Alabama’s Education Scholarship Program was passed and launched in 2013. The program, a tax-credit scholarship, allows taxpayers who donate to nonprofit scholarship granting organizations to receive tax credits for their contributions. Learn more about the program on this page, including eligibility, funding, regulations, legal history, and more.
Alabama offers tax credits to donors supporting Scholarship Granting Organizations (SGOs), nonprofits that provide private school scholarships to students in need.
Scholarship amounts are determined by SGOs. Scholarships are capped at the lesser of the private school tuition and fees or $6,000 in grades K–5, $8,000 in grades 5–8, and $10,000 in grades 9–12.
Individuals and corporations can claim a 100 percent tax credit for contributions to approved SGOs. Individuals and corporations can claim tax credits up to 50 percent of their tax liability; however, individual tax credits cannot exceed $50,000 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 $30 million.
Children are eligible to receive scholarships if their family qualifies for the federal free and reduced-price lunch (FRL) program ($44,863 for a family of four in 2015-16). 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 from a family with an income less than 275 percent of the federal poverty level ($66,688 for a family of four in 2015-16). Alabama defines a public school as failing if it meets one or more of the following requirements: The school is designated as a failing school by the state Superintendent of Education or the school does not exclusively serve a special population of students and is listed 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 July 31 of each year, scholarships may be made available to eligible students in public school, regardless of whether or not their assigned public school is considered failing.
Ala. Code §§ 40-2A-7(a)(5) and 16-6D
In May 2014, the Montgomery County Circuit Court struck down the Alabama Accountability Act, which contains the Parent-Taxpayer Refundable Tax Credit program. Judge Gene Reese ruled the Act violated provisions in the Alabama Constitution concerning the manner in which legislation must be passed and that it also violated provisions restricting the use of public funds. The Alabama Attorney General’s Office and the Institute for Justice, a public interest law firm that represents parents participating in the Accountability Act’s school choice program, appealed the decision to the Alabama Supreme Court. On March 2, 2015, the court upheld the constitutionality of the Alabama Accountability Act. The refundable tax credit and tax-credit scholarship programs continue to operate while the Alabama Supreme Court reviews the trial court’s ruling. Also, in 2014, a U.S. District Judge dismissed a separate lawsuit that challenged the Alabama Accountability Act on grounds the school choice program violated equal protection. Boyd v. Magee, C.M., et al., v. Robert J. Bentley, M.D.; et al.