Incentives Watch: As Children Go Back to School, Scholarship Tax Credits Make It Easier for Them

More and more states are enacting income tax credits for taxpayers that make contributions to certain scholarship programs. With states facing revenue shortfalls and the tightening of school budgets, it seems like this trend could not have come at a better time. However, opponents of the tax credit programs feel the money is being funneled to help mainly religious, private schools at the expense of the public school system, according to a New York Timesarticle. The article notes that some people feel the credits are “poorly disguised state subsidies.”

In Florida, the annual cap for its tax credit scholarship credit program was recently increased by 25 percent to $286.25 million for fiscal year 2013-14, according to an article in Bloomberg BNA’s Weekly State Tax Report. The Florida Tax Credit Scholarship Program allows taxpayers to make private, voluntary contributions to nonprofit scholarship funding organizations and receive a dollar-for-dollar credit . The scholarships can be used to send children to either public or private schools.

Virginia created a new tax credit for donations to nonprofit organizations that provide scholarships to low-income and disabled students, another Bloomberg BNA Weekly State Tax Reportarticle noted. The credit, known as the educational improvement scholarships tax credit, is awarded on a first-come, first-served basis, and the total amount of credits that can be awarded in a fiscal year cannot exceed $25 million. Like the other state programs, the scholarships can be used to send children to either public or private schools. With enactment of the credit, Virginia becomes the 14th state to have a publicly-funded, private school choice program, according to the American Federation for Children.

Pennsylvania established a new educational opportunity scholarship tax credit program to encourage businesses to fund scholarships for students enrolled in public schools that are ranked among the lowest 15 percent of underperforming districts. The scholarships will allow eligible students to enroll at a public school outside their district or at a nonpublic school. The credit is capped at $50 million per fiscal year, according to an article in Bloomberg BNA’s Weekly State Tax Report.

Several other states offer various tax credits for contributions to scholarship programs, including Colorado, Georgia, Indiana, North Dakota, Oklahoma, Oregon, and Rhode Island, according to the Bloomberg BNA State Tax Portfolios.

In other developments . . .

In Iowa Film Production Services v. Iowa Dept. of Econ. Dev., the Iowa Supreme Court held that film producers registered for film tax credits cannot enjoin the state from releasing summaries of the films' final budgets, a recent Bloomberg BNA Weekly State Tax Reportarticle reported.


By: Kathleen Caggiano

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