Scholarship Funding Corporate Tax Credit
Special Report - May 29, 2012
Corporations that make donations to certified education scholarship organizations that help low income students attend nonpublic schools would be eligible to receive a tax credit under legislation introduced last week in the North Carolina General Assembly. The bill, HB 1104Scholarship Funding Corporate Tax Credit, is sponsored by Representatives Paul Stam (RWake), William Brisson (DBladen), Mike Hager (RRutherford), and Marcus Brandon (DGuilford). Rep. Stam announced the proposed legislation at a school choice rally on May 22 at the General Assembly.
The measure would create an “Equal Opportunity Scholarship Tax Credit” for taxpayers that make donations to education scholarship organizations that give scholarships to low income students to attend private or religious schools of their choice. According to a press release from House Majority Leader Rep. Stam, the scholarships cannot “exceed $4,000 per year per student to cover tuition and fees for books, transportation, equipment, or other items required by the school.” To be eligible for the scholarship, a student must “belong to a household with an income level not in excess of 225 percent of the federal poverty level,” and must meet at least one of the following criteria: have been a full-time student at a public school during the previous semester, or have received a scholarship from an eligible scholarship-funding organization during the previous school year, or be entering kindergarten or first grade. HB 1104 caps the corporate tax credit “at $40,000,000 beginning on January 1, 2013, with provisions to expand the cap.”
According to Rep. Stam’s office, the proposed corporate tax credit for educational scholarships will pay for itself. “The Legislative Fiscal Research Division estimates combined savings to the government (state and local) of $53,000 in the first year, $16 million in the second year, and $12 million in the third year,” the press release states.
“The educational scholarships funded by this tax credit will provide new opportunities for families around the state,” Rep. Stam said in the press release announcing HB 1104. “This bill will open the door for parents to explore educational options available to their children and select the choice that best fits the needs of their family. It will also provide valuable savings of taxpayer dollars that can be used to meet crucial needs in our public schools.”
Similar education scholarship tax credit programs exist in eight states, including Florida, where that state’s scholarship program received $118,000,000 in donations in 2009, which provided scholarships to over 23,000 students. In 2011, the U.S. Supreme Court dismissed a lawsuit against Arizona’s 13 year-old education scholarship tax credit program. The program provides a dollar-for-dollar tax credit on state income taxes for taxpayers who make a voluntary donation to any of more than 50 private nonprofit School Tuition Organizations in the state.
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