KDOR change to allow sales tax deductions for home schooling

A lawsuit seems to have led to the Kansas Department of Revenue’s reversal of policy on sales tax exemptions for homeschool parents.

Until recently, homeschools were ineligible for the same sales-tax exemption public and private schools enjoyed.

Last year, Stilwell attorney Linus Baker filed a federal lawsuit on behalf of a homeschool family that registered a non-accredited private school named Heritage House in accordance with Kansas law but was denied the tax-exempt status other private schools enjoyed.

COMPLYING WITH KANSAS HOME SCHOOL LAW

In the lawsuit, Baker alleged violations of the Free Exercise clause of the First Amendment by denying the exempt status to a private Christian homeschool.

“K.S.A. 79-3606(c) is facially, and as applied to each plaintiff, unconstitutional because it targets private schools such as Heritage House for disparate and unequal treatment because of religion as it conveys tax-exempt benefits to private schools but only when sales are used ‘primarily’ for “for nonsectarian programs and activities,’” Baker wrote in the lawsuit.

The case was ultimately dismissed by the federal court because it involved state tax issues, which must be adjudicated in state courts.

On February 14, 2024, the lawsuit was filed in Johnson County District Court.

While the Department of Revenue publication describing details about tax exemptions has yet to be updated, Ted Smith, the general counsel for KDOR, said in an emailed statement that the policy changed around August 15.

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Smith said KDOR is currently updating publication HR-1560 to reflect the policy change.

He did not directly name the lawsuit as a reason for the policy change and instead said it was part of a regular review of policies.

“The Kansas Department of Revenue continually revisits its policies to ensure compliance with state laws,” Smith said. “The Kansas Department of Education’s creation of a program for registering Non-Accredited Private Schools (NAPS) prompted KDOR, in part,  to re-evaluate the interpretation of K.S.A. 79-3606(c), particularly the term ‘public or private elementary or secondary school or public or private nonprofit educational institution.’ The registration of these NAPS by the Kansas Department of Education provided KDOR with an objective reference point to differentiate between legitimate Kansas-based homeschool programs and other entities that may seek to misuse the state’s sales tax system.”

However, according to the Kansas State Department of Education private elementary and secondary schools — which includes homeschools  — have been required to register with KSDE since 1982.

The Sentinel contacted Smith to explain the discrepancy. As of publication, it has received no response, but email receipts show that Smith has read the message.

Smith said if a registered homeschool meets the criteria for the exemption they should apply for tax-exempt status. 

“To benefit from the sales tax exemption, the applicant must apply and receive a sales tax exemption certificate,” Smith said. “Upon receipt, the certificate may be used to exempt purchases of tangible personal property or services related to the educational program from sales tax. This exemption applies only to nonsectarian programs and activities and does not extend to the erection, construction, repair, enlargement, or equipment of buildings primarily used for human habitation.”

Baker said it is past time that homeschools were treated equally.

“Its been a long time coming that home schools were not treated as Children of a Lesser God by KDOR,” he said. “I am happy that the Kansas Department of Revenue has changed its illegal and unconstitutional discrimination against Kansas homeschools in denying those schools sales tax exemptions as I described in a federal lawsuit made against KDOR.

“However, I am disappointed that KDOR is taking credit for this policy change, claiming it re-evaluated whether home schools were legitimate schools under K.S.A. 79-3606(c) out of the goodness of its heart.  The Kansas Department of Education has been registering home-schools and keeping a registry database at least since 2003.  So it took KDOR 21 years to realize that home schools were legitimate — or was it because a federal lawsuit was filed in 2024 against it, pointing out that KDOR was intentionally discriminating against Kansas Home Schools, which provide a valuable community service to the education system both in education children while at the same time, these parents still pay significant yearly school taxes.

“I am happy that KDOR is doing the right thing but disappointed it won’t admit it took citizen push-back in the form of a federal lawsuit to get to that result.”