Iowa Association of Christian Schools

The Public Policy Voice of Iowa's Protestant, Christ-Centered Schools.

We are the public policy voice of
Iowa's Protestant, Christ-centered schools.

Action Alert! Increase STO Tax Credits!

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As a supporter of Christian education and school choice, we know you believe that all parents, regardless of address or income, deserve education choices that reflect academic goals and faith. The Iowa Association of Christian Schools supports an increase in the amount of the School Tuition Organization (STO) tax credits available to donors who make scholarships to lower and middle income families possible.

Last year, changes were made to ensure scholarships are available to nonpublic school families whose income is up to four times the federal poverty level.  This was up from three times the federal poverty level previously.  These scholarships enable parents to choose the school that best fits their child’s learning needs but the change in demographics eligible makes our call to increase the number of tax credits all the more urgent.

Currently $13 million in tax credits are available to donors and we are asking the legislature to increase that to at least $17 million in coming years.  Our goal has been $20 million for a number of years but House and Senate proposals have been introduced and we want to support the larger number currently found in the Iowa Senate’s proposal.

Both the House and the Senate versions of a tax bill include an increase in the STO tax credits among a number of other tax-related topics. Senate File 631 includes a $4 million increase for a total of $17 million. If all tax credits were expended, that would raise about $26 million for scholarships. House File 779 includes a $1 million increase.

The Iowa Department of Revenue estimates this program saves the state at least $12 million a year because the students don’t attend a public school that would cost the state more money.  The state does not write any checks for these scholarships as the money raised is private and the tax credits are a complete and separate discussion from public school funding.  The session is in its final days and we are hopeful, with your help, we can get this increase over the finish line!

Please send your legislators a message in support of an increase in School Tuition Organization tax credits.  Use the personal story box to add a personal story, communicate your desire for more children to have access to your school’s atmosphere/programing, or provide a general greeting or anecdote.  Then, please read through the suggested message that will be included in the body of your email to your Rep and Senator and customize it to ensure they get as many uniquely written messages as possible.  Thank you!

IACS

Action Alert! Support ESAs!

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One of the primary roles of parents is to be involved in and direct the formal education of their children.  There are many ways to accomplish this but those without the income to access more than one option lack that basic, fundamental right. The best way we know how to ensure every parent has access to what is best for their child is through Education Savings Accounts (ESAs).  ESAs will allow parents who choose not to enroll their children in a public school to receive a deposit of public funds into a savings account set up by the state. This money could be used by parents for private school tuition and some other education expenses including tutoring, giving parents the ability to customize their child’s education to meet his/her needs.

Iowa has increased public school funding annually, while maintaining school choice programs such as the School Tuition Organization tax credits. IACS supports the state’s commitment to public and non-public education.  We are not advocating that parents wanting to utilize a non-public option be given every financial resource available to the public system.  We are simply asking that the state allow a portion of those resources to follow the student to ensure every Iowa parent has every available quality option at their disposal.

School choice will not lead to money being “siphoned away from public education and given to private education providers.” No state or local funding for public schools would be diverted to this program. ESAs would be funded by a separate appropriation by the legislature.

Senate File 372 was introduced this week and has passed the Senate Education Committee’s subcommittee.  It is now eligible for debate in the full Education Committee.  We encourage you to contact members of the Senate Education Committee and Senate leadership in support of an ESA program which would be accessible to as many parents as possible. Rewrite the sample message in your own words and keep your comments positive.

TAKE ACTION HERE!

Thank you for your willingness to engage on this issue!

IACS January Newsletter – Legislative Session Preview

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Our IACS January 2019 Newsletter is out!  There are a few events to pencil in on your calendar and we have an overview on the legislature and our areas of focus for the year!

529 Plan Updates

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You may now use 529 Plans to pay for K-12 tuition in Iowa.  Iowa ACE has worked with the state to get the latest information and we are passing it along.  Always consult your tax professional before making any changes to or contributions from any account or plan that has tax ramifications:

From Iowa ACE:

Disclaimer
This Fact Sheet is not intended to provide tax or legal advice. If you are considering using an Iowa 529 plan for K-12 purposes and you have specific questions about your impact, please seek guidance from a tax professional or an attorney. This document is subject to change.

Federal Law Change
Beginning in 2018, qualified expenses for federal tax benefit purposes include K-12 tuition at public, private or religious schools up to $10,000 per year per student in the aggregate across all qualified tuition programs for a designated beneficiary.

Iowa State Law Change
The Iowa Tax Reform legislation signed into law in June 2018 contained provisions related to distributions from an Iowa 529. The tax provisions were retroactive to January 1, 2018. Under the new legislation Iowa taxpayers can use assets in one of the plans under the Iowa Education Savings Plan Trust to pay for K-12 tuition with no Iowa state tax consequences if:

  • The beneficiary attends an elementary or secondary school in the state of Iowa;
  • The elementary or secondary school is accredited under Iowa Code Section 256.11; and
  • The elementary or secondary school adheres to the provisions of the federal Civil Rights Act of 1964 and Iowa Code Chapter 216.

State tax treatment of K-12 withdrawals is determined by the state(s) where the taxpayer files state income tax. If you’re not an Iowa taxpayer, please consult with a tax advisor.

FAQ’s

Can an Iowa taxpayer use their 529 funds for K-12 tuition out of state?
Yes. However, their withdrawal would be considered nonqualified for Iowa state tax purposes and would be subject to recapture.

What is the recapture on non-qualified withdrawals?
Contributions to an Iowa 529 Plan that were previously deducted for Iowa income tax purposes must be included as Iowa income when distributed, unless they are used to pay for qualified education expenses. For Iowa income tax purposes, a rollover to a non-Iowa 529 plan will be treated as a nonqualified withdrawal and taxed as income to the extent previously deducted as a contribution to the Iowa 529 Plan.

Who can receive a distribution for K-12 tuition?
A qualified K-12 withdrawal can be sent directly to a K-12 Institution or to the Participant. Unlike higher education qualified withdrawals, distributions will not be sent directly to the Beneficiary.

Can a 529 participant have a K-12 distribution sent directly to the K-12 institution?
Yes. Forms and the website will be updated to clearly indicate if the payment is going to a K-12 or Higher Education Institution. Until then, participants may request a payment to the Eligible Institution and payment will be mailed directly to the K-12 institution.

Are the age-based tracks suitable for funds contributed for K-12 purposes?
No. Age-based options are designed for higher education and are generally not appropriate for K-12 time horizons. Please consult with a tax advisor for additional advice.

Are other K-12 expenses such as books and supplies qualified education expenses?
No. Tuition is the only qualified education expense for K-12.

When can participants start making qualified withdrawals for K-12?
Now. The federal law became effective on January 1, 2018 and the state law is retroactive to January 1, 2018. Forms are in the update process, but withdrawals may be taken at any time for K-12 Tuition.

The online and/or paper withdrawal form has not been updated, how do I request a qualified withdrawal for K-12 tuition?
We are in the process of changing the language related to withdrawals. Once that process is complete, there will be a selection specifically for K-12 qualified withdrawals. Until that time, you should select the qualified withdrawal option (even though it may indicate that is for higher education). You may direct the payment to the account owner or the K-12 Institution; simply enter that where it asks for the Institution of Higher Education.

How quickly can I receive my funds?
Please allow 7-10 business days for payment by check by regular mail to reach the account owner or the K-12 institution.
Changes to your account that can delay the regular delivery time of 7-10 days:

  • Contributions made by check, recurring contribution or EBT will not be available for withdrawal for seven business days.
  • If the address information that you have requested the withdrawal be sent to has changed in the last nine business days, your withdrawal will be held until this waiting period has been satisfied.
  • If the banking information that you have requested the withdrawal be sent to has changed in the last 15 calendar days, your withdrawal will be held until this waiting period has been satisfied.

What if I have additional questions?
Please call the 529 Plan and an associate will assist you.
College Savings Iowa: 888.672.9116
IAdvisor 529 Plan: 800-774-5127

Iowa ACE coordinated with the State Treasurer’s office for this information.

Trish Wilger, Executive Director, Iowa Alliance for Choice in Education,
twilger@iowaace.org, 515.323.0687

Make Your Voice Heard On K-12 Nonpublic Education Cuts!

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Although it is a tough budget year for the State of Iowa and many interest groups are asking for increased resources, we have heard time and again this year that “K-12 education will be held harmless.”  We laid significant groundwork for tax credit and education savings account legislation moving forward.

Despite this, funding of transportation services for nonpublic school students is facing a cut in SSB 1198.  The budget bill is being considered by the Iowa legislature this week. The funding was cut $278,000 in this current fiscal year.  Next year’s budget continues cutting nonpublic school transportation funding for a total cut of $363,000. This is unacceptable.

Please use our action alert to contact your Representative and Senator today and ask them to support nonpublic schools by truly “holding K-12 harmless.”