A bill to amend 1967 PA 281, entitled “Income tax act of 1967,” by amending section 30 (MCL 206.30), as amended by 2023 PA 4, and by adding sections 279 and 679.
SB 710 aims to establish a student opportunity scholarship program designed to provide financial assistance to eligible students in Michigan, enhancing their educational choices and addressing disparities in educational opportunities. The program will be administered by certified scholarship-granting organizations (SGOs), which will manage student opportunity scholarship (SOS) accounts. These accounts will be funded through contributions eligible for tax credits and will be used to cover various educational expenses, including tuition, fees for online learning programs, tutoring services, textbooks, and other instructional materials. The legislation specifies that eligible students include those from low-income households, children with disabilities, foster children, and siblings of current SOS recipients.
Funding for the program is structured with specific limits: for public school students, the maximum annual allocation is $500, or $1,100 for students with disabilities. For other eligible students, the allocation is up to 90% of the target foundation allowance, adjusted based on household income. The funds in SOS accounts can be used for a wide range of educational expenses, such as tuition for public or nonpublic schools, online learning programs, tutoring, textbooks, and educational software. The legislation also outlines the process for establishing and managing SOS accounts, including the application process, renewal conditions, and the responsibilities of SGOs.
The bill introduces changes to existing laws, particularly the income tax act of 1967, by allowing tax credits for contributions to SGOs. It also sets forth the operational requirements for SGOs, including the need for financial audits, annual reports, and maintaining separate accounts for SOS funds and operating funds. The Department of Treasury is tasked with certifying SGOs and ensuring compliance with the program's requirements. The legislation includes provisions for the transfer of funds between SGOs and outlines the conditions under which an SGO's certification can be revoked.
Significant timelines include the annual renewal of SOS accounts, the publication of a list of certified SGOs by January 1 each year, and the requirement for SGOs to allocate at least 90% of their annual contributions to SOS accounts by the end of the following calendar year.
SB 711 amends the Income Tax Act of 1967 by modifying section 30 and adding sections 279 and 679, with the primary objective of redefining "taxable income" for individuals. This includes various deductions and additions related to income sources such as retirement benefits, charitable contributions, and specific tax credits. A significant provision allows taxpayers to deduct funds allocated to Student Opportunity Scholarship (SOS) accounts for qualifying education expenses. Additionally, the bill establishes a tax credit for contributions made to certified scholarship-granting organizations (SGOs) participating in the Student Opportunity Scholarship Program. This credit can be claimed up to 100% of the total contributions made during the tax year, with a cap of $500 million for all credits reserved in any state fiscal year, subject to potential increases based on prior year utilization.
The bill outlines a detailed preapproval process for claiming the tax credit, requiring taxpayers to submit an application and contribution plan to the Department of Treasury. The Department must approve or deny applications within ten business days, and approved contributions must be made within specified timeframes. If the credit exceeds the taxpayer's liability, it can be carried forward for up to five years. The bill mandates annual reporting by the Department to the Legislature on the program's administration, operation, and financial impact, including data on applications, preapproval letters, contributions, and the number of SOS accounts opened.
The legislation also modifies existing statutes by adding new deductions and credits, such as the deduction for funds allocated to SOS accounts and the tax credit for contributions to SGOs. These changes aim to support educational opportunities and provide financial relief to taxpayers contributing to scholarship programs. The bill includes specific timelines for the implementation of these provisions, with the tax credit applicable for tax years beginning on or after January 1, 2024, and annual reporting requirements starting November 1, 2025.
The additional context clarifies that contributions can be in the form of cash or marketable securities and defines key terms related to the SOS program. It specifies that taxpayers must submit a contribution plan detailing the total amount, tax years, and form of contributions. The Department must issue preapproval letters within ten business days, and contributions must be made within 15 business days of the preapproval letter or by June 30 of the fiscal year. If contributions are in marketable securities, they must be monetized within five business days, and any shortfall must be supplemented with cash. The total credits reserved cannot exceed $500 million per fiscal year, with a potential 20% increase if utilization exceeds 90% in the prior year. Taxpayers can agree to multiyear contribution plans, not exceeding four tax years, and must attach a certificate of contribution to their annual tax return.
Introduced
by
Referred to the Committee on Education
