BRIEF: School Choice in the States, October 2018



Children receiving a better education thanks to tax-credit scholarship programs may soon see those scholarships reduced or eliminated as a result of a new federal tax rule. Secretary Steve Mnuchin of the Department of Treasury released a new IRS rule applicable to federal deductibility of donations to state tax credit programs, which includes school choice tax-credit scholarship programs.

The new rule impacts all state tax credit programs, including those supporting rural hospitals, land preservation, economic development and other programs determined by state legislatures to be necessary for the public good. You can find the rule here. The rule went into effect on August 28, and included a request for comments. The comment period ended October 11. EdChoice filed comments together with the Institute for Quality Education.

You can find our EdChoice comments here. More than 7,700 comments were filed.

The proposed rule severely limits federal deductibility of donations to charitable scholarship granting organizations, and it also includes a strong disincentive for donations from those individuals whose state and local tax burden does not reach the new individual deductibility cap of $10,000. This disincentive, ironically, is particularly harmful in many states that have enacted tax-credit scholarship programs, where the state and local tax burden is relatively low. Presumably, the detrimental impact on scholarships is an unintended consequence of the rule. We expect Secretary Mnuchin to mitigate damages from these unintended consequences in a way that will not harm students who rely on scholarships for quality educational opportunities; however, his path forward is not clear at this point.

On November 5, Leslie Hiner of EdChoice and Brandt Hershman of Barnes & Thornburg will testify on behalf of EdChoice at the IRS. Our intent is to support students and families who rely on scholarships to access an education that is the best fit and that prepares each child for a successful life. We stand with students and families.


Those paying the state’s motor vehicle sales tax became eligible to redirect those taxes to the Hope Scholarship Program, which is Florida’s newest school choice program for victims of bullying, beginning October 1. Eligible students also started receiving scholarship letters in October.


In Maine, the Institute for Justice, in partnership with the First Liberty Institute, are representing parents suing the state because religious, sectarian private schools are excluded from Maine’s town tuitioning school choice program. Their case, Carson vs. Hasson, Case 1:18-cv-00327-DBH, was filed in the U.S. District Court in Maine. On October 30, Americans United for Separation of Church and State and the national and state chapters of the ACLU filed a motion to intervene in the case, which plaintiffs will oppose. Plaintiffs must file their motion in opposition by November 20.


In Michigan, on October 16, the state Court of Appeals reversed the trial court decision in Council of Organizations vs. State of Michigan, Court of Appeals No. 343801, Court of Claims LC No. 17-000068-MB, finding that the court erred in finding it unconstitutional for the state to reimburse private schools for costs of complying with state mandated health, welfare and safety laws and rules. The Court of Appeals instructed the lower court to reexamine the case, applying three standards to determine whether a private school expenditure for complying with a health, safety or welfare mandate may be reimbursed:  (1) “. . . is, at most, merely incidental to teaching and providing educational services to private school students (non-instructional in nature), (2) does not constitute a primary function or element necessary for a nonpublic school to exist, operate, and survive, and (3) does not involve or result in excessive religious entanglement.”

Puerto Rico 

The island’s first charter school, which is run by the Boys & Girls Club of Puerto Rico, began operating. A new round of charter applications is now underway. The island’s private school voucher program is scheduled to launch next school year.

After the Puerto Rico Supreme Court ruled on August 9 of this year that vouchers and charter schools are constitutional, the original plaintiffs, the American Federation of Teachers-Puerto Rico, filed a motion asking the Court to reconsider its ruling. The Puerto Rico Supreme Court recently denied their motion. This should mark the end of this litigation.


EdChoice Legal Defense and Education Center Activities

At the Center for Urban Renewal and Education’s National Policy Summit, Leslie Hiner spoke on the education panel along with Josh House, attorney at the Institute for Justice, and Brittany Bull, attorney advisor to the General Counsel of the U.S. Department of Education.

Hiner and many other EdChoice team members also participated in the State Policy Network national conference in Salt Lake City, the American Enterprise Institute Midwest Regional Leadership Summit in Chicago, and the 25th anniversary conference of the Center for Education Reform in Miami. Our team also held educational trainings for choice advocates from all over the country last month, including a special event—the 2018 Millennial Convening on Educational Choice.