HF3491

Purpose

• This bill creates and regulates scholarship-granting organizations (SGOs) in Minnesota to participate in a federal tax credit program. It aims to expand private funding for student scholarships while setting rules to ensure responsible operation and transparency.

Main Provisions

• Definition and participation

  • Minnesota is designated as a covered state that participates in the federal tax credit program under Public Law 119-21, section 70411.
  • A scholarship-granting organization (SIGO) must be a nonprofit corporation organized for charitable purposes (tax-exempt under 501(c)(3)) and comply with U.S. Treasury rules for SGOs.

• How SGOs must operate

  • Maintain separate accounts for qualified contributions.
  • Award scholarships to at least ten students, with flexibility on whether all students attend the same school.
  • Spend at least 90% of income received on student scholarships.
  • Prioritize scholarships for returning students and siblings of current recipients.
  • Do not earmark funding for specific students.
  • Verify household income and family size of scholarship recipients.
  • Avoid self-dealing and do not award scholarships to disqualified persons.

• Annual reporting and transparency

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

• Effects on nonpublic schooling

  • The bill states that nothing in this section gives the Department of Education or any school district additional control or restrictions over nonpublic schools, nonpublic school students, or their parents.

Compliance and Oversight

• SGOs are subject to federal rules (Treasury guidance) and must regularly report to the Minnesota Department of Education.
• The state will publish eligible SGOs, enabling families to identify which organizations qualify for the program.

Significance and Potential Impact

• Expands private scholarship options for Minnesota students through a tax-credit framework while establishing clear requirements for accountability and use of funds.
• Aims to ensure most donor funds go toward scholarships, with protections against misallocation and conflicts of interest.
• Keeps state oversight limited to confirming eligibility and publication, without increasing control over nonpublic schools.

Significance for Stakeholders

• Families may gain access to more scholarship opportunities.
• SGOs face new operational standards and annual reporting.
• Public schools and nonpublic schools are not subjected to extra state control beyond the reporting and eligibility process.

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Relevant Terms - scholarship-granting organization (SGO) - nonprofit corporation - 501(c)(3) - United States Treasury rules and guidance - qualified contributions - awards scholarships - at least ten students - returning students - siblings of current recipients - earmark / earmarking - self-dealing - disqualified persons - household income and family size verification - Department of Education (Minnesota) - list of qualifying SGOs - nonpublic schooling - Public Law 119-21, section 70411