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REFERENCE TITLE: STOs; scholarship reporting; identification numbers |
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State of Arizona Senate Fifty-seventh Legislature Second Regular Session 2026
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SB 1726 |
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Introduced by Senator Epstein
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AN ACT
amending section 15-1041, Arizona Revised Statutes; amending title 15, chapter 9, article 8, Arizona Revised Statutes, by adding section 15-1047; amending sections 43-1503, 43-1506, 43-1603 and 43-1604, Arizona Revised Statutes; relating to school tuition organizations.
(TEXT OF BILL BEGINS ON NEXT PAGE)
Be it enacted by the Legislature of the State of Arizona:
Section 1. Section 15-1041, Arizona Revised Statutes, is amended to read:
15-1041. Student accountability information system
The student accountability information system is established to enable school districts, career technical education districts, and charter schools and certified school tuition organizations to transmit student level data and school finance data electronically through the internet to the department of education for the purposes of complying with the statutory obligations of the department of education and the state board of education.
Sec. 2. Title 15, chapter 9, article 8, Arizona Revised Statutes, is amended by adding section 15-1047, to read:
15-1047. Student data; school tuition organizations
The department shall assign a student identifier to any student who is not already included in the student accountability information system and who is identified by a certified school tuition organization as a recipient of an educational scholarship or tuition grant pursuant to section 43-1503 or 43-1603.
Sec. 3. Section 43-1503, Arizona Revised Statutes, is amended to read:
43-1503. Operational requirements for school tuition organizations
A. A certified school tuition organization must be established to receive contributions from taxpayers for the purposes of income tax credits under sections 43-1183 and 43-1184 and insurance premium tax credits under sections 20-224.06 and 20-224.07 and to pay educational scholarships or tuition grants to allow students to attend any qualified school of their parents' or custodians' choice.
B. To be eligible for certification and retain certification, the school tuition organization:
1. Must allocate at least ninety percent of its annual revenue from contributions made for the purposes of sections 20-224.06, 20-224.07, 43-1183 and 43-1184 for educational scholarships or tuition grants.
2. Shall not limit the availability of educational scholarships or tuition grants to only students of one school.
3. Must allow the department of revenue to verify that the educational scholarships and tuition grants that are issued are awarded to students who attend a qualified school.
4. Must not knowingly collude with any other school tuition organization to circumvent the limits of section 43-1504, subsection C.
5. Must not award educational scholarships or tuition grants to students who are simultaneously enrolled in a district school or charter school and a qualified school.
6. Shall include on the organization's website, if one exists, the percentage and total dollar amount of educational scholarships and tuition grants awarded during the previous fiscal year to:
(a) Students whose family income meets the economic eligibility requirements established under the national school lunch and child nutrition acts (42 United States Code sections 1751 through 1785 1793) for free or reduced-price lunches.
(b) Students whose family income exceeds the threshold prescribed by subdivision (a) of this paragraph but does not exceed one hundred eighty-five percent of the economic eligibility requirements established under the national school lunch and child nutrition acts (42 United States Code sections 1751 through 1785 1793) for free or reduced-price lunches.
C. A certified school tuition organization shall submit the following student data electronically to the department of education on or BEFORE July 1 of each year:
1. The student's name.
2. The amount of any educational scholarship or tuition grant the student received for the preceding fiscal year.
3. The name of the qualified school the student attends.
Sec. 4. Section 43-1506, Arizona Revised Statutes, is amended to read:
43-1506. Annual report; posting
A. On or before September 30 of each year, each school tuition organization shall report electronically to the department, in a form prescribed by the department, the following information, separately compiled and identified for the purposes of sections 20-224.06, 20-224.07, 43-1183 and 43-1184:
1. The name, address and contact person of the school tuition organization.
2. The total number of contributions received during the previous fiscal year.
3. The total dollar amount of contributions received during the previous fiscal year.
4. The total number of children awarded educational scholarships or tuition grants during the previous fiscal year.
5. The total dollar amount of:
(a) Educational scholarships and tuition grants distributed during the previous fiscal year.
(b) Monies being held for identified students' scholarships and tuition grants in future years.
6. The cost of audits pursuant to section 43-1507 paid during the fiscal year.
7. The percentage and total dollar amount of educational scholarships and tuition grants awarded during the previous fiscal year to:
(a) Students whose family income meets the economic eligibility requirements established under the national school lunch and child nutrition acts (42 United States Code sections 1751 through 1793) for free or reduced-price lunches.
(b) Students whose family income exceeds the threshold prescribed by subdivision (a) of this paragraph but does not exceed one hundred eighty-five percent of the economic eligibility requirements established under the national school lunch and child nutrition acts (42 United States Code sections 1751 through 1793) for free or reduced-price lunches.
8. For each school to which educational scholarships or tuition grants were awarded:
(a) The name and address of the school.
(b) The number of educational scholarships and tuition grants awarded during the previous fiscal year, including the number of students who received an educational scholarship and tuition grant in the amount of:
(i) Less than $5,000.
(ii) $5,000 or more but less than $10,000.
(iii) $10,000 or more but less than $20,000.
(iv) $20,000 or more but less than $30,000.
(v) $30,000 or more but less than $40,000.
(vi) $40,000 or more but less than $50,000.
(vii) $50,000 or more but less than $60,000.
(viii) $60,000 or more.
(c) The total dollar amount of educational scholarships and tuition grants awarded during the previous fiscal year.
(d) The mean and median dollar amount of educational scholarships and tuition grants awarded during the previous fiscal year.
9. The names, job titles and annual salaries of the three employees who receive the highest annual salaries from the school tuition organization.
10. The name, student identifier assigned pursuant to section 15-1047 and educational scholarship or tuition grant amount of each student who was awarded an educational scholarship or tuition grant from the school tuition organization during the previous fiscal year. The department shall use the information provided pursuant to this paragraph to determine the amount of educational scholarship or tuition grant monies each student receives. this paragraph does not authorize the department to release information that would violate the family educational rights and privacy act of 1974 (20 united states code section 1232g).
B. The department shall post on its website a report of the information it receives pursuant to subsection A of this section on or before March 31 of the calendar year following the year in which the information is received. The report must also include:
1. The total dollar amount awarded to students from each school tuition organization.
2. The total dollar AMOUNT of educational scholarships and tuition grants awarded to each individual student from school tuition organizations as identified by the student identifier assigned pursuant to section 15-1047.
3. the average dollar amount of educational scholarships and tuition grants awarded per student from school tuition organizations compared to the average sum of the charter additional assistance and base support level prescribed in sections 15-185 and 15-943, respectfully, per student by grade level. Each year the department shall provide this information to the joint legislative budget committee for inclusion in the historical spending reports for K-12 education.
Sec. 5. Section 43-1603, Arizona Revised Statutes, is amended to read:
43-1603. Operational requirements for school tuition organizations; notice; qualified schools
A. A certified school tuition organization must be established to receive contributions from taxpayers for the purposes of income tax credits under sections 43-1089 and 43-1089.03 and to pay educational scholarships or tuition grants to allow students to attend any qualified school of their parents' choice.
B. To be eligible for certification and retain certification, the school tuition organization:
1. Must allocate at least ninety percent of its annual revenue from contributions made for the purposes of sections 43-1089 and 43-1089.03 for educational scholarships or tuition grants.
2. Shall not limit the availability of educational scholarships or tuition grants to only students of one school.
3. May allow donors to recommend student beneficiaries, but shall not award, designate or reserve scholarships solely on the basis of donor recommendations.
4. Shall not allow donors to designate student beneficiaries as a condition of any contribution to the organization, or facilitate, encourage or knowingly allow the exchange of beneficiary student designations in violation of section 43-1089, subsection F, section 43-1089.03, subsection F and section 43-1089.04, subsection E.
5. Shall include on the organization's website, if one exists, the percentage and total dollar amount of educational scholarships and tuition grants awarded during the previous fiscal year to:
(a) Students whose family income meets the economic eligibility requirements established under the national school lunch and child nutrition acts (42 United States Code sections 1751 through 1793) for free or reduced-price lunches.
(b) Students whose family income exceeds the threshold prescribed by subdivision (a) of this paragraph but does not exceed one hundred eighty-five percent of the economic eligibility requirements established under the national school lunch and child nutrition acts (42 United States Code sections 1751 through 1793) for free or reduced-price lunches.
6. Must not award educational scholarships or tuition grants to students who are simultaneously enrolled in a district school or charter school and a qualified school.
C. A school tuition organization shall include the following notice in any printed materials soliciting donations, in applications for scholarships and on its website, if one exists:
Notice
A school tuition organization cannot award, restrict or reserve scholarships solely on the basis of a donor's recommendation.
A taxpayer may not claim a tax credit if the taxpayer agrees to swap donations with another taxpayer to benefit either taxpayer's own dependent.
D. In evaluating applications and awarding, designating or reserving scholarships, a school tuition organization:
1. Shall not award, designate or reserve a scholarship solely on the recommendation of any person contributing money to the organization, but may consider the recommendation among other factors.
2. Shall consider the financial need of applicants.
E. A taxpayer's contribution to a school tuition organization that exceeds the amount of the credit allowed by section 43-1089 but does not exceed the amount of the credit allowed by section 43-1089.03 is considered a contribution pursuant to section 43-1089.03. A school tuition organization must use at least ninety percent of contributions made pursuant to section 43-1089.03 for educational scholarships or tuition grants for students to whom any of the following applies:
1. Attended a governmental primary or secondary school as a full-time student as defined in section 15-901 or attended a preschool program that offers services to students with disabilities at a governmental school for at least ninety days of the prior fiscal year and transferred from a governmental school to a qualified school.
2. Enroll in a qualified school in a kindergarten program or a preschool program that offers services to students with disabilities.
3. Are the dependent of a member of the armed forces of the United States who is stationed in this state pursuant to military orders.
4. Are homeschooled before enrolling in a qualified school.
5. Moved to this state from out of state before enrolling in a qualified school.
6. Participated in an Arizona empowerment scholarship account and did not renew the account or accept the scholarship in order to accept a scholarship or tuition grant under this section.
7. Subject to subsection H of this section, are placed in foster care pursuant to title 8, chapter 4 at any time before the student graduates from high school or obtains a general equivalency diploma and who meet all of the following criteria:
(a) Are unable to attend a governmental primary or secondary school as a full-time student as defined in section 15-901. For the purposes of this subdivision, "unable to attend" means the student has been expelled or asked not to return due to the student's behavior or the school is not able to provide necessary services to the student.
(b) Have not attended a governmental primary or secondary school as a full-time student as defined in section 15-901 for at least ninety days of the prior fiscal year or one full semester before enrolling in a qualified school.
(c) The qualified school in which the students are enrolling is only considered because a governmental primary or secondary school cannot meet the students' unique needs, such as severe medical or behavioral needs that require specialized programs.
(d) Are unable to receive other scholarships or tuition grants under this chapter or chapter 15 of this title in an amount that is equal to the cost of tuition to attend the qualified school.
8. Received an educational scholarship or tuition grant under paragraph 1, 2, 3, 4, 5, 6 or 7 of this subsection or under chapter 15 of this title if the student continues to attend a qualified school in a subsequent year.
F. In awarding educational scholarships or tuition grants from contributions made pursuant to section 43-1089.03, a school tuition organization shall give priority to students and siblings of students on a waiting list for scholarships if the school tuition organization maintains a waiting list.
G. If an individual educational scholarship or tuition grant exceeds the school's tuition, the amount in excess shall be returned to the school tuition organization that made the award or grant. The school tuition organization may allocate the returned monies as a multiyear award for that student and report the award pursuant to section 43-1604, subsection A, paragraph 5, subdivision (b) or may allocate the returned monies for educational scholarships or tuition grants for other students.
H. If a court of competent jurisdiction issues a final judgment that the aggregate tax credit limit prescribed in section 43-1183, subsection C, paragraph 1 is unenforceable and that judgment is no longer subject to further appeal or review, a school tuition organization shall not issue an educational scholarship or a tuition grant under subsection E, paragraph 7 or 8 of this section for children who received an educational scholarship or a tuition grant under subsection E, paragraph 7 of this section.
I. A certified school tuition organization shall submit the following student data electronically to the department of education on or BEFORE July 1 of each year:
1. The student's name and the student identifier assigned to the student pursuant to section 15-1047.
2. The amount of any educational scholarship or tuition grant the student received for the preceding fiscal year.
3. The name of the qualified school the student attends.
Sec. 6. Section 43-1604, Arizona Revised Statutes, is amended to read:
43-1604. Annual report; posting
A. On or before September 30 of each year, each school tuition organization shall report electronically to the department, in a form prescribed by the department, the following information, separately compiled and identified for the purposes of sections 43-1089 and 43-1089.03:
1. The name, address and contact person of the school tuition organization.
2. The total number of contributions received during the previous fiscal year.
3. The total dollar amount of contributions received during the previous fiscal year.
4. The total number of children awarded educational scholarships or tuition grants during the previous fiscal year.
5. The total dollar amount of:
(a) Educational scholarships and tuition grants distributed during the previous fiscal year.
(b) Money Monies being held for identified students' scholarships and tuition grants in future years.
6. The cost of audits pursuant to section 43-1605 paid during the fiscal year.
7. The total dollar amount of educational scholarships and tuition grants awarded during the previous fiscal year to:
(a) Students whose family income meets the economic eligibility requirements established under the national school lunch and child nutrition acts (42 United States Code sections 1751 through 1793) for free or reduced-price lunches.
(b) Students whose family income exceeds the threshold prescribed by subdivision (a) of this paragraph but does not exceed one hundred eighty-five percent of the economic eligibility requirements established under the national school lunch and child nutrition acts (42 United States Code sections 1751 through 1793) for free or reduced-price lunches.
8. For each school to which educational scholarships or tuition grants were awarded:
(a) The name and address of the school.
(b) The number of educational scholarships and tuition grants awarded during the previous fiscal year, including the number of students who received an educational scholarship and tuition grant in the amount of:
(i) Less than $5,000.
(ii) $5,000 or more but less than $10,000.
(iii) $10,000 or more but less than $20,000.
(iv) $20,000 or more but less than $30,000.
(v) $30,000 or more but less than $40,000.
(vi) $40,000 or more but less than $50,000.
(vii) $50,000 or more but less than $60,000.
(viii) $60,000 or more.
(c) The total dollar amount of educational scholarships and tuition grants awarded during the previous fiscal year.
(d) The mean and median dollar amount of educational scholarships and tuition grants awarded during the previous fiscal year.
9. The names, job titles and annual salaries of the three employees who receive the highest annual salaries from the school tuition organization.
10. The name and educational scholarship or tuition grant amount of each student who was awarded an educational scholarship or tuition grant from the school tuition organization during the previous fiscal year. The department shall use the information provided pursuant to this paragraph to determine how many students are receiving more than one educational scholarship or tuition grant. This paragraph does not authorize the department to release INFORMATION that would violate the family educational rights and privacy act of 1974 (20 United States code section 1232g).
B. The department shall post on its website a report of the information it receives pursuant to subsection A of this section on or before March 31 of the calendar year following the year in which the information is received. The report must also include:
1. The total dollar amount awarded to students from each school tuition organization.
2. The total dollar AMOUNT of educational scholarships and tuition grants awarded to each individual student from school tuition organizations as identified by the student identifier assigned pursuant to section 15-1047.
3. the average dollar amount of educational scholarships and tuition grants awarded per student from school tuition organizations compared to the average sum of the charter additional assistance and base support level prescribed in sections 15-185 and 15-943, respectfully, per student by grade level. Each year the department shall provide this information to the joint legislative budget committee for inclusion in the historical spending reports for K-12 education.