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Enacted 1997, Began Operation in 1998, Expanded in 2005
| FAST FACTS |
- 24, 678 scholarships worth $41 million in 2006
- Average scholarship worth $1,643
- 56 School Tuition Organizations
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Arizona provides a credit on personal income taxes for donations to School Tuition Organizations (STOs), privately run non-profit organizations that support private-school scholarships. Individual taxpayers contributing to STOs may claim a dollar-for-dollar credit of up to $500, and married couples filing jointly may claim up to $1,000. Also, up to $200 may be claimed for contributing to a public school for extracurricular activities or character education programs. Any non-profit that wants to operate as an STO may do so; there were 53 STOs in 2004-05. Starting in 2007, this program will work in tandem with Arizona’s newly enacted corporate tax credit for donations to STOs.
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| Scholarship or Voucher Value: |
STOs provide varying amounts of student aid. In 2004-05 the average scholarship was worth $1,334. |
| Student or School Participation: |
In 2006, 24,678 scholarships worth a total of about $41 million were awarded at 357 private schools. |
| Student Eligibility: |
Each STO may set its own eligibility guidelines. Most STOs give to students based solely on financial need, sometimes concentrating on a specific location or school system. An individual taxpayer may not make a contribution to an STO earmarked for his or her own child. |
| Legal Status of Program: |
In January 1999 the Arizona Supreme Court upheld the program under both the state and federal constitutions, and in October the U.S. Supreme Court turned down an appeal of that decision. In early 2001 the Arizona Civil Liberties Union (AzCLU) filed another lawsuit challenging the program under the federal Constitution in federal court. The U.S. District Court for Arizona dismissed the case under the federal Tax Injunction Act, which requires that challenges to state taxes must be filed in state court. In June 2004, the U.S. Supreme Court ruled that the tax-credit program could be challenged in federal court. The case returned to the U.S. District Court and in March 2005, the judge granted the Institute for Justice Arizona Chapter’s motion to dismiss the case and upheld tax credits as constitutional. The AzCLU appealed to the 9th U.S. Circuit Court of Appeals, where the case was pending at the time of this publication. |
| Regulations on the Program: |
STOs are required to be non-profit organizations that allocate at least 90 percent of their revenue to private-school scholarships. STOs must file fiscal reports with the Department of Revenue, may not use a donor’s money to support that donor’s child and may not restrict their scholarships to a single school. Participating private schools may not discriminate on the basis of race, color, handicap, familial status or national origin. |
| Research on Program: |
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| News on Program: |
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| Governing Statutes: |
Title 43-1089 and 43-1089.01 of the Arizona statutes |
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