Education

Families, students harmed by Oklahoma Tax Commission’s action

May 9, 2024

Ray Carter

When the Oklahoma Parental Choice Tax Credit program was enacted in 2023, it put Oklahoma on the national map by offering robust school-choice opportunities to all families.

The program provides refundable tax credits of up to $7,500 per child to help families pay for private school. And all families can qualify for the program.

But a bizarre legal interpretation from the Oklahoma Tax Commission has resulted in a significant number of families being stripped of much of that opportunity—particularly working-class families enrolling their children in private school for the first time.

In some instances, those families experienced the elation of learning their children could access a private education that was previously out of reach—only to have that opportunity snatched away.

“The program is designed to help my family,” said Elizabeth Fleet, an Owasso mother of four children ages eight to 14. “We are who the bill is written for. And, ironically, that’s not the case.”

Those families are now hoping the Oklahoma Legislature will act this month to address the problem.

The state law that created the Oklahoma Parental Choice Tax Credit program says that qualifying families will receive the tax credit “in two installments, each of which shall be half of the expected amount of tuition and fees.”

Under the law, a family earning up to $75,000 per year qualifies for a tax credit of $7,500 per child and is to be provided $3,750 each semester. Those families are also given priority under the program, ensuring that nearly all people in that income category are assured of approval for the program even though the total amount of tax credits was capped at $150 million for the first year.

But under a bizarre interpretation imposed by officials at the Oklahoma Tax Commission, many families who enrolled a child in a private school for the first time starting next fall instead received just one-fourth of the credit, as did families who used the credit for a senior student’s final semester in spring 2024. Thus, parents earning less than $75,000 who expected a credit of $3,750 per semester instead received $1,875.

Because the approval process was so slow this year, that information was provided to families well into the current semester, long after many families had enrolled their children in private school and made financial commitments.

“We had families that were deferring payments, counting on that half-semester amount,” said Edi Burnet, who works in the finance office of Oklahoma Bible Academy, a private school in Enid.

Tiffany Rinas, school administrator for Owasso Preparatory Academy, noted that a major emphasis of the school-choice tax credit was to create educational opportunities for lower-income families, and that was reflected in the design of the program with larger tax credits and priority given to those families.

Yet the quarter-payment glitch is now hitting many lower-income families who chose to enroll a student because of the school-choice program.

“It feels like the very people that the bill was written for are the ones that actually can’t even benefit off of it,” Rinas said. “It feels in many ways like, ‘Well, if you were already in a private school, then you get to benefit. But if you weren’t, well, sorry.’ And that’s what’s been so disheartening.”

Military families, who change schools more often than others, may have been disproportionately impacted by the Oklahoma Tax Commission’s interpretation of the law.

Joel and Amber Kraus of Enid are among the families that qualified for the program but received only 25 percent of the tax credit promised for the current semester.

Amber Kraus said the family is working its way through the unexpected financial challenge, but she worries other families may have a tougher time. And had her family been shortchanged next year, the impact would have been greater.

“My husband, he is transitioning out of the Air Force, and so we’re taking a pretty large pay cut this next year to two years as he transitions over to the airlines,” Kraus said. “We were kind of relying on that tax credit to help us out.”

Fleet’s family is among those hit harder by the quarter-payment glitch.

“Private school, for us, has never been an option,” Fleet said. “We’re a single-income family of six.”

The family’s income puts them in the priority category eligible for the $7,500 per-child tax credit, and the family received an email from the Oklahoma Tax Commission informing them that their applications for all four children had been approved. The family enrolled the four children in Owasso Preparatory Academy starting in fall 2024.

But the family was recently informed they are among those receiving only 25 percent of their credit for the fall semester. That means they will receive only $1,875 per child next fall.

The full credit would have covered all private school tuition and fees for the family. The 25-percent credit does not.

“Without other financial-aid options or appealing this decision, my kids will not be able to attend,” Fleet said.

State Sen. Julie Daniels, R-Bartlesville, who was among those championing the program’s creation, said the quarter-payment problem should not be ignored.

“From the beginning, those working to advance the school-choice tax credit insisted that it be consumer-friendly, insisted that it be easy for parents to navigate, and not shortchange the credits available to them,” Daniels said. “This needs to be fixed—now—because eligible families taking advantage of this monumental reform to education should not have to worry or fret about whether their child will be able to attend the school of their choice.”

Lawmakers have sought to iron out kinks in the program and have already sent one bill to the governor, House Bill 3388. That legislation aligned the tax-credit program with the school year rather than the calendar year and also made clear that the tax credit is not considered taxable income, among other changes.

But HB 3388 does not include language addressing the quarter-payment problem.

Gov. Kevin Stitt noted that fact in a signing statement issued when he signed HB 3388 into law.

In his statement, Stitt said the Oklahoma Parental Choice Tax Credit Act “marked the most transformative change to Oklahoma’s education system in decades” and drew strong interest from families across the state, but he said the system still needs fixes and HB 3388 alone did not address all issues.

“Eager to take advantage of a program that would give parents more control over how and where their children are educated, thousands of Oklahoma families submitted applications—many within 90 minutes of the program’s launch,” Stitt wrote. “Although I am encouraged by the demand for this program, there is more work to be done.”

The governor specifically noted that the quarter-payment issue remains and language in House amendments to SB 1477 would fix the problem. That legislation ensures that families who were shortchanged for the fall 2024 semester receive the entirety of their remaining tax credit in spring 2025 to make them whole.

The House amendments to SB 1477 await a vote in the Oklahoma Senate.

If shortchanged families are not provided their full promised credit, officials worry some parents will be left with unnecessary financial challenges that deter them from re-enrolling their children in a private school, even if a family believes the private school served their child better.

“Are those families in so much debt now that, because they didn’t get that payment, that they decide they can’t carry on with private school?” Burnet asked. “We just don’t know how that’s going to shake out.”

Fleet said the school-choice program is a wonderful benefit to Oklahoma families and she remains grateful it exists. If lawmakers fix the quarter-payment problem, it will make a huge difference for lower-income families enrolling their children in private school for the first time, she noted.

“It would make the difference on whether or not my children would be able to go to a private school,” Fleet said. “So for us, it’s a huge benefit.”