The Local Education Agency Release

Tax Implications

Certain payments made on behalf of students participating in the ESA+ Program are reportable transactions for purposes of IRS information return reporting. SEAA reports ESA+ payments to the IRS as required.

SEAA Tax Implication Obligations

• SEAA reports any ESA+ scholarship funds parents spend on allowable expenses other than tuition and required fees to the IRS on Form 1099-G.

• In January, only those funds parents spent in the prior calendar year are reported on Form 1099-G by SEAA.

• Parents should consult a tax professional on how to address information reported on Form 1099-G in their tax return.

• North Carolina allows parents to deduct ESA+ funds reported on Form 1099-G from adjusted gross income for North Carolina income tax purposes on a Form D400 (in Schedule S, Part B, Line 13 entitled “Other deductions from federal adjusted gross income”), ONLY if those ESA+ funds were included in the federal adjusted gross income on their federal tax return.

For more information, visit the Tax Implications document in ESA+ Resources.

This document is not intended to provide and should not be relied upon for tax or accounting advice. Please consult your tax or accounting professional for advice and guidance on specific tax-related matters.

Minimum Spending Requirement

Parents are required to spend a minimum amount of ESA+ scholarship funds each school year to remain eligible to receive funding.

Parents must spend at least $1,000 by the end of the current school year, for school tuition and/or other allowable expenses related to one of the following academic subjects: English language arts, mathematics, social studies, and science.

If at least $1,000 is not spent by the end of the school year, the student’s renewal for the next school year will not be valid and the student will be ineligible to continue in the ESA+ program.

Once ESA+ funds have been sent to ClassWallet parents will be asked to sign an affidavit stating that they understand and will adhere to the aforementioned requirements.

Rollover of Funds

The ESA+ program limits the amount of ESA+ remaining funds that can roll over from a student’s current school year account to the next school year. The student’s award level determines whether the remaining funds can be rolled over.

If a student has received the higher award amount ($17,000), the parent can roll over funds from one school year to the next. The ESA+ Program does not allow remaining funds to be rolled over from one school year to the next school year if the student has received the base award ($9,000); any remaining funds are returned to the SEAA.

If the student has received the higher award amount ($17,000), the parent may roll over up to $4,500 of any remaining funds from the student’s current year award to the next school year. However, the total balance in the student’s account may not exceed $30,000.