Comment from Opportunity Scholarships of Nebraska

Opportunity Scholarships of Nebraska (OSN) is a 501c3 nonprofit organization established in 2023 to help implement Nebraska’s first school choice program, the Opportunity Scholarships Act. Throughout the life of the program, January 2024 to October 2024, OSN received and processed nearly $10M of state income tax credit contributions from more than 950 taxpayers. OSN distributed approximately 4,050 student scholarships with the funds raised through the tax credit scholarship program. While the state program no longer exists, we continue to see the positive impact these scholarship dollars made on Nebraska families. We look forward to participating in the new federal tax credit program established through the most recent budget reconciliation package. Informed by our experience with Nebraska’s tax credit scholarship program, OSN offers the following brief comments regarding implementation of the federal program. Recordkeeping and Reporting Issue: Recordkeeping required by scholarship granting organizations. To honor the intent of the law and optimize scholarship funds for students, recordkeeping should not be overly burdensome or onerous. SGOs should not be required to collect unnecessary sensitive information from every donor—instead, the same reporting rules that govern charitable donations for tax deduction purposes should govern FSTC donations. Like that process, the SGO should provide the donor a written statement acknowledging receipt of the contribution and stating that the donor received no value for that donation. This would be enough record for tax purposes and ensure less spent on administrative resources. It is crucial that Treasury does not disclose any taxpayer/contributor information publicly but instead uses this to inform their own auditing and enforcement. Married filing jointly taxpayers Issue: Married couple filing jointly should be able to contribute $3400, not limited to $1700. A commonsense reading of the statute and governing IRS precedent assumes that the giving limitation applies per individual, allowing married couples filing jointly to give $3,400. It is our understanding that IRS regulations generally recognize that a joint return consists of two taxpayers. For example, 26 CFR §1.6013-4(b) states, “Although there are two taxpayers on a joint return, there is only one taxable income.” Additionally, tax court decisions have confirmed that spouses on a joint return remain separate “taxpayers” absent express statutory merger. For example, Dolan v. Commissioner (1965) and Anne Goyne Mitchell (1969) treat each spouse independently for assessment and notice. Rodney v. Commissioner (1969) and Moore v. United States (1965) treat spouses filing jointly as separate taxpayers when it comes to criminal proceedings. SGO Income Requirements Issue: The law requires a scholarship granting organization to spend “not less than 90 percent of the income of the organization on scholarships for eligible students”. While implementing Nebraska’s tax credit scholarship program as an SGO, Opportunity Scholarships of Nebraska raised a significant amount of 501c3 charitable donations to cover startup, operational, and marketing costs. Because of this, OSN was able to allocate more than 90% of tax credit contributions raised to benefit scholarship recipients. Therefore, it is critically important for SGOs to be able to supplement non-scholarship costs with tax-exempt donations to cover essential administrative and compliance expenses while ensuring that scholarship funds are protected and optimized. A reasonable reading would suggest that Congress intended the 90% requirement to apply only to income from FSTC-eligible contributions, not to all the income of the organization. Treasury should resolve this ambiguity in a way that honors Congress’s intent to increase school choice opportunities for students and families. Thank you for the opportunity to offer comments for this highly anticipated school choice program. The scholarships provided through this law will have a lasting impact on the educational future of countless American families. With so much at stake, all parties unquestionably desire to make this program as efficient and effective as possible.