CHAPTER 13-65
PARTNERS IN EDUCATION TAX CREDIT PROGRAM
13-65-1 Definitions.
13-65-2 Partners in education tax credit program established.
13-65-3 Limit on tax credits.
13-65-3.1 Tax credits reducing quarterly payments.
13-65-3.2 Tax credits--Maximum allowable.
13-65-3.3 Tax credits--Calculation of maximum allowable.
13-65-4 Requirements for scholarship granting organizations.
13-65-4.1 Participation agreement--Requirements.
13-65-5 Annual financial information reports.
13-65-6 Responsibilities of eligible students and their parents.
13-65-7 Promulgation of rules.
13-65-8 Receipts for contributions--Reporting of each contribution.
13-65-9 Annual report of contributions.
13-65-10 Financial review or audit.
13-65-11 Applicability of chapter.
13-65-12 Regulatory authority over nonpublic schools not expanded.
13-65-1. Definitions.
Terms, as used in this chapter, mean:
(1) "Certified enrollment," the K-12 enrollment data required to be submitted to the Department of Education by an accredited school by October fifteenth of each year and published by the department on the department's website;
(2) "Division," the Division of Insurance in the Department of Labor and Regulation;
(3) "Educational scholarship," a grant to an eligible student to cover all or part of the tuition and fees at a qualifying school. The average value of all scholarships awarded by a scholarship granting organization may not exceed eighty-two and five-tenths percent of the state's share of the per student equivalent, as defined in § 13-13-10.1;
(4) "Eligible student," any student entering kindergarten through twelfth grade who resides in South Dakota while receiving the educational scholarship and:
(a) Is a member of a household whose total annual income, the year before the student enters the program, did not exceed one hundred fifty percent of the income standard used to qualify for a free or reduced-price lunch under the national free or reduced-price lunch program. If sufficient funding is available, once a student meets the initial income eligibility requirement, the student remains income eligible for three years or if the student is entering high school, until the student graduates high school regardless of household income. After the initial period of income eligibility, a student remains eligible if the student is a member of a household whose total annual income in the prior year did not exceed two hundred percent of the income standard used to qualify for a free or reduced-price lunch; or
(b) Is in foster care;
(5) "Low-income eligible student," any student who is a member of a household whose total annual income, the year before the student enters the program, did not exceed one hundred percent of the income standard used to qualify for a free or reduced-price lunch under the national free or reduced-price lunch program;
(6) "Parent," any guardian, custodian, or other person with authority to act in place of a parent for the child;
(7) "Program," the partners in education tax credit program established pursuant to this chapter;
(8) "Qualifying school," any nonpublic school that operates within the boundaries of South Dakota or any tribally controlled school on a federally recognized Indian reservation that operates within the boundaries of South Dakota, is accredited by the Department of Education, provides education to elementary or secondary students, and has notified a scholarship granting organization of its intention to participate in the program and comply with the program requirements. This term excludes any school that receives a majority of its revenues from public funds;
(9) "Scholarship granting organization," a nonprofit organization that complies with the requirements of the program and provides educational scholarships to students.
Source: SL 2016, ch 102, § 1; SL 2018, ch 107, § 1; SL 2018, ch 108, § 1; SL 2021, ch 84, § 1; SL 2022, ch 50, § 1; SL 2024, ch 66, § 1.
13-65-2. Partners in education tax credit program established.
The partners in education tax credit program is hereby established. Through the program, any company that is liable to pay the insurance company premium and annuity tax, pursuant to § 10-44-2, may claim credit for contributions made to the scholarship granting organization. The tax credit may be claimed by the company on the annual premium tax return in an amount equaling up to one hundred percent of the total contributions made to the scholarship granting organization in the previous taxable year.
No tax credit may be claimed pursuant to this chapter for the portion of the tax that is collected and set aside for workers' compensation coverage as provided in subdivision 10-44-2(4) or for the tax that is levied on fire insurance premiums pursuant to § 10-44-9.
Source: SL 2016, ch 102, § 2; SL 2019, ch 97, § 2.
13-65-3. Limit on tax credits.
Notwithstanding the provisions of § 13-65-2, the total amount of tax credits claimed on annual premium tax returns pursuant to this chapter may not exceed five million dollars in fiscal year 2025 and each year thereafter.
Source: SL 2016, ch 102, § 3; SL 2022, ch 50, § 2; SL 2024, ch 67, § 1.
13-65-3.1. Tax credits reducing quarterly payments.
Any company may claim a premium tax credit as provided in § 13-65-2 to reduce quarterly payments required by § 10-44-2. Claims for tax credits on quarterly payments shall be reported to the Division of Insurance on a form prescribed by the director. Pursuant to § 13-65-8, a company must report the amount and specify, at the time of contribution, the quarter to which the premium tax credit shall be applied. No tax credit claimed under this section may reduce a quarterly payment otherwise required by § 10-44-2 to an amount less than zero. A company shall report all reductions in quarterly payments pursuant to this section on its annual premium tax return.
Source: SL 2019, ch 97, § 1.
13-65-3.2. Tax credits--Maximum allowable.
The division shall authorize the maximum allowable allocation of tax credits for each scholarship granting organization pursuant to § 13-65-3.3 for each calendar year, by January first of each calendar year.
Source: SL 2024, ch 66, § 5.
13-65-3.3. Tax credits--Calculation of maximum allowable.
The division shall calculate the maximum allowable contributions eligible for a premium tax credit for each scholarship granting organization for each fiscal year by:
(1) Dividing the total certified enrollment of all qualifying schools in a participation agreement with the scholarship granting organization in the previous school year by the total certified enrollment of all qualifying schools in participation agreements with all scholarship granting organizations in the previous school year; and
(2) Multiplying the result of subdivision (1) by the total available tax credits provided in § 13-65-3.
Source: SL 2024, ch 66, § 4.
13-65-4. Requirements for scholarship granting organizations.
Each scholarship granting organization shall:
(1) Annually notify the division of its intent to provide educational scholarships to eligible students attending qualifying schools;
(2) Demonstrate to the division that it has been granted exemption from the federal income tax pursuant to section 501(c)(3) of the Internal Revenue Code;
(3) Distribute periodic scholarship payments from the educational scholarship fund account as checks made out to an eligible student's parent and mailed to the qualifying school where the eligible student is enrolled. The parent shall endorse the check before it may be deposited;
(4) Annually collect written documentation, from each qualifying school that accepts educational scholarship payments, verifying the school is accredited by the Department of Education;
(5) Provide a division-approved receipt to companies for contributions made to the scholarship granting organization;
(6) Ensure that at least ninety percent of its revenue from contributions is spent on educational scholarships, and that all revenue from interest or investments is spent on scholarships;
(7) Carry forward no more than twenty-five percent of its revenue from contributions in the educational scholarship fund account from the fiscal year in which they were received to the next fiscal year. Contributions that are not carried forward must be remitted to the division;
(8) Submit to the division the names and addresses of all board members and documentation validating that criminal background checks have been conducted on all of its employees and board members, and exclude any employee or board member from employment or governance who might reasonably pose a risk to the appropriate use of contributed funds;
(9) Ensure that scholarships are portable during the school year and can be used at any qualifying school to which the scholarship granting organization grants scholarships and that accepts the eligible student according to a parent's wishes. If a student moves to a new qualifying school during a school year, the scholarship amount may be prorated;
(10) Report to the division by June first of each year the following information, prepared by a certified public accountant, regarding its contributions in the previous calendar year and the scholarship awards in the current fiscal year:
(a) The name and address of each contributing company;
(b) The total number and total dollar amount of contributions received from each company; and
(c) The total number and total dollar amount of educational scholarships awarded to eligible students, the total number and total dollar amount of educational scholarships awarded to low-income eligible students, and the percentage of first-time recipients of educational scholarships who were enrolled in a public school in the prior school year;
(11) Report to the division by December fifteenth of each year, in a format prescribed by the director, information regarding schools entering into participation agreements with the scholarship granting organization, including school names and school certified enrollment as provided by the Department of Education on the Department of Education's website;
(12) Maintain a board that consists of at least five members, each of whom must be a resident of this state; and
(13) Maintain and staff a physical location in the state to meet with and provide service to qualifying schools.
Any donation received that is not awarded a tax credit pursuant to § 13-65-2 is not subject to subdivisions (5) to (7), inclusive, of this section.
Source: SL 2016, ch 102, § 4; SL 2018, ch 107, § 2; SL 2024, ch 66, § 2.
13-65-4.1. Participation agreement--Requirements.
A qualifying school electing to accept scholarships from a scholarship granting organization may only enter into a participation agreement with one scholarship granting organization each school year. A participation agreement for the next school year must be completed each year by November fifteenth.
To be eligible for a premium tax credit for contributions to a scholarship granting program pursuant to this chapter, the scholarship granting organization must have entered into a participation agreement with at least twenty percent of the qualifying schools in the state.
Source: SL 2024, ch 66, § 3.
13-65-5. Annual financial information reports.
The scholarship granting organization shall demonstrate financial accountability by annually submitting to the auditor general a financial information report that complies with uniform financial accounting standards and is the result of an audit conducted by a certified public accountant and by having the auditor certify that the report is free of material misstatements. The scholarship granting organization shall provide the audit to the auditor general within one hundred eighty days after the completion of the scholarship granting organization's fiscal year.
Source: SL 2016, ch 102, § 5.
13-65-6. Responsibilities of eligible students and their parents.
The responsibilities of an eligible student and an eligible student's parent in participating in the program include the following:
(1) An eligible student's parent shall select a qualifying school and apply for admission of the eligible student;
(2) An eligible student participating in the program shall remain in attendance throughout the school year, at the qualifying school in which the eligible student is enrolled, unless, excused by the school for illness or other good cause, or the eligible student has transferred to another school;
(3) An eligible student and an eligible student's parent shall comply with the published policies of the qualifying school in which the eligible student is enrolled;
(4) An eligible student's parent shall ensure that the eligible student participating in the program takes the norm-referenced tests or statewide assessments administered by the qualifying school; and
(5) The parent of an eligible student, upon receipt of a scholarship warrant from the scholarship granting organization, shall restrictively endorse the warrant to the qualifying school district for deposit.
Source: SL 2016, ch 102, § 6.
13-65-7. Promulgation of rules.
The secretary of the Department of Labor and Regulation shall promulgate rules, pursuant to chapter 1-26, establishing annual timelines for the notifications, verifications, and other procedures required of the insurance companies seeking a tax credit pursuant to § 13-65-2.
Source: SL 2016, ch 102, § 7.
13-65-8. Receipts for contributions--Reporting of each contribution.
The division shall provide a standardized format for a receipt to be issued by the scholarship granting organization to a company to indicate the value of a contribution received. The division shall require a company to provide a copy of this receipt when claiming the tax credit established in this chapter. Prior to accepting any contribution from any company, the scholarship granting organization shall first verify with the division that the limit on the total amount of tax credits allowed pursuant to § 13-65-3 has not yet been reached for the current fiscal year. The scholarship granting organization shall report to the division the name of the insurance company, date, and amount for each contribution received from an insurance company seeking a tax credit pursuant to § 13-65-2 within thirty days of the date of the contribution.
Source: SL 2016, ch 102, § 8.
13-65-9. Annual report of contributions.
The division shall provide a standardized format for the scholarship granting organization to report the information in subdivision 13-65-4(10). Any information provided relating to the identity of a taxpayer that provides an eligible contribution pursuant to this chapter shall remain confidential unless the company deems otherwise.
Source: SL 2016, ch 102, § 9.
13-65-10. Financial review or audit.
The auditor general may conduct either a financial review or audit of the scholarship granting organization if it possesses evidence of fraud.
Source: SL 2016, ch 102, § 10.
13-65-11. Applicability of chapter.
For the 2024-2025 school year and 2025 fiscal year tax credits, each scholarship granting organization shall:
(1) File the report required by § 13-65-4 by July 1, 2024; and
(2) Complete all participation agreements required by § 13-65-4.1 by July 1, 2024.
The division shall authorize the 2024 maximum allowable tax credit for each scholarship granting organization on July 1, 2024, for fiscal year 2025, using the certified enrollment from the 2023-2024 school year.
Source: SL 2016, ch 102, § 11; SL 2024, ch 66, § 6.
13-65-12. Regulatory authority over nonpublic schools not expanded.
The program established pursuant to this chapter does not expand the regulatory authority of the state or the state's officers to impose additional regulation of nonpublic schools beyond those necessary to enforce the requirements of this chapter.
Source: SL 2016, ch 102, § 12.
