FEDERAL TAX CUT PROVISION

ADVANCES ARKANSAS SCHOOL CHOICE

 

(March 2018) A provision of the recently-enacted Republican federal tax cut, meant to increase competition in the delivery of education services was approved by the state legislature in mid-March and became law on March 20.

 

State legislators amended the Arkansas Tax-Deferred Tuition Savings Program Act1 to allow Section 529 Plans to be used to pay tuition at private schools. The 529 Plans were previously limited to post-secondary education.

 

The measure, sponsored by U.S. Sen. Ted Cruz,2 R-Texas, amended the Tax Cuts and Jobs Act (H.R. 1) to encourage school choice by allowing families to use 529 Plans for K-12 private school tuition. More than 20,000 students attend Arkansas private schools, a recent Policy Foundation memo3 noted.

 

The Policy Foundation has advanced school choice as an idea since1995.

 

The Arkansas measure4 was spearheaded by state Sen. Jason Rapert, R-Conway. It allows a $5,000 (individual) or $10,000 (married, filing jointly) tax deduction for contributions to 529 Plans, administered by the State Treasurer.

 

Arkansas' 529 site (www.arkansas529.org) includes the following explanation:

 

"On December 22, 2017, the president signed new tax legislation into law. We're working on updating our website to reflect the new U.S. tax laws. In the meantime, the website may not address the changes. The legislation includes several new provisions related specifically to 529 plan accounts. We'll provide more information as additional details about the effects of the tax bill become clear. We encourage you to consult a qualified tax advisor about your personal situation (emphasis added)."

 

The IRS provides updated information on 529 Plans at the following site:

 

https://www.irs.gov/newsroom/529-plans-questions-and-answers

 

 



1 The Arkansas Tax-Deferred Tuition Savings Program Act, 6-84-101 et seq.

2 Senate Amendment 1852 to Senate Amendment 1618 to HR 1, 115th U.S. Congress. Sen. Cruz, in a radio interview, termed the provision "the most significant federal school choice legislation that has ever passed ... The amendment I introduced expands 529 savings plans, so in addition to using them for college now you can use them as well for K-12 education." His amendment included a home school provision later removed on a procedural vote.

3 "The Arkansas School Choice Market" (January 2018), Policy Foundation research memo

4 PA 15 of the Second Extraordinary Session of 2018.