Scholarship tax credit explained

In the United States, scholarship tax credits, also called tax credit scholarships, education tax credits or tuition tax credits, are a form of school choice that allows individuals or corporations to receive a tax credit from state taxes against donations made to non-profit organizations that grant private school scholarships. At the start of the 2014–2015 school year, fourteen states had scholarship tax credit programs.

History

The first scholarship tax credit program was Arizona's Personal Tax Credits for School Tuition Organizations program, which has been in operation since 1997.[1] In 2001, Florida created the second Scholarship Tax Credit program by enacting the Florida Tax Credit Scholarship Program.[2]

Legal challenges

On April 4, 2011, the Supreme Court of the United States upheld Arizona's Personal Tax Credits for School Tuition Organizations program in Arizona Christian School Tuition Organization v. Winn.[3] The plaintiffs challenged that the use of tax credit scholarships to send children to religious schools violates the establishment clause. The district court originally dismissed the claim, but the Ninth Circuit court reversed the decision, ruling that the plaintiffs had standing to sue by citing Flast v. Cohen. The Supreme Court ruled 5-4 that the plaintiffs did not have standing to sue. Justice Kennedy, writing for the majority, explained that tax credits are not a form of government spending, and that donations to scholarship organizations are voluntary. As a result, no taxpayer is ever compelled to donate to such a program in violation of conscience and therefore no taxpayer can be harmed by the program. But plaintiffs must be able to demonstrate harm in order to have standing to sue, and so the case was dismissed for lack of standing and the scholarship program was upheld.

On March 12, 2009, Arizona's Corporate Tax Credits for School Tuition Organizations was upheld by the Arizona Court of Appeals in Green v. Garriott.[4] The Arizona Supreme Court refused to hear the appeal.[5]

State tax credit program comparison

StateProgramEnactedCredit ValueMeans-Tested
AlabamaAlabama Accountability Act of 2013 Tax Credits for Contributions to Scholarship Granting Organizations2013100%150% Median Household Income
ArizonaPersonal Tax Credits for School Tuition Organizations1997100%No
ArizonaCorporate Tax Credits for School Tuition Organizations2006100%185% Free and Reduced Lunch federal eligibility guidelines
ArizonaLexie's Law Corporate Tax Credits2009100%No
Arizona"Switcher" Individual Income Tax Credit Scholarship Program2012100%No
FloridaFlorida Tax Credit Scholarship Program2001100%Free and Reduced Lunch federal eligibility guidelines
GeorgiaPrivate School Tax Credit for Donations to Student Scholarship Organizations2008100%No
IllinoisEmpower Illinois2017100%185% Poverty, or 300% Poverty for residents in Focus Districts
IowaSchool Tuition Organization Tax Credit200665%300% Poverty Limit
IndianaSchool Scholarship Tax Credit201050%200% Free and Reduced Lunch federal eligibility guidelines
KansasTax Credit for Low Income Students Scholarship Program201470%100% Free Lunch Program
LouisianaTax Credit for Donations to School Tuition Organizations2012100%250% Poverty
New HampshireSchool Choice Scholarship Program201285%300% Poverty
OklahomaOklahoma Equal Opportunity Education Scholarships201150%300% Free and Reduced Lunch federal eligibility guidelines
PennsylvaniaEducational Improvement Tax Credit200175%/90%$60,000 Household Income
PennsylvaniaEducational Opportunity Educational Opportunity Scholarship201275%/90%$60,000 Household Income
Rhode IslandTax Credits for Contributions to Scholarship Granting Organizations200675%/90%250% Free and Reduced Lunch federal eligibility guidelines
South CarolinaEducational Credit for Exceptional Needs Children2013100%Student must have a disability (as defined by South Carolina Department of Education)
VirginiaEducational Opportunity Scholarship Tax Credits201265%300% Poverty
As of September 2, 2014[6]

Special needs scholarships

Children raised in the foster care system of various states are not provided the funding for school choice. Recently many states have instituted voucher programs or scholarship programs allowing a foster family to choose a private school which is paid for with a scholarship or voucher. Special needs scholarships assist children in the foster care system as well as children with disabilities.[7]

StateProgramEnactedValue
ArizonaEmpowerment Scholarship Accounts201190%
FloridaJohn M McKay Scholarship2011100%
GeorgiaSpecial Needs Scholarship2007100%
LouisianaSchool Choice201050%
OhioAutism Scholarship2003$20,000
OklahomaScholarship for Students with Disabilities2010100%
UtahSpecial Needs Scholarship2005100%
Other federal tax credits exist to help the special needs children including the adoption tax credit and the proposed Special Needs Tax Credit.

Notes and References

  1. Web site: Personal Tax Credits for School Tuition Organization. The Friedman Foundation . March 26, 2013.
  2. Web site: Florida Tax Credit Scholarship Program . The Friedman Foundation . March 26, 2013.
  3. Web site: Arizona Christian School Tuition Organization v. Winn . The United States Supreme Court . PDF . March 27, 2013.
  4. Web site: Green v. Garriott. Leagle . March 27, 2013.
  5. Web site: Personal Tax Credits for School Tuition Organization. The Friedman Foundation . March 27, 2013.
  6. Web site: School Choice Programs. The Friedman Foundation . March 26, 2013.
  7. Web site: Special Needs Bills .