EDUCATION TAX CREDIT PROGRAMS: AN ANALYSIS OF PROVISIONS BY STATE TO THE POINT The Foundation ► As of 2013, 13 states have laws in place to provide a tax for Opportunity credit for contributions to scholarship organizations; in Education ► Across these states, there are many similarities and also significant differences in the provisions associated with how these laws are implemented; ►The purpose of this analysis is to familiarize the reader with OCTOBER 2013 OCTOBER these laws and their various provisions. © 2013, Foundation for Opportunity in Education The Foundation for Opportunity in Education is classified as a Section 501(c)(3) organization under the Internal Revenue Code of 1954. Nothing in this document should be construed as an attempt to aid or hinder the passage of any bill or measure on the ballot or pending before the State Legislature or U.S. Congress. SUMMARY I. Provisions II. Additional State Resources As of 2013, there are 13 states that provide a tax Following the breakdown of provisions is a list credit for contributions to scholarship organiza- of helpful websites, broken down by state, which tions that, in turn, provide funding to eligible contain additional information about the nuances students to attend nonpublic schools. While there of each state’s education tax credit laws. are many similarities in how states implement these laws, there are significant differences in the Additionally, the full text of each state law is amount of the credit permitted for both individual available upon request. A listing of all available and corporate donors, the total program aggre- laws, organized by state, appears at the end of this gate amount allowed annually, the amount of the section. scholarship, how the scholarship organization must operate, what school programs are eligible to participate, and which students may receive a scholarship. Inside is a breakdown of the various provisions and how each state implements that provision. 3 • THE FOUNDATION FOR OPPORTUNITY IN EDUCATION •EDUCATION TAX CREDIT PROGRAMS AN ANALYSIS OF PROVISIONS BY STATE • OCTOBER 2013 TABLE OF CONTENTS I. Provisions 1. Amount of Individual Tax Credit ................................................................................................................6 2. Amount of Business Tax Credit ..................................................................................................................9 3. Total Program Amount ....................................................................................................................................14 4. Pre-Approval of Tax Credit ..........................................................................................................................17 5. Amount of Scholarship ...................................................................................................................................20 6. Tax Credit Carryover & Conveyance, Transfer of Assign ...........................................................22 7. Scholarship Organizations: Eligibility ........................................................................................................25 8. Scholarship Organizations: Governance ...............................................................................................29 9. Scholarship Organizations: Budget ...........................................................................................................31 10. Scholarship Organizations: Transfer of Donor Funds ...................................................................34 11. Scholarship Organizations: Fair Distribution of Scholarships ...................................................36 12. Scholarship Organizations: Priority in Awarding Scholarships ...............................................38 13. Scholarship Organizations: Use of Scholarships – Number of Schools ...........................40 14. Scholarship Organizations: Use of Scholarships – Portability ..................................................42 15. Scholarship Organizations: Grant of Multi-Year Scholarships ..................................................44 16. Scholarship Organizations: Accountability ..........................................................................................46 17. Scholarship Organizations: Penalties for Non-Compliance ......................................................54 18. Donor Designation of Scholarship .........................................................................................................56 19. Scholarship Eligibility........................................................................................................................................58 20. Participating Schools: Eligibility ...................................................................................................................63 21. Participating Schools: Anti-Discrimination ..........................................................................................67 22. Participating Schools: Enrollment Requirements .............................................................................69 23. Participating Schools: Standardized Testing .........................................................................................71 24. Participating Schools: Required Reporting .........................................................................................73 25. Miscellaneous Provisions ...............................................................................................................................74 a. Department of Revenue Obligations .........................................................................................75 b. Donor Refund .........................................................................................................................................77 c. Estimated Taxes .......................................................................................................................................77 d. Parent and Student Recipient Obligations ............................................................................78 e. Student Receipt of Other Funds ..................................................................................................78 26. Payment and Receipt of Scholarships ...................................................................................................79 II. Additional State Resources 1. State Websites .....................................................................................................................................................82 2. State Laws ..............................................................................................................................................................84 THE FOUNDATION FOR OPPORTUNITY IN EDUCATION • EDUCATION TAX CREDIT PROGRAMS AN ANALYSIS OF PROVISIONS BY STATE • OCTOBER 2013 • 4 1. Provisions 5 • THE FOUNDATION FOR OPPORTUNITY IN EDUCATION •EDUCATION TAX CREDIT PROGRAMS AN ANALYSIS OF PROVISIONS BY STATE • OCTOBER 2013 1. Amount of Individual Tax Credit Of the 13 states with tax credits for donations made to tuition scholarship organizations, nine states allow individuals to make contributions and receive a tax credit up to a certain amount, set by the state. The implementation of such a provision ranges from the state establishing a maximum amount the individual taxpayer may claim as a credit on his or her return to allowing an unlimited credit amount. % of Donation State Eligible for Tax Credit Maximum Tax Credit Alabama 100% $7,500 single or married $500 single Arizona 100% $1,000 married Florida N/A N/A $1,000 single Georgia 100% $2,500 married Indiana 50% no maximum Iowa 65% no maximum 100% less Louisiana administrative expenses no maximum New Hampshire N/A N/A $1,000 single Oklahoma 50% $2,500 Married Pennsylvania N/A N/A Rhode Island N/A N/A South Carolina 100% No Maximum $125,000 single Virginia 65% or married ALABAMA: Alabama taxpayers may claim a credit for donations to a scholarship granting organizations in an amount equal to the total contributions made during the taxable year. While 100 percent of donations are eligible for the credit, it may only be applied towards up to 50 percent of a taxpayer’s liability and may not exceed $7,500 for individual taxpayers or married couples filing jointly. ARIZONA: In Arizona, an individual taxpayer may claim a credit for making a donation to a qualified School Tuition Organization (“STO”) for scholarships to private schools in amount equal to the amount contributed up to $500 for singles and $1,000 for married couples, filing jointly, with a small annual adjustment for inflation (unless inflation the Consumer Price Index decreases, which would require the maximum to stay the same as it was in the previous year). In 2013, the cap is $517 for singles and $1,034 for married couples, filing jointly. Spouses filing separately may each only claim one-half of the tax credit that would have been allowed for a joint return. In 2012-13, 48 STOs awarded 24,327 scholarships valued at more than $45 million to students enrolling in 936 individual schools. FLORIDA: Florida does not provide an individual tax credit for donations made to scholarship organizations. THE FOUNDATION FOR OPPORTUNITY IN EDUCATION • EDUCATION TAX CREDIT PROGRAMS AN ANALYSIS OF PROVISIONS BY STATE • OCTOBER 2013 • 6 GEORGIA: In Georgia, individual taxpayers may be allowed a credit against their taxes for qualified education expenses donated to a Student Scholarship Organization