01-05-2025
Gov. Walz proposes cutting out nonprofit middlemen in tutoring tax credit
The Minnesota State Capitol, April 24, 2025. (Photo by Nicole Neri/Minnesota Reformer)
Gov. Tim Walz's administration wants to eliminate a program that allows low-income parents to take out loans from nonprofit organizations for tutoring services, using their tax refunds as collateral.
The proposal comes after the Reformer and Sahan Journal reported on mothers losing thousands of dollars from their tax refunds to pay debts to Success Tutoring and Achievers Tutoring for instruction they say their kids barely used and didn't benefit from.
The mothers say they were told the tutoring was free and would help their kids recover from pandemic learning loss. Instead, they were outraged to discover their tax refunds had been transferred to a nonprofit organization, which in turn paid the companies for online tutoring with overseas instructors the kids couldn't understand.
The Reformer interviewed three instructors based in the Philippines, one of whom said she was paid less than $5 an hour to supervise mostly Somali-American students as they worked through online modules in reading and math.
The loan program was intended to help more low-income families take advantage of the K-12 Education Tax Credit, which reimburses families earning less than about $80,000 for three-quarters of their eligible educational expenses, up to $1,500 per child per year. Most eligible families can't afford to spend thousands of dollars up front and wait to be repaid when they get their tax refund the next year.
But it also made low-income households vulnerable to losing money if they didn't submit the correct paperwork or the tutoring services they received were later deemed ineligible by the Department of Revenue. In those cases, the tax credit wouldn't be awarded — but the loan to the nonprofit would still be repaid directly from the Department of Revenue through the rest of their refund, including money from Child Tax Credit and the Earned Income Tax Credit.
Families interviewed by the Reformer tried to recover the money missing from their refunds but found themselves trapped in a Kafkaesque maze, carrying stacks of different colored papers to the nonprofit lender, Minnesota Afterschool Advance, the state Department of Revenue, the Attorney General's Office and, finally, to the press.
'The benefits of receiving the credit early are diminished by the potential confusion for the taxpayer when it is time to file their tax return,' the Walz administration wrote in its budget proposal.
The Walz administration also noted that less than 1% of eligible taxpayers who claimed the credit used a lender to advance them the funds, making it harder to justify the resources needed to oversee financial compliance and preapprove tutoring providers.
That tax credit won't go away under the governor's proposal, but nonprofits and financial institutions will no longer be able to loan families money for tutoring, computers and books to be repaid by their tax refunds.
Both Democrats and Republicans have introduced a slew of proposals aimed at clamping down on a crisis of fraud in state government, with hundreds of millions of dollars allegedly siphoned away from programs supposed to fund child nutrition, autism services, transportation and interpretation assistance.
Minnesota Afterschool Advance, the organization that loaned the families money to pay for tutoring, said it's not issuing new loans in 2025 as they are 'focused on systems change.'
'MAA is aware of the governor's proposal. While we are not opposing it, MAA remains committed to working with government stakeholders to improve access to the Minnesota K-12 Education Tax Credit,' spokeswoman Lynne Matthews wrote in an email to the Reformer.
Minnesota Afterschool Advance, which is a collaboration between Youthprise and Venn Foundation, was founded by Rep. Matt Norris, DFL-Blaine. Norris helped grow the program to $1.8 million in funding for educational programs in 2022, according to his campaign website.
Norris, who left Minnesota Afterschool Advance when he entered the Legislature in 2023, said last year he was unaware of the mothers' complaints — and debt.
Norris declined to comment on the governor's proposal through a spokesperson.
