The first step to developing an effective implementation strategy is tracking tuition payments and applying the appropriate credit. A model of how this may be accomplished is the existing procedure for claiming a Michigan Individual Income tax credit for payment of college tuition and fees. As shown on the following page, form MI-1040, Schedule CT (Download study file for image of form (343KB)), requires taxpayers to identify each student’s name, Social Security number, college or university attended, college or university code number, amount of tuition and fees paid, and the amount of the credit. The form also requires the taxpayer to state whether someone else is contributing to the students’ tuition and fees.
The Michigan Department of Treasury should design a similar form and procedure for the UTTC. In addition to identifying the same items listed above, the form should identify whether or not the student’s family income is below the federal poverty level. Each year, the form will be modified to reflect the increasing maximum credit amount. Other modifications may be made as the Department of Treasury deems necessary.
To eliminate the possibility that several taxpayers will claim total credit for a single student in excess of that allowed by law, the Legislature may require alternative schools to issue receipts showing tuition payments made for each student, the date of each payment, and the maximum credit.
A key element of this process will be verifying claims of eligibility for a 100 percent credit based on having family income below the federal poverty level. When a parent fraudulently claims poverty level status, and such a claim results in an excessive tax credit to be claimed by any taxpayer, the parent should be liable to the state for the amount of excess credit claimed. The implementation legislation must provide for this and specifically exempt from liability those taxpayers who pay tuition and claim a credit for such students in good faith after having received confirmation from the parents of the families’ poverty level status.