An Act to authorize the provision of charitable contributions to a scholarship granting organization.

Be it enacted by the Legislature of the State of South Dakota:

Section 1. That a NEW SECTION be added to a NEW CHAPTER in title 13:

Terms used in this chapter mean:

(1) "Eligible student," a student who has not reached the age of nineteen prior to July first of the current school year and:

(a) Is in any educational grade level from kindergarten through twelve;

(b) Is a resident of this state;

(c) Is a United States citizen or an alien who has permanent resident status;

(d) Is a member of a household whose annual income during the preceding calendar year did not exceed three hundred percent of the area median income, as determined by the U.S. Department of Housing and Urban Development; and

(e) Is not enrolled full-time in a school district in this state;

(2) "Microschool," a business entity that:

(a) Is registered with the secretary of state;

(b) Is located within this state;

(c) Provides educational services or academic opportunities to students who receive alternative instruction in accordance with chapter 13-27; and

(d) Requires enrollment and the payment of tuition;

(3) "Parent," any guardian, custodian, or other person with authority to act in place of a parent for the child;

(4) "Scholarship," a grant to an eligible student to support the student's education; and

(5) "Scholarship granting organization," an entity that is registered in accordance with section 3 of this Act.

Section 2. That a NEW SECTION be added to a NEW CHAPTER in title 13:

Any person may provide a charitable contribution to a scholarship granting organization that is registered with the Department of Education, in accordance with section 3 of this Act.

Section 3. That a NEW SECTION be added to a NEW CHAPTER in title 13:

In order to become registered, a scholarship granting organization must:

(1) File with the Department of Education documentation indicating that the organization is exempt from federal taxation under 26 U.S.C. § 501 (January 1, 2026); and

(2) Enter into a contract with the department to:

(a) Distribute scholarships to or on behalf of eligible students in accordance with this chapter and rules adopted by the department;

(b) Retain no more than ten percent of the total annual contributions received under this chapter for administrative expenses;

(c) Provide an annual statement to each contributor verifying the amount contributed; and

(d) Provide to the department, no later than June first of each year, an audited financial statement showing, for the preceding calendar year, the amount of contributions received, the number and amount of scholarships awarded to or on behalf of eligible students, and the purposes for which the scholarship dollars were used.

Section 4. That a NEW SECTION be added to a NEW CHAPTER in title 13:

The parent of an eligible student may annually apply to the scholarship granting organization for a scholarship.

A scholarship awarded to or on behalf of an eligible student must be forwarded to the student's parent and used for:

(1) Tuition and fees required as a condition of enrollment at an accredited nonpublic school or microschool located within this state;

(2) Virtual coursework approved by the Department of Education and offered by a provider, but not on behalf of a school district;

(3) The purchase of curricula and associated instructional materials or supplies, used within a nonpublic school, within a microschool, or in the provision of alternative instruction;

(4) The purchase of educationally related technological devices and associated hardware and services, used within a nonpublic school, within a microschool, or in the provision of alternative instruction;

(5) Transportation between the student's home and any nonpublic school, microschool, or institution of higher education, in which the student is enrolled; and

(6) The fee for any standardized college or university entrance examination approved by the department.

A scholarship awarded to or on behalf of an eligible student may not exceed the lesser of eighty-two and five-tenths percent of the state's share of the per student equivalent, as defined in § 13-13-10.1, or the actual expenses noted in the application.

Section 5. That a NEW SECTION be added to a NEW CHAPTER in title 13:

As a condition of awarding the scholarship to an eligible student, the scholarship granting organization shall request documentation from the student's parent to verify any expenditures and may seek the recovery, in whole or in part, of any scholarship amount awarded, upon determination that the award was not used in accordance with the purposes set forth in section 4 of this Act.

Section 6. That a NEW SECTION be added to a NEW CHAPTER in title 13:

The Department of Education shall promulgate rules, in accordance with chapter 1-26, to:

(1) Establish the application and review process for the registration of a scholarship granting organization;

(2) Establish the process by which the parent of an eligible student may annually apply for a scholarship;

(3) Establish a process by which, and the time within which, a scholarship granting organization must evaluate each application for a scholarship;

(4) Establish the time, manner, and method applicable to the distribution of scholarship dollars;

(5) Establish a process for verifying that the scholarship dollars were used in compliance with section 4 of this Act;

(6) Establish an appeal process under which a parent may request and receive a review of a denied reimbursement; and

(7) Establish a process by which any amounts not annually utilized, in accordance with section 4 of this Act, may be recovered in whole or in part.