The Alabama Department of Revenue recently released a set of rules it has proposed to govern the CHOOSE Act, which allows families to use proceeds from tax-credit-funded education savings accounts to pay for their child’s K-12 education, including private school tuition.
Now, a public hearing is set for next month offering citizens the ability to speak out about any questions or concerns about the rules before they are final.
The rules, posted on ADOR’s website, are nearly identical to the law, laying out who is eligible, how to become an education service provider to receive payment and what types of materials and services can be paid for with an ESA.
Though not specified in the proposed rules, the CHOOSE Act says an ESA will contain $7,000 per year for each eligible child to pay for eligible services, and $2,000 for homeschooled children.
Lawmakers initially set aside $100 million to fund ESAs, but that annual allocation could increase based on demand and availability of funding. As many as 14,300 students could obtain a $7,000 ESA at that funding level. The proposed rules state that unused ESA funds will be returned to the CHOOSE Act Fund at the end of each academic year, which runs from July 1 to June 30.
As in the law, the proposed rules state that ESAs can be established for children aged 5 to 19, or up to age 21 if the child has a disability. There is a three-year phase-in process beginning in the 2025-26 school year, for what, beyond age, makes a child eligible for an ESA:
- For 2025-26 and 2026-27, a child’s family’s adjusted gross income cannot exceed 300% of the federal poverty level;
- Beginning in the 2027-28 school year, all children become eligible.
Each year, the first 500 ESAs will be reserved for students with disabilities, and income eligibility requirements will apply to those families, too.
Priority then goes to dependents of active duty service members whose children are enrolled are assigned to a priority school – which is a school that earned a ‘D’ or ‘F’ on the state report card.
The remaining ESAs can then be distributed to students whose families meet income eligibility requirements, according to the proposed rules.
Students who receive tax credit scholarships through the Alabama Accountability Act cannot also have an ESA.
ClassWallet was chosen through an RFP process and $1.4 million contract to administer the ESA program and is already accepting applications for schools to participate.
The ClassWallet application lists the types of education service providers that can participate and will receive payment directly from ADOR:
- K-12 private school (in-person), located in Alabama;
- K-12 private school (online);
- K-12 educational therapies, including speech, physical, occupational, vision and applied behavior analyst therapies;
- K-12 private tutors;
- Textbooks, curriculum or educational items: Vendors who sell only these items;
- Online education classes/courses;
- Student exams, certifications or assessments;
- Public school district;
- Computers of technological aids: Vendor who sells only these items.
Regarding private tutors, while existing law, Section 16-28-5, requires private tutors to hold a teaching certificate, the proposed CHOOSE Act rules have three ways a person can be considered a private tutor:
- Hold a Bachelor’s degree;
- Hold a teaching certificate; or
- Be accredited by a regional or national accrediting organization.
Private tutors must also submit to a background check.
Many of the rules for schools to participate are similar to the rules for the Alabama Accountability Act’s tax credit scholarship program, including:
- The school must be accredited or seeking accreditation from one of the organizations in the law;
- The school must agree to give the student a standardized test annually;
- The school must provide test results at the school, not individual, level – to ADOR.
Unlike the AAA, there is no requirement in the law or the proposed rules that requires any type of evaluation of outcomes for students using ESAs. The AAA requires a bi-annual evaluation of how students using AAA tax credit scholarships are performing academically compared to their peers in public school.
The proposed rules expand on what the law specified about what types of materials and services ESAs can be used to purchase. Instructional materials and tutoring related to the subject of religion are listed as eligible expenditures.
In addition to private and online school tuition and fees, qualifying expenses include:
- Textbooks;
- Instructional materials;
- Educational software and applications;
- After-school and summer programs;
- Private tutoring;
- Educational services for students with disabilities like applied behavior analysis and speech therapy, and;
- Fees for standardized and nationally recognized tests, including advanced placement and college admissions tests.
The proposed rules state that a computer can be eligible for ESA coverage every two years, up to a cost of $1,200. Those that are considered “gaming computers” are not eligible for ESA payment.
ESAs can also be used to pay for educational services contracted from a public school district.
A public hearing on the proposed rules will take place at 1:30 p.m. on Nov. 5 and those who want to attend virtually must sign up with the Tax Policy and Governmental Affairs Division at [email protected] or call 334-242-1380 to obtain sign-in information.
Depending on the results of the hearing, the Revenue Commissioner could give final approval to the rules or they could be changed.