Sen. Jim Wilson filed legislation this week to help ensure more of Oklahoma's students have access to a high quality education. Senate Bill 1121 modifies the amount of tax credit allowed under the Equal Opportunity Education Scholarship Act and also closes a loophole to ensure that funds are only used for low income children.
"My intent with this bill is to stop potential abuse of the scholarship program that is supposed to help low income students attend better schools," said Wilson, D-Tahlequah. "Unfortunately, under the current rules there are families who make over $100,000 a year who can qualify for the program. That isn't right. We need to tighten up the language to ensure these scholarships are available only to families who are truly living in poverty and in need of assistance."
Wilson explained the program was created to provide children who live in under performing school districts the opportunity to be able to attend a better school. Currently the law says that any family making up to 300% of the child nutrition income eligibility guidelines set by the U.S. Department of Agriculture may qualify for scholarships. Reduced lunch price guidelines are 185% of poverty or $41,348 annual income for a family of four which when multiplied by three allows the family to make just over $124,000 per year and still qualify for a scholarship.
Wilson further pointed out that the law currently also allows a contributing taxpayer to claim a tax credit for donating to a scholarship fund with virtually no cost. The first year the contributor can actually make a profit. The law allows the taxpayer to take a 75% tax credit for the amount contributed if an agreement is made for the same contribution in the subsequent two years. The same contribution can also serve as a deduction since it is being made to a 501c3 (tax exempt) organization. The taxpayer can deduct a federal tax liability up to 35% and a state liability of up to 5.25%. Therefore, the taxpayer could easily receive a tax break of 115.25% the first year with a three year average of 98.5%.
SB 1121 would remove the 300% multiplier and would base scholarship eligibility on whether the applicants qualify for free and reduced lunch ensuring they are truly low income. The bill also proposes to lower the tax credit for scholarship donations to ten percent, which would still allow the taxpayer an effective break of 50% when coupled with the federal credit.