Okla. Admin. Code § 710:50-15-172

Current through Vol. 42, No. 7, December 16, 2024

Section 710:50-15-172 - [Effective until 9/14/2025] Private school tax credit

(a)General provisions. For tax year 2024, and fiscal year ending June 30, 2026, and subsequent fiscal years ending June 30, an income tax credit is allowed for qualified expenses paid for an eligible student to attend an accredited private school.

(b)Qualified expenses. Qualified expenses for the private school tax credit include tuition and fees at an accredited private school. Fees may, but are not limited to, include enrollment, registration, or application fees; textbook fees; technology fees; activity fees; testing and assessment fees; and fees paid for school uniforms, if paid directly to the school. Qualified expenses for the private school tax credit do not include tuition and fees paid with a scholarship or otherwise reduced or discounted by the school.

(c)Amount of credit. For an eligible student who attends or will attend an accredited private school, the credit amount is equal to the amount of tuition and fees charged to or will be paid by the taxpayer for attending the accredited private school for the full school year, as stated on the enrollment verification form, subject to the following limitations:

(1) The maximum credit amount allowed is $7,500 if the combined adjusted federal AGI of the parents or legal guardians of the eligible student during the second preceding tax year does not exceed $75,000;

(2) The maximum credit amount allowed is $7,000 if the combined adjusted federal AGI of the parents or legal guardians of the eligible student during the second preceding tax year is more than $75,000 but does not exceed $150,000;

(3) The maximum credit amount allowed is $6,500 if the combined adjusted federal AGI of the parents or legal guardians of the eligible student during the second preceding tax year is more than $150,000 but does not exceed $225,000;

(4) The maximum credit amount allowed is $6,000 if the combined adjusted federal AGI of the parents or legal guardians of the eligible student during the second preceding tax year is more than $225,000 but does not exceed $250,000; or

(5) The maximum credit amount allowed is $5,000 if the combined adjusted federal AGI of the parents or legal guardians of the eligible student during the second preceding tax year is more than $250,000.

(6) The maximum credit amount allowed is $7,500 for taxpayers who receive income-based government benefits, including the Supplemental Nutrition Assistance Program (SNAP), Temporary Assistance for Needy Families (TANF), or SoonerCare/SoonerSelect, as of the date of the tax credit application.

(d)Annual cap and limitation of credit.

(1) The total amount of private school tax credits authorized by 70 O.S. § 28-101(C)(1) is subject to the following caps:

(A) For tax year 2024, the total amount of credits shall not exceed $150,000,000.

(B) For the period of January 1, 2025, through June 30, 2025, the total amount of credits shall not exceed $100,000,000.

(C) For fiscal year ending June 30, 2026, and subsequent fiscal years ending June 30, the total amount of credits shall not exceed $250,000,000.

(2) The total amount of credits allowed may be reduced pursuant to the provisions 70 O.S. § 28-101(J).

(e)Claiming the private school tax credit.

(1)Application. If an Oklahoma taxpayer incurs or will incur a qualified expense on behalf of an eligible student during the school year, the taxpayer may be eligible to claim the private school tax credit. To apply for the credit, the taxpayer shall complete and submit an online application for each eligible student and include the following documentation and information with the application:

(A) The name, address, and social security number or individual taxpayer identification number (ITIN) of the taxpayer.

(B) The name, address, date of birth, and social security number or ITIN of the eligible student.

(C) If the taxpayer is not the parent or legal guardian of the eligible student, the taxpayer shall provide a signed parental consent form to allow the taxpayer to apply for the credit on behalf of the eligible student.

(D) Income verification of the parents or legal guardian of the eligible student, according to one of the following:

(i) Verification of federal AGI for the second preceding tax year of the parents or legal guardians of the eligible student, which may include providing copies of the applicable Oklahoma income tax return(s) or federal income tax return(s). If, at the time of submission of the tax credit application, the taxpayer has not filed the second preceding years' tax return, but had a filing requirement, and therefore AGI cannot be verified, the tax credit application will be denied and must be resubmitted once the second preceding tax year return is filed. The resubmission date and time of a complete application will determine the applicant's place in line.

(ii) If the parents or legal guardians had no tax filing requirement for the second preceding tax year, the taxpayer shall attest within the application they did not have a tax filing requirement.

(iii) If a taxpayer is a recipient of income-based government benefits including the Supplemental Nutrition Assistance Program (SNAP), Temporary Assistance for Needy Families (TANF), or SoonerCare/SoonerSelect, the taxpayer shall not be required to provide additional income verification. The taxpayer must attach documentation that shows he or she is a current recipient of the above-listed government benefits at the time of the tax credit application. Failure to attach the required documentation, without any other income verification documentation, may result in denial of the application. The resubmission date and time of a complete application will determine the applicant's place in line.

(E) An enrollment verification form completed by the private school in which the eligible student is enrolled or is expected to enroll with the following information:

(i) The name, address and date of birth of eligible student;

(ii) The designated semester(s) and school year during which the qualified expenses will be paid;

(iii) The name and address of the private school;

(iv) The name and telephone number of a contact person(s) with the private school; and

(v) The amount of qualified tuition and fees to be charged the taxpayer for the eligible student during the school year, less any scholarship or tuition and fees discounted or otherwise reduced by the school.

(2)Review and submission. The applicant is responsible for reviewing the information contained within the enrollment verification form and verifying its accuracy. Once the enrollment verification form is submitted with an application, the information included within the enrollment verification form cannot be changed. In order to adjust any information after an application has been submitted, a taxpayer must withdraw their application, request a new enrollment verification form from the private school, and submit a new application. The date and time of the new application will be used to determine applicant's place in line for the credit.

(3)Application period opening date. Beginning with the 2025-2026 school year and subsequent school years, the application period will open on February 15, at 9:00 a.m. (CST), prior to the beginning of the applicable school year. To ensure payment of the credit by August 30, processable applications must be submitted no later July 15. If February 15 falls on a Saturday, Sunday or legal holiday, the application process will open on the next day that is not a Saturday, Sunday or legal holiday.

(4)Priority consideration. For any eligible student whose parents or legal guardians have a combined federal AGI that does not exceed $150,000, processible applications must be submitted to the Tax Commission on or before the sixtieth (60^th) calendar day following the opening of the application period to receive priority consideration as authorized by 70 O.S. § 28-101(E). Priority will be given to eligible students of taxpayers who received the credit in the prior year and whose parents or legal guardians have a combined federal AGI that does not exceed $150,000. After all timely-filed applications entitled to priority consideration have been reviewed and processed, the Tax Commission will review and process remaining applications for the credit in the order received, provided the Annual Cap has not been reached.

(5)Notification of approval or denial. Notification of tax credit approval will be sent to the applicant by email once a determination has been made that the application is complete and qualifies for the credit. For those applications that are denied, a letter will be mailed to the applicant, stating the reason for denial.

(6)Application for review hearing. If a taxpayer's application for the credit is denied, the taxpayer may request a hearing by filing OTC Form L-26, Application for Commission Hearing pursuant to the provisions of 68 O.S. § 207(c).

(A) The following supporting information and documentation must be included with the request:

(i) A description of the tax credit applied for and the amount in controversy;

(ii) A clear explanation of the alleged error(s) committed by the Tax Commission;

(iii) The legal authority the taxpayer intends to rely upon at hearing;

(iv) A statement of the relief requested; and

(v) A list of witnesses, including names and addresses, and the request to subpoena witnesses if so desired.

(B) The application for hearing and supporting documentation may be submitted either online or by mail addressed to Oklahoma Tax Commission, PO Box 269060, Oklahoma City, OK 73126.

(C) The application for hearing and documentation will be reviewed by the Income Tax Accounts Division and Legal Division of the Oklahoma Tax Commission. If the matter cannot be resolved without a hearing, the application for hearing will be forwarded to the Oklahoma Tax Commission's Office of the Administrative Law Judges and set for hearing pursuant to the rules set forth in OAC 710:1-5-21 through 710:1-5-49.

(7)Installment payments. For eligible students enrolled in a full school year, the credit will be paid in two installments, one per school semester. Each payment will be no more than half of the total approved credit. For processible applications filed on or before July 15, payments will be issued no later than August 30 and January 15.

(A) Payments of the credit will be made by the Tax Commission with individual warrants made payable to the taxpayer and mailed to the private school where the eligible student is enrolled or expected to enroll.

(B) The taxpayer shall restrictively endorse the warrant to the private school for deposit into the account of the school unless the tuition and fees for the eligible student have already been paid by the taxpayer.

(8)Spring 2025 credit payment. A taxpayer who applied for and received a private school tax credit in tax year 2024 is not required to reapply for a credit payable for the period of January 1, 2025, through June 30, 2025. The amount of the credit payable for the spring 2025 semester will be the amount of the 2024 fall semester installment payment.

(9)Reconciliation. No later than June 15 of each year, each participating private school shall provide reconciliation information to confirm student enrollment and tuition for each semester. For the reconciliation due no later than June 15, 2025, the participating private school shall provide student enrollment and tuition information for the spring 2025 semester. For all subsequent reconciliations, beginning June 15, 2026, the participating private school shall provide student enrollment and tuition information for the fall and spring semester of the just completed school year.

(A) Reconciliation information must be provided electronically.

(B) Participating private schools shall verify the following information:

(i) The name and address of the private school;

(ii) The total number of instructional days per semester;

(iii) The total number of instructional days the eligible student was enrolled in the private school each semester;

(iv) The amount of tuition paid on behalf of the eligible student for the applicable year (the initial amount of tuition and fees, less any scholarship or discount);

(v) The name, grade level, address, and date of birth of the eligible student; and

(vi) Any other information requested by the Tax Commission.

(10)No carryover. The credit can be claimed only for the school year for which the qualified expenses are incurred. Where qualified expenses are incurred in excess of the allowable credit for any given year, the excess of qualified expenses shall not be used in claiming the credit for any other year.

(11)AGI determination. The total federal AGI of an eligible student's parents or legal guardians shall be determined as follows:

(A) If the eligible student's parents or legal guardians have an income tax filing status of "married, filing jointly", the federal AGI reported on the parents' or legal guardians' second preceding year tax return will be used.

(B) If the eligible student's parents or legal guardians have an income tax filing status of "married, filing separately", the parents' or legal guardians' federal AGI reported on each tax return for the second preceding tax year will be added together to determine the federal AGI.

(12)School registration. Each accredited private school that intends to issue enrollment verification forms for the Oklahoma Parental Choice Tax Credit Program, shall annually complete an online registration with the Tax Commission. Registration shall include the following information:

(A) Name, address, phone number, FEIN, and website of the private school;

(B) Primary and secondary contact information for the private school, including proof of employment;

(C) Proof of accreditation from the State Board of Education or another accrediting association; and

(D) Other school identification information as requested by the Tax Commission.

(13)Notification of non-use. Taxpayers that claimed the credit shall notify the Tax Commission electronically no later than thirty (30) days after the date on which the eligible student:

(A) Enrolls in a public school, including an open-enrollment charter school;

(B) Enrolls in a nonaccredited private school;

(C) Is no longer enrolled in an accredited private school;

(D) Graduates from high school; or

(E) Is no longer utilizing private school tax credits for any reason.

(14)Recapture. The Tax Commission shall recapture private school tax credits if:

(A) The credit was claimed for expenditures that were not qualified expenses;

(B) The taxpayer has claimed an eligible student who no longer attends a private school or has enrolled in a public school for the period for which the credit was claimed; or

(C) Taxpayer fails to comply with the applicable Oklahoma statutes and regulations.

Okla. Admin. Code § 710:50-15-172

Adopted by Oklahoma Register, Volume 42, Issue 5, November 15, 2024, eff. 10/10/2024, exp. 9/14/2025 (Emergency)