HF3490

Purpose

Establishes and regulates scholarship-granting organizations (SGOs) in Minnesota to participate in a federal tax credit program. The bill defines what counts as an SGO, sets operating and reporting requirements, and clarifies that the state will not place extra controls on nonpublic schools or families involved in nonpublic schooling.

Key Provisions

• Definition and eligibility of scholarship-granting organizations

  • An SGO must be a nonprofit corporation (501(c)(3)) that operates exclusively for charitable purposes.
  • It must comply with federal Treasury rules and guidance for SGOs and keep separate accounts for qualified contributions.
  • It must award scholarships to at least ten students, with no requirement that all students attend the same school.
  • At least 90% of the organization’s income must be spent on student scholarships.
  • It should prioritize returning students and siblings of current recipients.
  • It cannot earmark funding for specific students and must verify household income and family size.
  • It must avoid self-dealing and not award scholarships to disqualified persons.

• Annual reporting and transparency

  • By July 1 each year, an SGO must notify the Minnesota Department of Education (MDE) that it is in compliance with applicable Treasury rules and guidance.
  • MDE must post a list on its website of qualifying SGOs that have reported eligibility.

• Effects on nonpublic schooling

  • The act does not authorize any additional state or district control or supervision over nonpublic schools, nonpublic school students, or their parents.

Significance and Policy Implications

• Creates a formal framework for SGOs to operate in Minnesota and participate in the federal tax-credit system.
• Increases accountability and public transparency through annual compliance reporting and a published list of eligible SGOs.
• Balances expanded scholarship opportunities with safeguards against misuse, such as earmarking funds or self-dealing.
• Keeps existing restrictions on nonpublic schools’ oversight by the state and school districts, focusing new requirements on SGOs and their operations.

How it changes current law

• Codifies the concept of scholarship-granting organizations into Minnesota law with specific criteria for eligibility, spending, and operations.
• Establishes annual reporting obligations to the Department of Education and public posting of qualifying SGOs.
• Clarifies that participation in the program does not extend state control over nonpublic schools.

Practical impact

• Donors and families may see expanded scholarship options through qualified SGOs.
• SGOs must maintain strict governance and financial practices to remain eligible.
• Public access to which SGOs are eligible increases transparency around funded scholarships.

Terms and concepts emphasized

• Scholarship-granting organization (SGO)
• 501(c)(3) nonprofit
• Qualified contributions
• Separate accounts
• Scholarships to at least ten students
• 90 percent of income toward scholarships
• Returning students and siblings
• No earmarking
• Verify household income and family size
• Self-dealing
• Disqualified persons
• Minnesota Department of Education (MDE)
• Public Law 119-21 section 70411
• Treasury rules and guidance
• Nonpublic schooling

Relevant Terms - scholarship-granting organization - nonprofit corporation - 501(c)(3) - qualified contributions - separate accounts - scholarships - returning students - siblings of current recipients - earmarking - household income - family size - self-dealing - disqualified persons - Department of Education (MDE) - list of qualifying organizations - nonpublic schooling - tax credit - Public Law 119-21 section 70411 - Treasury rules and guidance - Minnesota Statutes chapter 127A