Updated January 1, 2019
What is the Oklahoma Equal Opportunity Education Scholarship Act?
The Oklahoma Equal Opportunity Education Scholarship Act (68 Okla. Stat. §2357.206) allows individuals and businesses to receive Oklahoma state income tax credits for donating to a scholarship granting organization (SGO) recognized by the Oklahoma Tax Commission. The SGO then uses those contributions to provide scholarships for eligible students to attend an accredited private school.
What is a Scholarship Granting Organization (SGO)?
A SGO is a 501(c)(3) not-for- profit organization approved by the Office of the Secretary of State, the IRS, and the Oklahoma Tax Commission. It serves as the central administrative service for member schools while allowing significant local school control over scholarship dollars.
The SGO will insure that scholarship assistance is provided to the neediest of families; assures the integrity of the Board and staff members; keeps full and accurate records, and reports to the Governor and Legislature every four years.
What is the Opportunity Scholarship Fund?
The Opportunity Scholarship Fund (OSF) is a not-for-proft Oklahoma corporation organized as a SGO in compliance with the Oklahoma Equal Opportunity Education Scholarship Act. It is an independent, tax-exempt entity organized under Section 501(c)(3) of the Internal Revenue Code. The OSF awards scholarships that allow eligible students to attend a participating private school accredited by the State Department of Education (SDE), or an accrediting association approved by the SDE, in Oklahoma. The OSF Board will monitor the OSF compliance with the Law and ethical standards. The OSF staff will be available to assist all schools to optimize the opportunities created by the OSF. Send general queries to firstname.lastname@example.org
How many Oklahoma private schools are eligible to participate in the OSF?
There are 109 eligible accredited private schools in Oklahoma that serve students in PreK – 12. Of these schools, 76 are eligible to join the Opportunity Scholarship Fund. Over 60 of these accredited private schools have joined as member schools. For a listing of the active schools in the OSF – see the Schools section on this website.
Do tax-credit scholarships help the state budget?
Yes. An independent study by economists from Oklahoma City University found that tax-credit scholarships provided through programs like ours actually save the state money. Based on the state’s per-pupil spending on common education, the fiscal return to the state is $1.39 of savings for every $1 of tax credit issued. (When accounting for all funding sources (federal, state and local taxes), the fiscal return is $2.91 for every $1 of tax credit issued.) The fiscal impact to the state is determined by the trade off of tax revenue and per-pupil expenditures.
Schools and Students
In order to participate in the OSF, what must a school do?
A school must sign a Memorandum of Understanding with the OSF setting out each party’s responsibilities.
A school must: be accredited by the State Board of Education or an accrediting association within the Oklahoma Private School Accreditation Commission; be in compliance with all applicable health and safety laws and codes; have a stated policy against discrimination in admissions on the basis of race, color, national origin or disability, and ensure academic accountability to parents and guardians of students through regular progress reports.
The tax credit scholarship law requires that schools do not discriminate based upon disability. What does that mean?
The Law requires Schools to “have a stated policy against discrimination in admissions on the basis of race, color, national origin or disability.” With respect to disability, what does this mean for a school that does not hold itself out as an approved school for the Lindsey Nicole Henry Scholarship for students with Disabilities Program?
This is the position of the OSF Board of Directors:
This provision applies ONLY to the educational programs that the school currently provides. So, if a school does not provide a disability educational program qualifying for Lindsey Nicole Henry scholarships, then the school should have a candid discussion with the parents about its capability to serve that student. If the parents wish to continue with the application process, knowing the school is not capable of providing the needed services, that is the parents’ right. In other words, a school cannot be expected to serve students beyond its capability, but it is the parents’ choice on whether the child is still better served at the school over another educational environment.
Are there any additional restrictions placed upon faith-‐based schools?
What are the student eligibility requirements?
A student must be of school age, be lawfully present in the United States; accepted by a participating school; and be a member of a household that has an annual income below 300% of free/reduced lunch eligibility – OR – attend, or live in the attendance zone, of a public school designated as “in need of improvement” by the State Board of Education OR; attended an Oklahoma public school with an individualized education program (IEP).
The 2018-19 income limits defining ELIGIBLE families are:
Family size of 2 $ 91,353
Family size of 3 $ 115,329
Family size of 4 $ 139,305
Family size of 5 $ 163,281
Add $23,976 for each additional family member.
Does the OSF suggest student/family preferences for scholarship assistance?
No. But the legislation suggests that the dollar amount of scholarships to low-income families, defined as families eligible for free and reduced lunches, be roughly proportional to the overall state percentage of these families. This is not tracked by school, just by our overall statewide effort. We think this will self-calibrate as schools identify their students/families who have locally demonstrated financial need.
How is eligibility renewed?
Once a student qualifies for an OSF scholarship, that student remains eligible until high school graduation, or being 21 years of age, whichever occurs first. Additionally, any siblings automatically qualify. Therefore a family only needs to become eligible once.
If a student qualifies for a scholarship, is it automatically granted?
No. Qualification does not mean entitlement. The recipients, and amount of scholarship, will be nominated by each member school in accordance with their local financial assistance policies.
How will recipients be selected?
The student will apply for the scholarship at the member school, not with the OSF. If the student meets the school’s standards for enrollment and financial assistance and the OSF requirements as described in the Law, the school may forward the application, with recommendations, to OSF for review and final action.
How large will scholarship awards be?
For 2016-17, the Scholarship Act allows an eligible student to receive up to $6,900 annually. This is 80% of the statewide annual average expenditure per pupil ($8,633 for the 2014-2015 school year, the latest year reported by the State Department of Education).
The actual scholarship amount will depend upon a number of factors including OSF and participating member schools’ success in raising funds each year. The school will propose a scholarship amount, but the final decision will rest with the OSF.
How will awards be announced and paid?
Scholarship funds will be sent by check, jointly payable to the student’s parents/guardians and the school. The check will be delivered to the school where the student is enrolled. It is expected that the school will notify the parents/guardians and that both will then reconcile the tuition obligation.
Are the scholarships taxable?
No, as long as the scholarship award is not in excess of the cost of tuition, transportation and fees associated with attending the member school. The scholarships are for tuition and fees. Such scholarships are universally tax-exempt.
How are "low income" students defined?
A low income student is defined as eligible for free and reduced lunch based upon family income. According the federal guidelines, that is 185% of the Federal Poverty Level. Therefore the 2018-19 upper income levels by family size is:
2 – $30,451
3 – $38,443
4 – $46,435
5 – $54,427
Additional person add $7,992
It is reported that 62% of public school students in the state meet this standard. The law suggests that roughly 62% of the scholarship fund go to low income students attending private/independent schools. We will monitor this regularly.
How are “special needs” students accommodated?
These students are eligible for the OSF scholarship. If they are properly certified and documented, “special needs” students may receive up to $25,000 per year for tuition, fees and transportation. Consult the member school and OSF staff for more information. HB 1693 expanded the definition of disability so that all worthy students may now qualify. See the legislation, or call the OSF staff, for a complete description.
What is a tax credit?
Tax credits directly reduce the taxes you pay on a dollar-for-dollar basis. An Oklahoma state income tax credit is like a gift card from the State of Oklahoma that you can use to pay your state income taxes. For example, with a $1,000 tax credit from the State of Oklahoma, you can pay $1,000 in state income taxes.
Our credits are valued at 50% of a donation for a one-year donation commitment and, effective January 1, 2016, donors making a two year commitment will enjoy a 75% tax credit for both years that they donate to a member school through the OSF.
Regardless of donation amount, the maximum annual tax credits allowable are $1,000 for individual filers; $2,000 for a family filing jointly and, for qualified business entities, a very generous $100,000 annually.
What is a tax deduction?
Tax deductions reduce the base of taxable income upon which you pay taxes, which translates into a reduction on the amount of taxes that you pay; however, the value of tax deductions depends upon a number of factors specific to each taxpayer, including 1) your taxable income which determines your tax rate, 2) the application of phase outs of certain deductions, and 3) whether the alternative minimum tax applies to your financial situation.
What is the difference?
Both tax credits and tax deductions help to reduce the overall taxes that you pay, but tax credits are much more valuable because tax credits directly reduce your taxes dollar-for-dollar.
What is a legal business entity?
The law states that a “qualified business entity” includes limited and general partnerships, corporations, subchapter S corporations and limited liability companies that files as a partnership, corporation, subchapter S corporation or sole proprietorship.
The law does not address “sole proprietorships” or any other form of business structure. If a donor/taxpayer believes that their business should be treated as a “qualified business entity”, each taxpayer must seek a separate private letter ruling from the Oklahoma Tax Commission. See OTC Rules Chapter 1: Administrative Operations, 710:1-3-73-f, Opinions and letter rulings. It states:
(f) Requests for letter rulings. Requests by individuals or groups of taxpayers for letter rulings will be honored by the Commission, at its discretion, and in consideration of the time and resources available to respond to such requests. Requests for letter rulings should be made to the Tax Policy and Research Division, Oklahoma Tax Commission, 2501 N. Lincoln, Oklahoma City, OK 73194.
Oklahoma Tax Credits
Always consult your professional tax advisor for specific tax advice and interpretation.
Who is eligible to receive a tax credit?
Any individual, family or legal business entity paying taxes in Oklahoma is eligible to contribute to the Fund and receive tax credits.
Do these tax credits take away from public school funding?
No. Although the tax credits are a reduction of the total funding of state government, this tax credit program actually helps save Oklahoma state budget money by reducing the cost of common education for school districts across the state. The state continues to fund common education as its highest priority based on the amount of appropriations available each year. Watch this video to see how your contributions to a scholarship granting organization help families and schools in Oklahoma.
How much of a tax credit will I get?
Any individual, family or business entity paying taxes in Oklahoma is eligible to contribute to the Fund and receive tax credits. All donors making a single year donation are eligible for Oklahoma tax credits of 50% of the allowable donation amount. The amount of tax credits may not exceed $1,000 for individual filers, $2,000 for those filing jointly, and $100,000 for businesses.
Donors who pledge in writing (see adjacent form) to give the same amount over TWO years will receive a 75% tax credit for BOTH years. The annual tax credit limitations apply.
All donors (individuals, families and businesses) should always consult their tax preparer for their specific situation.
Should statewide contributions earn over $5.0 million in annual tax credits, and that ceiling not be raised, the credits for all contributors will be reduced prorata. Any credits not allowed due to exceeding the tax credit cap, will become “suspended” and will be allowed as a carryover credit for the next immediate tax year.
What if statewide donations exceed the annual tax credit ceiling?
Current law allows for a total of $5.0 million in tax credits for a year. If statewide donations exceed that amount, the amount of your tax credit will be reduced on a prorata basis for each class of donor, so that each class of donor (individual or legal business entities) receives that same percentage of tax credit for their donation.
Starting in 2017, if the tax credit cap is exceeded and the tax credits for that year prorated, the credits not taken will be “suspended” and allowed to be taken in the next immediate tax year.
All SGOs are required to file a report with The Oklahoma Tax Commission on or before January 10 of each year detailing contributions received during the prior calendar year. The Tax Commission will determine the actual percentage of tax credit available to donors on or before February 15 of each year.
When can I use my tax credit?
Your tax credits may be used in the immediately following year. For example, tax credits received from a 2017 OSF donation may be used to offset income taxes on your 2017 Oklahoma tax return filed in 2018.
The tax credit is good up to the state tax liability. The tax credit from a scholarship granting organization is not refundable. You may only use this tax credit as an offset to Oklahoma income taxes. Any tax credit not used in a given tax year due to no tax liability may be carried over for up to three years.
What’s the deadline to contribute and still get a tax credit?
Donations to OSF that are postmarked by December 31, 2017, will count as charitable contribution made during 2017.
The tax credit that you get for donating to OSF in 2017 may be claimed when you file your tax return for 2017. Federal and state tax deductions for your charitable contribution to OSF in 2017 may also be claimed when filing your 2017 tax returns.
Making Donations to OSF
How can I make a contribution to OSF
Donors may contribute by sending a check made out to Opportunity Scholarship Fund. Send the check, along with a completed donation form, via U.S. mail to Oklahoma Scholarship Fund, 1831 East 71 Street, Tulsa, OK 74136.
Donors may also contribute marketable stocks and securities. See our Donate page for forms and instructions on transferring these assets to OSF.
Can I contribute online?
Not at this time.
May I designate my donation be dedicated to a specific school?
Yes … or you may split your donation among several schools … or you may request it be undesignated and allow the OSF Board to disburse the funds for scholarships where most needed.
May I designate my payment for a specific student?
No. Internal Revenue Code regulations do not allow for particular individuals to receive direct benefit from a gift by a donor.
May a school encourage parents to route student tuition payments through the OSF to get the tax credits and deductions?
No. This would be considered illegal under the Internal Revenue Code. Funds raised for a particular school are disbursed independently by a group within each school to determine financial need and award an appropriate amount of assistance for each applicant. It is a responsibility of the OSF Board to insure that the funds are raised and disbursed in a transparent and ethical manner. There can be no “quid pro quo” for donations to go to a specific student.
How is my donation allocated?
The Scholarship Act requires that the OSF disburse at least 90% of the money it receives each calendar year in the form of scholarships for eligible students during the following academic year. A scholarship granting organization cannot retain more than 10% of contributions to pay its administrative costs. Currently, the OSF retains only 7.5% of the contribution, allowing 92.5% of the gift to be used for lower-income students to afford the private school of their choice.
Where are contributions held?
Contributions to OSF are held at a commercial bank account designated solely dedicated solely to the OSF. All contributions to OSF are deposited into this account and all scholarship payments are made from this account.
An independent accounting firm audits the accounting records of the OSF annually.