Purpose

To establish and regulate scholarship-granting organizations that help fund student scholarships, and to participate in a federal tax credit program related to such organizations. The measure sets criteria for what counts as a scholarship-granting organization and outlines how these organizations must operate and report.

Main provisions

• Definition and eligibility of scholarship-granting organizations
  • Must be a nonprofit corporation exempt from federal income tax under section 501(c)(3) and follow Treasury rules and guidance for such organizations.
  • Must maintain separate accounts for qualified contributions.
  • Must award scholarships to at least ten students, with no requirement that all students attend the same school.
  • Must spend at least 90% of income received on student scholarships.
  • Must prioritize returning students and siblings of current recipients.
  • Must not earmark funding for specific students.
  • Must verify household income and family size.
  • Must avoid self-dealing and must not award scholarships to disqualified persons.
• Annual reporting and public listing
  • By July 1 each year, scholarship-granting organizations must notify the Department of Education that they are in compliance with Treasury rules and guidance.
  • The Department of Education must post a list of qualifying scholarship-granting organizations on its website after the organizations report their eligibility.
• Relationship to nonpublic schooling
  • The measure clarifies that nothing in this section grants the Department of Education or any school district additional authority over nonpublic schools, nonpublic school students, or their parents.

Administrative and compliance details

• The bill ties the eligible organizations to a federal tax credit program (Public Law 119-21, section 7041) and explicitly requires adherence to Treasury rules and guidance.
• It creates a formal process for annual verification and public transparency (annual notice to the Department of Education; public listing of eligible organizations).
• It sets explicit operating and governance standards (no self-dealing, verification of income, no earmarking, at least 90% of income spent on scholarships).

Implications and scope

• Expands the framework for how private, nonprofit organizations can provide scholarships to Minnesota students.
• Increases transparency by requiring a public list of qualifying organizations.
• Adds specific minimum criteria to ensure scholarships reach multiple students and are used for actual scholarships rather than administrative or other purposes.
• Limits state-level control over nonpublic schools, maintaining a boundary around supervision of nonpublic education.

Potential considerations

• Stakeholders may assess whether the ten-student minimum and 90% spending threshold effectively reach students across districts.
• Organizations must maintain compliance with federal Treasury rules and reporting requirements.

Relevant Terms

• scholarship-granting organization
• nonprofit corporation
• 501(c)(3)
• United States Internal Revenue Code
• Treasury rules and guidance
• qualified contributions
• separate accounts
• scholarships
• at least ten students
• not all from the same school
• returning students
• siblings of current recipients
• no earmarking
• household income
• family size
• self-dealing
• disqualified persons
• Department of Education
• annual notification (by July 1)
• list of qualifying organizations
• nonpublic schooling
• tax credit
• Public Law 119-21
• section 7041