions that improperly benefit insiders and could not award scholarships to people disqualified under the program’s rules. Recipients would not all have to attend the same school. These requirements would take effect the day after final enactment.

The Minnesota Department of Education would publish a list of qualifying scholarship organizations that report their eligibility. The list would appear on the Minnesota Department of Education’s website. Each organization would notify the department annually that it complies with federal Treasury rules and guidance. This section would not authorize the department or school districts to add oversight or restrictions on private schools, their students, or their students’ parents. These provisions would take effect the day after final enactment. Organizations would submit their annual compliance notice by July 1.