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New Oklahoma Parental Choice Tax Credit Rules Signed into Law

New Oklahoma Parental Choice Tax Credit Rules Signed into Law

House Bill 3388, which makes some changes to the Oklahoma Parental Choice Tax Credit (PCTC), has been signed into law by Gov. Kevin Stitt. OPSA has created this easy to read document to help parents stay informed about the changes.

Service Providers

Accredited, brick-and-mortar private schools that are physically located inside the boundaries of the state of Oklahoma are eligible to participate in the PCTC. 

Private virtual schools or brick-and-mortar private schools in bordering states are not eligible to participate in the PCTC. 

There are, however, some tutoring services, etc. that may be used by homeschooled families that may be virtual or outside the state that would be considered qualified expenses.

 

Order of Deductions

In the spring semester of 2024, deductions from private school tuition were subtracted in this order: 

  • Lindsey Nicole Henry Scholarship (LNH)
  • PCTC
  • Opportunity Fund Scholarship (OSF)/Equal Opportunity Scholarships
  • Other school discounts
  • Unknown financial aid/adjusted tuition

However, the new legislation has changed the deductions order to:  

  • Lindsey Nicole Henry Scholarship (LNH),  
  • Opportunity Fund Scholarship (OSF)/Equal Opportunity Scholarships
  • Other school discounts
  • PCTC
  • Unknown financial aid/adjusted tuition

This has the potential to make a big difference for some private school families. 

 

Microschools

Previously microschools were not an option for any PCTC funds. However, microschools and other non-accredited learning environments are now eligible for the $1,000 homeschool tax credit. 

 

Adjusted Gross Income

Previously the PCTC legislation calculated the amount of credit for each student based on the adjusted gross income of all adult members of the household. For example, if you had an adult child living in your home and working full time, or a grandparent, etc. then the amount a school aged child would receive might have been lowered due to that additional income. The new legislation amends this to calculate the credit based solely on the adjusted gross income of the child’s parents/guardians. 

 

Homeless Students

Private schools that exclusively serve homeless students, right now there is only one, Positive Tomorrows, will now receive a full credit amount of $7,500 per student or the entire cost of tuition for that student, whichever is less. 

 

Low-income Students

Private schools in which 90% of their student population lives in a home that meets 250% of the federal poverty threshold will now receive $7,500 per student or the entire cost of tuition for that student, whichever is less. The federal poverty threshold is different every year, but this year for a family of four it would be $78,000. The cost of the tuition will be the average of all the students attending divided by the previous year’s expenditures. 

 

No Offset Funds

Some families experienced the dismal surprise that a portion of their PCTC was used for back taxes, health expenses, college tuition, or other items. The updated legislation no longer allows the offset of funds. No amount of the PCTC will be deducted for debt, unpaid fines, final judgments, claim or tax reliability, penalties, or interest. 

 

Enrollment Clarification

The new legislation clarifies that students expected to enroll are covered by the PCTC; they do not need to currently be enrolled.

 

School Year 

The application window has been moved from tax year to school year, however, the application dates have only changed slightly. Every student currently receiving the tax credit will NOT need to reapply in 2024. The fall 2024 semester and the spring 2025 semester are covered by a parent’s previously approved application. That means if your only student using the tax credit will graduate in May 2025 you will not need to reapply. 

The tax commission has not released whether all money available for the PCTC has already been dispersed. Thus, families wanting to apply for the tax credit for the first time should do so now. Funding may not be available for the Fall 2024 semester, however it’s possible that some funding (not already allocated to other PCTC students) may be available for the Spring 2025 semester. Families who are applying for the first time should go ahead and submit an application.

The Fall 2025 and Spring 2026 PCTC application window will open on February 15, 2025. Every family wanting to apply should do so as close to Feb. 15th as possible. Again, families earning less than $150,000 a year will be given priority approval. All priority applications will be notified of their application status within 90 days of Feb. 15, when the application opens. 

 

Income-based Government Benefits

Families who provide documentation that they are receiving income-based government benefits will not need to provide any other documentation as to their income. 

 

PCTC Distribution

The PCTC will be paid in two installments. Schools should receive the first payment no later than August 30, 2024 and the second on payment on Jan. 15, 2025 for students with previously approved applications. 

 

Priority Tiers

When the PCTC application window reopens on Feb. 15, 2025, applications in the priority category, families making $150,000 or less, who have previously received the PCTC will receive the highest priority. Then applications from families making $150,000 or less that had not previously received the tax credit. Finally, applications for all families making $150,000 or more. 

 

Notify the Commission

All families must notify the tax commission within 30 days if their students return to a public or charter school, if they enroll in a non-accredited school, if they graduate, or if they are no longer utilizing the tax credit for any other reason. 

 

Reallocated Funds

According to the new law, the tax commission will have the authority to reallocate any funds to the next student in line if the funds are not being used by the previous student.

 

Updated Tally

Every month the OTC must publish the following information:

  • The number of students awards a PCTC
  • The amount of awards dispersed 

That information will be available for each of the priority tiers. 

The OTC will also keep a tally of the number of students leaving a public school in order to use the PCTC. 

Every month the OTC will also publish:

  • The number of denied applications
  • The total amount of denied awards

 

Not Taxable Income

The PCTC will not constitute taxable income. No 1099s will be issued to any family that has previously received the PCTC. The PCTC will not in any way impact income assistance. 

 

Effective July 1, 2024

The new PCTC law will go into effect on July 1, 2024. 

 

As a result of these changes the OTC will likely make administrative rules changes. OPSA will update you when those are published. 

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