Tennessee Passes School Choice Tax Exemption For Parents

Photo Credit: Courtesy of Allison Shelley/The Verbatim Agency for American Education: Images of Teachers and Students in Action / CC

Published April 21, 2021

The Tennessee Conservative Staff –

Tennessee Governor Bill Lee recently signed into law Senate Bill 127, which will not allow any funds used from the School Choice Program to count as taxable income. This program gives Tennessee parents an alternative to the school their child has been assigned if it is not meeting the child’s individual needs.

Tennessee Capitol Building in Nashville

Parents have the option to send their children to a charter school, magnet school, or private school. Families can also utilize homeschooling and virtual learning options.

School Choice helps historically disadvantaged students by providing funds directly to the parents for their child’s education. The funds are taken from tax dollars that would be used toward their education at the student’s assigned school.

During the House Floor Session at the end of March, sponsor of the House bill Republican State Representative Johnny Garrett, said, “Currently, the IRS taxes this as income.”

“The state of Tennessee does not collect any taxes on this benefit at all, but what this bill, hopefully, is doing, is to strengthen the position for the particular taxpayer. To tell the IRS that this is not taxable income for federal purposes,” Garrett said.

Senator Ferrell Haile is the Senate bill’s sponsor. Senate Bill 127 passed the House Floor Session with a 93-0 vote and was moved to the desk of Governor Lee.

The American Federation for Children is an advocate for school choice programs across the country. Shaka Mitchell, the State Director for AFC in Tennessee, released a statement to address the bill passage.

“Tennessee applauds the passage of Senate Bill 127,” the statement said. “Which makes abundantly clear that when parents access school choice program funds, those funds are not treated as income and therefore not subject to being taxed. While this was always the intention for these programs, this new law clarifies the issue for related state and federal departments. Ultimately, this will likely result in more parents being able to access the program which has already been a lifeline to hundreds of students across the state. Thank you to Representative Johnny Garrett and Senator Ferrell Haile for bringing this issue forward, and to Governor Lee for quickly signing it into law.”

With School Choice becoming a better option for families across the state, the passage of this bill will allow more of them the opportunity to utilize it. Overall support for the program has grown in the past months.

A recent poll from Real Clear Opinion Research showed that 71% of registered voters support School Choice.

Mitchell said the poll “makes it clear that more parents than ever before support educational freedom. With more than $3.8 billion in COVID-related coming to Tennessee to support learning loss, our state has an opportunity to increase families’ educational options by getting money in the hands of parents immediately.”

John Schilling, president of AFC, said, “The need for education freedom is at an all-time high and it’s reaffirming to see many state policymakers stepping up and supporting school choice across the country. Thirty-two states have introduced 36 bills to create or expand educational choice and we urge policymakers in these states to get these bills over the finish line on behalf of families and students.”

Mitchell added that, “The Tennessee Education Savings Account Pilot Program is pending in front of the TN Supreme Court and a hearing date could be set in the coming weeks. That program is written to be non-taxable just as the IEA program.”

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