Ted Cruz, S. 306, and Home Schooling

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We’ve officially entered the silly season.  Random attacks are being thrown out with wild abandon, in the hopes that some of them will stick.  One such is a claim that’s apparently gaining some traction within the home school community:  that Ted Cruz has sought, through legislation, to push a “secret agenda” to “attack” home schooling.  I’m writing here to set the record straight.  In the interest of full disclosure, I support Cruz for the GOP nomination.  But my support doesn’t change the language of S. 306, the legislative proposal that is being cited as an “attack” on home schooling.

As best I can tell, this kerfluffle had its genesis in a post by one Diane Marshall, who has her own site called The Marshall Report.  Breitbart has made passing note of the “YUUUGE” picture of Donald Trump” displayed in her site banner.  Ms. Marshall claims that language contained in S. 306, which Cruz has signed as a co-sponsor, would mean that ‘…. your choice to home school will now fall under the classification of ‘private school’ with all the Federal bells and whistles tacked on the end, including the United Nations mandates of cooperation for world education.”

As an attorney with some experience in drafting legislation, I think that the first most important step in deciding what legislation does or does not do is to actually go and read the legislation itself. I don’t ever rely on what other people say about it. Ms. Marshall’s claim is based on some language contained in the second part of S. 306. The purpose of this second part is to amend that section of the U.S. Code that deals with Coverdell Educational Savings Accounts (ESAs). A Coverdell ESA is one of two types of tax-advantage savings accounts for educational expenses, the other being a 529.  One of the primary differences between a Coverdell ESA and 529 is that a Coverdell ESA can be used for expenses in both college/graduate school and for expenses in grades K-12. 529s can only be used for college/grad school expenses. Obviously, this makes a Coverdell ESA an attractive option for home schooling parents….if they can qualify.

At the outset, it’s important to note that starting and contributing to a Coverdell ESA is a voluntary action. Just like an IRA or any other tax-advantage savings plan, there’s nothing that says you’ve got to have one.

When considering any piece of legislation that amends (changes) existing law, it’s crucial to understand the existing law in order to understand what the amendment would do. The portion of the U.S. Code which establishes Coverdell ESAs is found in Title 26 U.S.C. Section §530.  Very simply, it provides that “A Coverdell education savings account shall be exempt from taxation under this subtitle.”  Ah, but what, exactly, is a Coverdell education savings account?  The term is defined in the “definitions” subsection of §503, which is subsection (b).  Subsection (b)(1) states that “The term “Coverdell education savings account” means a trust created or organized in the United States exclusively for the purpose of paying the qualified education expenses of an individual who is the designated beneficiary of the trust….”

So what, exactly, is a “qualified education expense”?  Well, like most statutes, there are definitions inside the definitions.  Tracking a little further, we find the answer in (b)(2):  A “qualified education expense” includes either a “qualified higher education expense” (which is defined here in the same way as it is in 529s, the other kind of tax advantage account mentioned above) or a “qualified elementary and secondary education expense”.  If we drill down a little further, we find that that the term “qualified elementary and secondary education expense” is defined in the very next subsection, (b)(3), which utilizes the phrase “public, private, or religious school.”  This raises the question of what, exactly, is a “school”?  At last we come to the language that is of interest to us here, (b)(3)(B):

“The term “school” means any school which provides elementary education or secondary education (kindergarten through grade 12), as determined under State law.”

So, under the existing U.S. Code, one can use funds from a Coverdell ESA for education expenses in the K-12 years only if you are in a state that allows home schools to be operated as/defined as a private or religious school under your state’s law.   

According to the Home School Legal Defense Association, this is a minority of states – only 14 out of 50. In the other 36 states, a home school is not defined as a private or religious school.  Public, private, religious, and home schools are defined separately. In those 36 states, then, a home school would not meet the definition of a “school” under the current 26 U.S.C. Section §530. The result is that parents in those states cannot elect to utilize a Coverdell ESA for K-12 expenses. They cannot qualify, because their home schools do not meet the current definition of “schools” in the IRS Code. Home schooling parents in those states are, therefore, being disadvantaged at tax time.

This is precisely the problem that part two of S. 306 is trying to fix. It is worth nothing that the chief sponsor of S. 306 is Senator Mike Lee, the only member of Congress to have a perfect 100 score from both Heritage Action and Conservative Review.  (Cruz is at 100 with Heritage Action and 97 with Conservative Review).

The second section of S. 306 would change the definition of “school” as it applies to Coverdell ESAs by adding this language into subsection (b)(3):

(C) Private school
For purposes of this section, the term ‘private school’ includes any home school that meets the requirements of State law applicable to such home schools, whether or not such school is deemed a private school for purposes of State law.

If SB 306 is enacted and signed into law (unfortunately, it’s been stalled in the Senate Finance committee since late January of 2015), then the language from SB 306 would get “plugged in” to 26 U.S. Code § 530(b)(2)(3) as a new subsection (C). The whole definition of “school” in § 530 for purposes of a Coverdell ESA would then read this way:

(B) School
The term “school” means any school which provides elementary education or secondary education (kindergarten through grade 12), as determined under State law.

(C) Private school
For purposes of this section, the term ‘private school’ includes any home school that meets the requirements of State law applicable to such home schools, whether or not such school is deemed a private school for purposes of State law.

Here is the final very important point:  Note that the proposed new subsection (C) begins with this phrase: “For purposes of this section….”  That is not throwaway language. Folks who aren’t used to reading statutes every day may naturally gloss over that first phrase and jump right into the rest of the definition, but that first phrase is vitally important. In statutory construction, that phrase limits the application of the language that follows after it to only “the section” in which the language it appears. In this case, that is § 530 of Title 26 of the U.S. Code – the Coverdell ESA section. By its plain language, therefore, it specifically would not apply to any other section of the U.S. Code. Adding this language to § 530 of Title 26 would not change any definitions of schools or private schools as they currently exist in any other federal laws and regulations.

Ms. Marshall claims that adding this new language to § 530 of Title 26 would re-define “school” or “private school” to include home schools for all parts of the U.S. Code and all federal regulations. That is just simply not the case.   Her failure to clarify this in the face of numerous articles pointing out the error – plus the fact that she attributes S. 306 to Cruz without mentioning Lee and all the other co-sponsors –  makes her blog look a whole lot more like a political hit piece on Cruz than a genuine effort to inform the home school community.

Allowing all home schooling parents in every state to participate in the tax advantages of Coverdell ESAs if they choose is a good thing.

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Kimberly_Schwartz
Southern girl and proud of it. Wife, mother, prosecuting attorney, political conservative, and home-based business owner; living and working in Central Georgia, USA. Dabbler in web design, photography, and mixed media. Still prefers reading and writing over math. Totally obsessed rubber stamper and scrapbooker. Shares several acres of easily-defensible farmland with husband, daughter, four dogs, and way too many cats.
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Southern girl and proud of it. Wife, mother, prosecuting attorney, political conservative, and home-based business owner; living and working in Central Georgia, USA. Dabbler in web design, photography, and mixed media. Still prefers reading and writing over math. Totally obsessed rubber stamper and scrapbooker. Shares several acres of easily-defensible farmland with husband, daughter, four dogs, and way too many cats.

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vassarbushmills
Admin
February 11, 2016 7:49 am

Nice to see (and hear) from you, Kimberley. I’ve forwarded this t my son, who lives in Cartersville, and is involved in home schooling programs. We have a colleague who does background checks on various writers, so will likely get back to you.

Melody Warbington
February 11, 2016 10:14 am

Thanks, Kimberley. I’ve read other articles that support what you’ve written.

LadyImpactOhio
February 11, 2016 12:52 pm

All this lady talks about on twitter is Trump. And it’s always in caps, which people tend to ignore because it appears to be screeching. She doesn’t have much of a following on twitter so her message isn’t making big rounds.

I tweeted the article directly to her. We will see if she has an reaction.