The South Dakota Tax Credit Scholarship Program (SB 159) allows any company that pays South Dakota’s insurance premium tax the opportunity to fund tuition scholarships for lower income K-12 children while earning an 80% tax credit for up to 100% of its tax liability. Any company that is liable to pay the insurance company premium and annuity tax, pursuant to 10-44-2 may claim an 80% credit for contributions made to a State registered 501 (c) (3), non-profit Scholarship Granting Organization. Through this program, South Dakota has created an opportunity for insurance companies to partner with families allowing parents to choose a non-public school if they decide that is the best fit for their child. Insurance companies doing business in South Dakota now have another way to give back to local communities.
Scholarship Granting Organization
In keeping with the legislative intent to award scholarships across the State, the non-profit SD Partners in Education (SDPE) was incorporated with statewide Board representation. Great Plains Education Foundation, Aberdeen, SD, serves as the Scholarship Granting Organization. They provide the financial infrastructure and SDPE fulfills many of the operational requirements for them. Great Plains Education Foundation currently serves a similar function for the State with the Dakota Corps Scholarship and has been instrumental in many educational initiatives in South Dakota.
An insurance company wishing to participate in these premium tax credits can reserve their credit for their proposed contribution with the Scholarship Granting Organization. The SGO is responsible to verify with the Division of Insurance that the proposed contribution is below the current $2 million tax credit cap set by the 2016 law. The Division will provide the SGO with conditional authorization. The tax credit may be claimed by the company on the annual premium tax return in an amount equal to, up to 80% of the total contributions made to the SGO in the previous taxable year. *(However, no tax credit may be claimed for the portion of the tax that is collected and set aside for workers’ compensation and coverage as provided in 10-44 -2 (4) or for the tax levied on fire insurance premiums pursuant to 10-44-9.)
Remittance and Acknowledgement
Upon receiving the contribution payment, the SGO will provide a Division approved tax credit certificate. The $2 million tax credit cap is based on the calendar year. Tax liability, payments need to be made by December 31. Scholarships are given on a school year calendar. The earlier the contributions, the better. Early contributions help SDPE determine scholarship amounts before school starts in the fall, which in turn helps families make good decisions on their child’s behalf.
Communication with Schools and Parents
SDPE has created the operations handbook and required participation forms for the schools and parents. School participation is voluntary; those registered will be listed on SDPE website. Families will be applying for the scholarships with TADS, a tuition and financial aid management company. TADS is currently used by many of our non-public schools to validate income and rank need for private scholarships. They will provide much the same function for SDPE and Great Plains Education Foundation to ensure the validity of income eligibility and objectivity in awarding scholarships.
FAQ are available on the Division of Insurance website.
Questions on the tax credit can be directed to the Division by email at SDInsuranceTaxCredit@state.sd.us or by contacting Patsy Madsen, Program Assistant, at 605.773.3563
South Dakota Partners in Education Board
The South Dakota Partners in Education Board members listed below are available to visit with anyone in your organization to further explain this new tax credit program.
Dan Fritz, 605-553-1861
Rep. Brian Gosch 605-381-2804, firstname.lastname@example.org
Sen. Phyllis Heineman 605-610-5453, email@example.com
Katie Mellor 419-559-6354, firstname.lastname@example.org
Scott Perrenoud, 605-940-6534
Robert Satter, 480-223-3605, email@example.com