Enacted 2013 • Launched 2013 • Tax-Credit Scholarship
Individuals and corporations can claim a 100 percent tax credit for contributions to approved Scholarship Granting Organizations (SGOs), nonprofits that provide private school scholarships. Individuals and corporations can claim tax credits up to 50 percent of their tax liability; however, individual tax credits
cannot exceed $7,500 per taxpayer or married couple filing jointly. Taxpayers may carry forward a tax credit under this program for three years. The total amount of tax credits awarded statewide is limited to $25 million.
Latest Stats (2014)
- Students participating: N.A
- Schools participating: N.A
- Scholarship organizations: N.A.
- Average scholarship value: N.A
Each SGO determines the amount of scholarships it distributes.
Children are eligible to receive scholarships if their family income does not exceed 150 percent of Alabama’s median household income ($62,361 in 2012) and their family income does not exceed 200 percent of the federal poverty level ($47,100 for a family of four in 2013-14). Also, qualifying students
must (1) be younger than 19 years of age, (2) be public or private school students zoned to attend a public school designated as failing, or (3) have been a non-graduate scholarship recipient in the previous school year under this program, regardless of household income. Alabama defines a public school as
failing if it meets one or more of the following requirements: The school is labeled as persistently low-performing by the Alabama State Department of Education; the school is designated as a failing school by the state Superintendent of Education; the school does not exclusively serve a special population of students; or the school has been listed three or more times during the most recent six years in the lowest 6 percent of public K-12 schools on the state standardized assessment in reading and math. If an SGO has scholarship funds unaccounted for on September 15 of each year, scholarships may be made available to low-income students in public school, regardless of whether or not their assigned public school is considered failing.
The Alabama Education Association (AEA) filed a lawsuit in state court claiming the refundable tax credit
and tax-credit scholarship programs violate the state constitution’s provision regarding public funds
being used for charitable and religious institutions. The lawsuit also invokes several provisions of the
state constitution governing the procedures by which legislation is enacted and programs are funded. In
October 2013, a Montgomery judge granted a motion to allow parents from Montgomery and Mobile to
intervene as defendants in the lawsuit. The parents are represented by the Institute for Justice, a publicinterest
law firm that defends civil liberties. The Institute for Justice and the Alabama’s attorney general
are both seeking dismissal of the lawsuit. The AEA plaintiffs moved for a motion for judgment on the
pleadings asking the court to grant judgment in their favor now as to all of their claims that don’t concern
the means by which state dollars flow to religious schools. The hearing on all the motions in the state case
will be as early as mid-January 2014.
The Southern Poverty Law Center (SPLC) also filed a lawsuit in federal court claiming the school choice
programs violate equal protection. Alabama’s attorney general is seeking dismissal of the lawsuit.
Rules & Regulations
• Income Limit: 150 percent x median household income and under 200 percent federal poverty
• Prior Year Public School Requirement: SGOs are required to give at least 75 percent of scholarships to first-time recipients of scholarships who were not continuously enrolled in a private school during the previous year.
• Geographic Limit: Statewide
• Enrollment Cap: None
• Scholarship Cap: Full Tuition
• Testing Mandates: State achievement tests or nationally recognized norm-referenced tests
• Credit Value: Corporations can receive a 100 percent tax credit for 50 percent of tax liability. Individuals can receive a tax credit worth up to $7,500.
• Total Credit Cap: Yes
• Budget Cap: $25 million
Ala. Code §§ 40-2A-7(a)(5) and 16-16D-1
Stephanie Linn | firstname.lastname@example.org