Access Denied: Minority families of Color Confront New Barriers to Accessing the Education Tax Credit and Getting Audits at Alarming Rates. They wonder if the system is broken and how we can fix it.

Somali families in Minnesota face significant challenges as tax credit audits reveal confusion over educational loans and documentation requirements, highlighting persistent barriers in the state’s education funding system and the need for reform.

Success Tutoring organized an event to recognize students who have achieved significant milestones in their educational journeys. This event was held at the Zawadi Center in Bloomington, Minnesota, on November 30, 2023. It honored high-achieving students from SuccessTutoring programs and aimed to inspire students to strive for excellence and reach their full potential.

More than 100 people attended the event, including parents and their children. Approximately 50 students received certificates and gift bags in recognition of their achievements. Abdi Yusuf, Known as Mr. Aidurus, the Executive Director of Success Tutoring, students to the podium to present their certificates while parents and peers clapped and cheered in celebration. 

He announced each student by their full name and offered encouraging comments about their potential future careers. “Please applaud Abdirahman Nur, who is the future doctor of our community,” he said, calling the student while attendees were applauding.  Adruus repeated the same process for each student, highlighting different career paths they may pursue.

Mohamud Nur, a parent whose children attend Success Tutoring, told Somali Media of Minnesota that his child has been in the tutoring program for the past five months and has successfully closed his achievement gap. He said, “He was behind in his academics before he joined Success Tutoring. I am pleased with the progress he has made so far,” Mohamud explained.

According to Success Tutoring, parents pay $150 per subject a month for two hours of tutoring per week per subject. Mohamud said he pays the tuition fee out of his pocket.   

Mohamud acknowledged that paying tuition fees out of pocket is financially challenging, especially when you have three children who are struggling academically. Despite the difficulties, Mohamud is determined to prioritize his children’s education. “I would rather cut my budget from other expenses to invest in my child’s education,” he said. 

Sadiyo Mohamed, another parent of a student who received an honorary certificate, mentioned that her daughter Yusra has been in the Success Tutoring program for six months. “Her math and reading skills are ‘mashallah’; (Great) she is doing good,” she said. Standing beside her husband and holding an infant, Sadiyo noted that her children attend tutoring twice weekly, and she is happy with their reading and math skills. Sadiyo also pays the tuition fee out of pocket. 

A fifth-grade student, Yussuf has been attending Success tutoring for a year and a half. When asked about his academic feelings, Yussuf said, “I feel good and confident in reading and math.” Yussuf’s mother, Zamzam, expressed her satisfaction with her child’s progress, stating, “My child has achieved a lot because of Success Tutoring and encourage other parents to join it. My son is learning two grade levels above his grade. Success Tutoring has helped my child become the best student in this class. Thank you, Success. ” 

All the parents we interviewed acknowledged that they paid tuition expenses out of their pockets and were uncertain whether they could claim these costs when filing their tax returns. 

 Allowable Expenses

According to the Minnesota Department of Revenue, Minnesota provides a state income tax subtraction for K-12 education-related expenses, allowing taxpayers to deduct up to $2,500 for each dependent in grades 7-12 and up to $1,625 for each dependent in grades K-6. 

Eligible expenses for this deduction include tuition for nonpublic schools, after-school enrichment programs, academic summer camps, music lessons from qualified instructors, and tutoring. Additional qualifying expenses encompass textbooks, instructional materials, transportation costs for getting children to school, school supplies, musical instrument rentals and purchases, and up to $200 for computer hardware and educational software.   

Low-income parents who cannot afford to pay this expense can assign the payment of an educational services credit to participating financial institutions and tax-exempt foundations. In return, they receive a loan that is paid directly to a third-party provider of educational services and programs. 

This arrangement enables very low-income families to acquire educational services while anticipating the tax credit they will receive when filing their tax returns the following year. The credit is then paid directly to the financial institution or foundation that accepted the assignment from the parents. 

This system can be complicated and confusing for many parents, particularly those with limited English proficiency. As a result, they may choose not to seek these essential services, even though their children greatly need them. 

Minnesota After School Advance runs the program in partnership with  Ven Foundation and Youth Price. The Ven Foundation and Youth Price cover the cost of educational expenses through an interest-free loan, which will be repaid through the tax refunds that parents expect to receive.

Although the program has been around since 1997, it saw its biggest growth in 2022 and 2023. This increase was partly due to the pandemic, which led to school shutdowns starting in early 2020 and caused many children to fall behind in their studies.

Aidurus told Somali Media of Minnesota that they lobbied to increase the income limit for eligible families from $33,500 to $70,000 and the tax credit from $1,000 to $1,500. We worked closely with Youth Price and testified before the Senate; our goal was to increase accessibility to help struggling students,” Aidurus said. 

Minnesota Department of Revenue Audited Families

Some media outlets reported Somali families who did not receive their tax credits. They also complained about unknowingly signing up for a loan. Although many families received their tax credits, those parents were audited and asked to provide additional information, which seemed challenging for them.

An audit letter obtained by Somali Media of Minnesota asked parents to submit various types of documentation. They were asked to provide proof for every tutor, instructor, or teacher who directly instructed their child, along with a list of dates their child met with them. 

Parents were also required to submit itemized receipts from Minnesota Afterschool Advance (MAA) that detailed the expense breakdown for each service provider and the payment breakdown of those expenses. Furthermore, they had to confirm whether their family paid their portion of the activity cost and, if so, provide proof of payment.  

Other questions asked parents about the number of adults living in the household, the number of nights children sleep at home, the specific school their children attend, school transcripts, and marital status.

A Complicated System 

According to an email Somali Media of Minnesota received from Youthprise, Ven Foundation, and Minnesota Afterschool Advance (MAA), stated that their organizations are committed to supporting families: “The entire purpose of the MAA program is to help eligible Minnesota families take advantage of the Minnesota K-12 Education Tax Credit (METC).” 

The statement added that they are working with the Minnesota Department of Revenue and a local faith leader to solve this problem. 

The statement added that  MAA’s primary goal is to help eligible Minnesota families access the Minnesota K-12 Education Tax Credit (METC) through a formal assignment process, enabling their children to benefit from qualified educational enrichment services.

They recognize that the METC and the associated assignment process are complicated, and they strive to assist families in understanding and navigating the system.  

We contacted the Minnesota Department of Revenue via email and received a response declining to comment on individual tax returns or audits submitted to them. The email also stated, “We are working with all parties involved to ensure the specifics of the program are being properly communicated to taxpayers and remain available and willing to meet with/discuss questions or potential issues with taxpayers and the involved organizations.”

Persistent Achievement Gaps in Minnesota Education

According to the 2024 MCA scores released by the Minnesota Department of Education, significant achievement gaps persist among students. Currently, 59% of white students meet Minnesota’s proficiency standard in reading, while only 32% of Indian American students, 31% of Black students, and 29% of Hispanic and Latino students achieve the same. The situation is particularly alarming for English Language Learners, with only 10% meeting the reading proficiency standard.

In math, 56% of white students meet proficiency standards, compared to just 22% of Black students, 22% of Hispanic students, and 12% of English Language Learners. These students, often immigrants who speak a language other than English at home, consistently score the lowest in math and reading.

There is an urgent need for additional support and effective interventions to foster meaningful improvements in these areas.

Modernizing Minnesota System

Unlike Minnesota, Some other states utilize a more simplified system that is easy to navigate. The Ohio ACE (After School Enrichment) system provides eligible parents and guardians with a $1,000 educational savings account to support their children’s academic opportunities.

 Parents and guardians can apply for this funding through the Ohio Department of Education.  Once approved, they receive an email from Merit International, Inc. containing their digital access credentials, which allow them to log into the Ohio ACE application.

After gaining access, parents can browse the Ohio ACE Education Marketplace to find verified service providers offering approved programs and services suitable for their child. Using the Ohio ACE application, they can submit claims for reimbursement and check their educational savings account balance. 

Notifications about the approval or rejection of claims are sent via email. Once a claim is approved, payments are processed to the parent or the educational service provider, depending on the parent’s choice during submission. It may take 6-8 weeks for payments to be issued, and the student’s account balance will reflect any reimbursements made.

In Virginia, the state collaborates with ClassWallet, a modern digital wallet system that simplifies the process for parents seeking assistance. Parents are given a secure username and password through a user-friendly online platform to request funding.

Once approved, the funds are transferred directly to their digital wallet accounts, enabling them to select from a variety of educational services, including music, art, dance, and tutoring.

To put this into perspective, Virginia has successfully educated over 400,000 students through its digital wallet system—a milestone that Minnesota has yet to reach.

 Understanding the Minnesota After School Advance Application Process

Minnesota families can submit their applications for the Minnesota After School Advance (MAA) through an online portal. Once an application is submitted, Youthprise will review it to determine eligibility. This review process typically takes about one week, but it may take longer if additional information is needed.

If an applicant is approved, they will receive an acceptance email, and the service providers will also be notified. The applicant must then pay 25% of the activity cost. After this payment is made, MAA will contribute the remaining 75% to the child’s account. 

Youthprise will then submit the M1EDR form to the Minnesota Department of Revenue (MDOR) on the applicant’s behalf, and a confirmation letter from MDOR should arrive within a few weeks.

Once registered and payment is completed,  families must ensure that their child fully participates in the activities for which they are enrolled. Families must also commit to filing a Minnesota income tax return for the year of enrollment in MAA. Youthprise offers various resources to support this process, including opportunities for free tax preparation. 

Families are responsible for repaying MAA with their tax refund, which should include a tax credit to cover the activities. Instructions and assistance for this repayment are provided during the tax filing season.

As part of the application process, families will sign three forms: the M1EDR, M1EDA, and the Loan and Participation Agreement. It is important to note that these forms will reference the Venn Foundation and Youthprise in their official roles as MAA partners. Additional details about the partners and the forms are available for further clarification.

Experts and community advocates call for modifying the Minnesota system, which was created in 1997. 

Mohamed Abdi, a community member who advocated for quality education, stated, “Minnesota’s application process  involves excessive paperwork and a complicated credit rebate system, making it challenging for many families—particularly those from low-income backgrounds or with limited English proficiency—to benefit from available funds.”  

He added that Minnesota should implement a streamlined, user-friendly process that simplifies the application for educational funds. This modernization could include a digital solution that allows families to apply directly for funds online, reducing the administrative burden and expediting access to necessary resources.