Homeschoolers in the United States are debating whether an amendment to the GOP tax reform bill – that would expand 529 College Savings Plans to allow use of tax-exempt funds to pay for homeschooling expenses – will put homeschoolers at risk of federal oversight.
The Senate’s tax reform bill includes an amendment offered by Texas Republican Sen. Ted Cruz that would expand 529 College Savings Plans to include K-12 elementary and secondary tuition for public, private, religious, and homeschools.
For homeschooling families, the amendment would allow use of their tax-exempt funds to pay for homeschooling expenses.
“It is the most far-reaching federal school choice legislation ever passed,” said Cruz Wednesday on Fox News, explaining:
What it does, is it takes 529 College Savings Plans, which many, many people have. They let you save in a tax-advantaged way for college expenses and are immensely popular. Parents, grandparents can save so that kids can go to college. My amendment expands 529s so now you can not only save to go to college, you can also spend from your 529 plan on K-12 education expenses for public schools, for private schools, for religious schools, for homeschooling. Up to $10,000 a year, you can save in a tax-advantaged plan and spend $10,000 per child. You are in charge of your kid’s education.
The bill was crafted with the help of Home School Legal Defense Association (HSLDA), which says it “strongly opposes any federal funds to homeschoolers.”
“We have vigorously opposed past attempts to give federal money to homeschool families, and will continue to do so,” HSLDA asserts.
However, not all homeschoolers are on board with the amendment, and fear it will open up homeschooling families to federal oversight.
Attorney Deborah Stevenson, founder of National Home Education Legal Defense (NHELD), says Cruz’s amendment, though perhaps intended to be helpful to parents, is unconstitutional, and actually places homeschooling parents in jeopardy of being subject to the federal government’s intrusion.
“Mark my words, giving the IRS authority over whether the parents’ homeschool ‘qualifies’ for a ‘tax break’ is not going to bode well for parents,” Stevenson said in an article she wrote about the issue and sent to Breitbart News.
She explains:
More to the point, Senator Cruz and his supporters have no Constitutional authority to give such a “tax break” to parents who homeschool, and, as “Constitutional scholars” they should know better … The federal government simply has no authority to have anything to say about the rights of parents, even if it is only purportedly to “help” parents with a “tax break.”
Stevenson asserts the amendment offered by Cruz, and backed and promoted by HSLDA, “now directly regulates the rights of parents regarding the education of their children, by providing a direct ‘benefit’ to them,” one that potentially will have “very negative, long term consequences, despite its innocuous and beneficial sounding language.”
Given the measure’s “grant” of a tax exemption, Stevenson continues, it would “allow the IRS to determine whether some of the money a parent earns will NOT be taxed, i.e., will not be taken by the federal government for tax purposes.”
“Whether it is an outright ‘grant’ of money to a person, or it is a ‘grant’ of a ‘benefit’ to a person that the federal government will NOT exercise what it believes to be its authority to take that person’s money, it is unconstitutional,” she states.
Michigan homeschool parent activist Karen Braun has similar concerns about Cruz’s amendment.
“This doesn’t expand ‘choice’ for parents,” she tells Breitbart News. “It expands the reach of the federal government and allows the feds to create definition of a ‘legitimate’ homeschool expense. What the feds define they will refine.”
Braun says federal overreach into education will not stop with 529 plans.
“Once the feds expand the 529 in the name of ‘fairness’ to homeschoolers, the argument that it is ‘fair’ will be used to expand the use of the federally funded education savings account (ESA) for the ‘legitimate’ homeschool expenses,” she explains, adding that in her own state of Michigan, state “Sen. Patrick Colbeck is officially asking Congress to allow federal funding to be deposited directly into a student ESA.”
“So much for the federal government having no role in education,” she adds, observing that U.S. Education Secretary Betsy DeVos has also included homeschooling in her “choice” initiatives.
“If this amendment passes and conservatives continue to promote federal initiatives in homeschooling as part of ‘choice’ we will eventually lose true choice in education,” Braun asserts.
In response to a request for comment from Cruz’s office, his spokeswoman Catherine Frazier told Breitbart News, “There is no mechanism opening those who would utilize this program to any additional federal oversight. The K-12 and/or homeschool provision would be regulated just as it is currently, i.e., by state and local governments.”
Will Estrada, director of federal relations for HSLDA, also tells Breitbart News homeschoolers have nothing to fear from Cruz’s amendment.
“There’s no danger of it coming back on people, nor of the federal government getting involved in homeschooling,” he said in an interview, explaining:
Like any tax-advantaged account, whether it’s Coverdell education savings accounts – which have already been around for over 20 years – it’s your money, you save it after tax, in a tax-advantaged account, then it grows and the proceedings grow tax-free if you use them for whatever they’re set up for, in this case, an educational expense.
If there were any truth to these concerns, then we would have seen regulations coming out of Coverdells – and there really hasn’t been. The only way the government interacts with you is if there’s an audit, and then you just need to keep documentation to show them your expenses were legitimate educational expenses; otherwise you’ll have to pay whatever the tax would have been on that amount that had grown tax-free. That’s the only way there would ever be any interaction between you and the government.
Families use 529’s right now for higher education. Now, higher-education 529s do have more regulation because Congress put more regulation on them when they created them. If you want to use a 529 for higher education, the law that set up 529s … said it could only be used for tuition at an accredited institution, as well as other higher education-related expenses.
On its website, HSLDA explains the differences between the Coverdell ESAs and the newer 529 college savings accounts:
One main difference between the Coverdell and the 529 is that the Coverdell can be used for education expenses anywhere from preschool to graduation from high school, as well as for a child’s college costs. The 529 can only be used for college and graduate school expenses.
Another difference is that families can contribute far more money into a 529 than into a Coverdell. Additionally, the Coverdell has income restrictions on who can contribute. Families who make above a certain level cannot use the Coverdell. The 529 has no such restrictions, making the 529 the vehicle of choice for higher income families.
The problem that has faced homeschoolers is that the federal law that created the Coverdell defined eligible expenses as costs associated only with public and private school costs. So the Coverdell cannot be used for homeschool expenses, unless a family is operating their homeschool program as a private school in one of the 14 states where a homeschool is treated as a private school.
“When we worked with Sen. Cruz’s office on this, we put in a very broad definition of homeschool expenses and added whether the school is defined as a homeschool or private school under applicable state law,” Estrada says. “We don’t want the IRS creating a definition of what is a homeschool, but we also didn’t want to say it’s for accredited K-12 expenses. The only limitation – and this had to go in for it to get enough votes – was that you can’t use it for tutoring from family members.”
Estrada says homeschoolers who are opposed to the amendment argue that just as the traditional 529s are for accredited institutions, Congress will also say, “Well a 529 is a 529, so it can only be used for accredited homeschool programs,” which is not what the Cruz amendment states, he points out.
Asked by Breitbart News if another Congress could expand the Cruz 529 amendment to further regulate homeschooling, Estrada replied, “Congress can always amend federal law if they want to. We feel pretty safe about this, however, for two reasons.
He explains that, first, HSLDA has tried over some 15 years to expand Coverdell ESAs to include homeschooling expenses, but has been met with the response that Congress is usually very reluctant to open up the tax code.
“So, we finally had our chance to allow homeschoolers to be able to use these tax-advantaged accounts because Congress is doing a comprehensive overhaul of the tax system,” he says.
Secondly, Estrada reasons the amount of money that is involved in the 529 provision is “fairly small.”
“It’s not like a voucher or an ESA that is coming out of the treasury,” he continues. “It’s your money that you’re saving in your own account. So, it’s not like the Department of Education is going to put regulations on it, or anything out of a future secretary of education. It’s a very limited interaction that homeschool families will ever have with the government – whether it’s a Republican or Democrat administration.”
Estrada contrasts the Cruz 529 amendment that expands to include homeschooling expenses from a proposed measure that was offered by Rep. Steve King (R-IA) in February. HSLDA fiercely opposed that measure – as did Stevenson, Braun, and most other homeschooling parents – creating an uproar that ultimately halted the legislation.
“That was a voucher program,” Estrada explains. “That would have allowed homeschoolers to take their portion of the federal money that goes per pupil, and then actually use the voucher to get money out of the treasury.”
“HSLDA is dead set against those – always have, always will be,” he adds. “This is a provision in which families can take up to $10,000 of their own money – after taxes. It’s just like a health savings account, or a Coverdell, or an existing 529.”