Choose an audience +

school choice

Alabama – Education Scholarship Program


Alabama – Education Scholarship Program

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.

Program Fast Facts

  • 3,590 participating students (Fall 2015)

  • 42 percent of families income-eligible statewide

  • 5 scholarship organizations awarding scholarships (Fall 2015)

  • Average scholarship value: $4,571 (Projected 2015–16)

  • Value as a percentage of public school per-student spending: 52 percent

Program Details

Alabama’s Education Scholarship Program Participation

Students Participating
Calendar Year/School Year

Click the + symbols to learn more about this program’s details.

Alabama offers tax credits to donors supporting Scholarship Granting Organizations (SGOs), nonprofits that provide private school scholarships to students in need.

Student Funding

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.

Student Eligibility

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.

Rules and Regulations

  • Income Limit: 100 percent x FRL
  • Prior Year Public School Requirement: Conditional (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: $6,000 (K–5), $8,000 (6–8), $10,000 (9–12)
  • Testing Mandates: State or National
  • Credit Value: $50,000 (individual) / 100 percent (business)
  • Total Credit Cap: Yes
  • Budget Cap: $30 million
  • SGO Requirements:
    • Use at least 95 percent of contributions for scholarships
    • Conduct criminal background checks on all employees and board members
    • Make scholarships portable to any qualifying school
    • Ensure that scholarship funds on hand at the beginning of a calendar year are spent on scholarships by the end of the school year ending in the next calendar year. Any scholarship funds left shall be deposited with the State Department of Education for the benefit of its At-Risk Student Program.
    • Ensure at least 75 percent of first-time scholarship recipients were not enrolled in a private school during the previous year
    • Submit annually to the state:
      • Data on accepted contributions
      • Data on scholarships awarded and funded, including the amount awarded to students who qualify for the federal free and reduced-price lunch program, and the percentage of first-time scholarship recipients who were enrolled in a public school the previous year
      • Financial audit performed by a certified public accountant
      • Verification of policies and procedures used to determine scholarship eligibility
    • Submit quarterly to the state:
      • Data on scholarships awarded and funded
      • Names of and total funds paid to each qualifying school
      • Number of scholarship recipients enrolled in each qualifying school, the number
      • Number of first-time scholarship recipients who were continuously enrolled in a nonpublic school prior to receiving a scholarship

Governing Statutes

Ala. Code §§ 40-2A-7(a)(5) and 16-6D

Legal History

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.

Questions on School Choice?

Choose your path.

Receive School Choice Updates In Your Inbox

Friedman Newsletter Signup