Scholarship tax credit

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Scholarship tax credit programs of the United States of America, also called tax credit scholarship, education tax credit or tuition tax credit programs, 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[edit]

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[edit]

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[edit]

State Program Enacted Credit Value Means-Tested
Alabama Alabama Accountability Act of 2013 Tax Credits for Contributions to Scholarship Granting Organizations 2013 100% 150% Median Household Income
Arizona Personal Tax Credits for School Tuition Organizations 1997 100% No
Arizona Corporate Tax Credits for School Tuition Organizations 2006 100% 185% Free and Reduced Lunch federal eligibility guidelines
Arizona Lexie's Law Corporate Tax Credits 2009 100% No
Arizona "Switcher" Individual Income Tax Credit Scholarship Program 2012 100% No
Florida Florida Tax Credit Scholarship Program 2001 100% Free and Reduced Lunch federal eligibility guidelines
Georgia Private School Tax Credit for Donations to Student Scholarship Organizations 2008 100% No
Illinois Empower Illinois 2017 100% 185% Poverty, or 300% Poverty for residents in Focus Districts
Iowa School Tuition Organization Tax Credit 2006 65% 300% Poverty Limit
Indiana School Scholarship Tax Credit 2010 50% 200% Free and Reduced Lunch federal eligibility guidelines
Kansas Tax Credit for Low Income Students Scholarship Program 2014 70% 100% Free Lunch Program
Louisiana Tax Credit for Donations to School Tuition Organizations 2012 100% 250% Poverty
New Hampshire School Choice Scholarship Program 2012 85% 300% Poverty
Oklahoma Oklahoma Equal Opportunity Education Scholarships 2011 50% 300% Free and Reduced Lunch federal eligibility guidelines
Pennsylvania Educational Improvement Tax Credit 2001 75%/90% $60,000 Household Income
Pennsylvania Educational Opportunity Educational Opportunity Scholarship 2012 75%/90% $60,000 Household Income
Rhode Island Tax Credits for Contributions to Scholarship Granting Organizations 2006 75%/90% 250% Free and Reduced Lunch federal eligibility guidelines
South Carolina Educational Credit for Exceptional Needs Children 2013 100% Student must have a disability (as defined by South Carolina Department of Education)
Virginia Educational Opportunity Scholarship Tax Credits 2012 65% 300% Poverty

As of September 2, 2014[6]

Special needs scholarships[edit]

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]

State Program Enacted Value
Arizona Empowerment Scholarship Accounts 2011 90%
Florida John M McKay Scholarship 2011 100%
Georgia Special Needs Scholarship 2007 100%
Louisiana School Choice 2010 50%
Ohio Autism Scholarship 2003 $20,000
Oklahoma Scholarship for Students with Disabilities 2010 100%
Utah Special Needs Scholarship 2005 100%

Other federal tax credits exist to help the special needs children including the adoption tax credit and the proposed Special Needs Tax Credit.

References[edit]

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