Who can claim the Kansas low income students scholarship tax credit, and how much is it?

Plain-English summary

Kansas Notice 17-08 explains changes made by Senate Bill 19 (2017) to the tax credit scholarship program -- which allows a credit equal to 70% of contributions to a scholarship granting organization that pays tuition for eligible students to attend a qualified Kansas school. (See Notice 14-14 for the program's background.)

Now open to individuals. Under prior law the credit could be claimed only against corporate income tax, privilege tax (financial institutions), or insurance premium tax. The amendment to K.S.A. 72-99a07 makes the credit also available to individual income taxpayers for tax years commencing after December 31, 2016; individual contributions can begin July 1, 2017.

A new contribution cap. Also effective for tax years after December 31, 2016, the total contributions for any taxpayer cannot exceed $500,000 for any tax year.

Redefined program terms. Section 96 amended K.S.A. 72-99a02, effective July 1, 2018, to change the definitions of "eligible student" (tied to at-risk status and prior public-school enrollment), "public school" (lowest-performing Title I schools), and "qualified school" (nonpublic schools meeting program and, after July 1, 2020, accreditation requirements).

What this means for you

Individual income taxpayers

• Beginning with tax year 2017, you can claim the 70% credit for contributions to a scholarship granting organization (contributions could start July 1, 2017), up to $500,000 per year.

Corporations, banks, and insurers already using the credit

• You still claim the 70% credit against corporate income, privilege, or premium tax, now subject to the $500,000 annual cap.

Scholarship granting organizations and schools

• Note the redefined "eligible student," "public school," and "qualified school" terms effective July 1, 2018, and the accreditation requirement for qualified schools on and after July 1, 2020.

Common questions

How big is the credit? 70% of the amount contributed to a scholarship granting organization.

Can individuals claim it now? Yes -- for tax years after December 31, 2016, with contributions able to begin July 1, 2017.

Is there a cap? Yes -- contributions for any taxpayer cannot exceed $500,000 per tax year.

When do the new definitions take effect? July 1, 2018.

Citations and references

• Senate Bill 19 (2017), Section 96 -- amended K.S.A. 72-99a02 to redefine eligible student, public school, and qualified school (effective July 1, 2018).
• K.S.A. 72-99a07 -- extended the 70% credit to individual income taxpayers for tax years after December 31, 2016 and capped contributions at $500,000 per taxpayer per year.
• See Notice 14-14 for program background.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: Notice 17-08

Original ruling text

Tax Policy Group Phone: 785-296-3081
915 SW Harrison St FAX: 785-296-7928
Topeka KS 66612-1588 www.ksrevenue.org
Samuel M. Williams, Secretary Department of Revenue Sam Brownback, Governor

                                       NOTICE 17-08

                 TAX CREDIT FOR LOW INCOME STUDENTS SCHOLARSHIP
                                  (JULY 1, 2017)

During the 2017 Legislative Session Senate Bill 19 was enacted. The Bill amends the tax credit
that is available for certain contributions to a scholarship granting organization which provides
eligible students with scholarships to pay all or a portion of the tuition to attend a qualified school
in Kansas. Please see Notice 14-14 for additional information regarding this program and credit.

Section 96 of the Bill amends K.S.A. 72-99a02 to change the definition of an "eligible student",
effective July 1, 2018. As amended, subsection (d) provides:

        (d) "Eligible student" means a child who:
        (1)(A) Qualifies as an at-risk pupil as defined in K.S.A. 72-6407, prior to its
  repeal Is an at-risk student, as defined in section 4, and amendments thereto, and who
  is attending a public school; or (B) has been eligible to receive an educational
  scholarship under this program and has not graduated from high school or reached 21
  years of age;
        (2) resides in Kansas while eligible for an educational scholarship; and
        (3) (A) was enrolled in any public school in the previous school year in which an
  educational scholarship is first sought for the child; or (B) is eligible to be enrolled in
  any public school in the school year in which an educational scholarship is first sought
  for the child and the child is under the age of six years.

As noted in the new language, Section 4 of the Bill defines the term "at-risk student". It provides

       (c)(1) "At-risk student" means a student who is eligible for free meals under the
  national school lunch act, and who is enrolled in a school district that maintains an
  approved at-risk student assistance program.
       (2) The term "at-risk student" shall not include any student enrolled in any of the
  grades one through 12 who is in attendance less than full time, or any student who is
  over 19 years of age. The provisions of this paragraph shall not apply to any student
  who has an individualized education program.

Section 96 also amends K.S.A. 72-99a02 to change the definitions of "public school" and
"qualified school". As amended, subsections (g) and (h) provide:

       (g) "Public school" means a school that would qualify as either a title I focus
  school or a title I priority school as described by the state board under the elementary

 and secondary education act flexibility waiver as amended in January 2013 and is
 operated by a school district, and identified by the state board as one of the lowest 100
 performing schools with respect to student achievement among all schools operated by
 school districts for the current school year.
       (h) "Qualified school" means any nonpublic school that provides education to
 elementary or secondary students, has notified the state board of its intention to
 participate in the program and complies with the requirements of the program. On and
 after July 1, 2020, a qualified school shall be accredited by the state board or a national
 or regional accrediting agency that is recognized by the state board for the purpose of
 satisfying the teaching performance assessment for professional licensure.

The scholarship program is financed through a tax credit in an amount equal to 70% of the amount
contributed for scholarships. Under prior law, the credit could be claimed against corporate
income, premium (insurance companies) or privilege (financial institutions) tax liability. Effective
for tax years commencing after December 31, 2016, the credit is also available to individual
income taxpayers. Contributions from individual income taxpayers can begin on July 1, 2017.
Also effective for tax years commencing after December 31, 2016, the total amount of
contributions for any taxpayer cannot exceed $500,000 for any tax year. The new language, which
amends K.S.A. 2016 Supp. 72-99a07(a) provides:

        (a) (1) There shall be allowed a credit against the corporate income tax liability
 imposed upon a taxpayer pursuant to the Kansas income tax act, the privilege tax
 liability imposed upon a taxpayer pursuant to the privilege tax imposed upon any
 national banking association, state bank, trust company or savings and loan association
 pursuant to article 11 of chapter 79 of the Kansas Statutes Annotated, and amendments
 thereto, and the premium tax liability imposed upon a taxpayer pursuant to the
 premiums tax and privilege fees imposed upon an insurance company pursuant to
 K.S.A. 40-252, and amendments thereto, for tax years commencing after December 31,
 2014, and ending before January 1, 2017, an amount equal to 70% of the amount
 contributed to a scholarship granting organization authorized pursuant to K.S.A. 2016
 Supp. 72-99a01 et seq., and amendments thereto.
        (2) There shall be allowed a credit against the tax liability imposed upon a
 taxpayer pursuant to the Kansas income tax act, the privilege tax liability imposed upon
 a taxpayer pursuant to the privilege tax imposed upon any national banking
 association, state bank, trust company or savings and loan association pursuant to
 article 11 of chapter 79 of the Kansas Statutes Annotated, and amendments thereto,
 and the premium tax liability imposed upon a taxpayer pursuant to the premiums tax
 and privilege fees imposed upon an insurance company pursuant to K.S.A. 40-252, and
 amendments thereto, for tax years commencing after December 31, 2016, an amount
 equal to 70% of the amount contributed to a scholarship granting organization
 authorized pursuant to K.S.A. 2016 Supp. 72-99a01 et seq., and amendments thereto.
 In no event shall the total amount of contributions for any taxpayer allowed under this
 subsection exceed $500,000 for any tax year.

                              Taxpayer Assistance

Additional copies of this notice, forms or publications are available from our web site,
www.ksrevenue.org. If you have questions about this Notice, please contact:

                          Taxpayer Assistance Center
                         Kansas Department of Revenue
                           Topeka, KS 66612-1588
                             Phone: 785-368-8222
                              Fax: 785-291-3614