Idaho is one step closer to joining 13 other states in providing parents tax-credit scholarships for their children’s education. Tax-credit scholarship programs allow individuals or businesses to donate money to nonprofit scholarship granting organizations (SGOs) and receive a corresponding credit against their state taxes. The SGOs then award scholarships to eligible students to pay tuition at qualified nonpublic schools.
The Idaho House passed H507, the Idaho Elementary and Secondary Scholarship Act, sponsored by Majority Caucus Chair John Vander Woude and 19 co-sponsors.
SGOs may award scholarships worth up to the lesser of 80 percent of the tuition and fees at the student’s chosen school or the state’s per-pupil amount given to public schools (about $4,300). SGOs are also free to award lower amounts than those maximum levels if they choose.
To receive a tax-credit scholarship, students must live in households where the income does not exceed 150 percent of the federal free and reduced-price lunch standard ($54,200 for a family of three and $65,350 for a family of four in 2014). Students must have attended a public school the previous semester, be entering kindergarten or first grade, or are attending an Idaho school for the first time. They must also live in and attend school in Idaho.
TAX CREDITS AND SGOs
Individuals and business entities in Idaho may donate to a qualified SGO and receive a tax credit worth 50 percent of their donation, but businesses are further limited to 50 percent of their total tax liability. The total amount of credits that can be claimed statewide for 2014 is $10 million, which would be adjusted annually based on the change in the Consumer Price Index.
To qualify to receive credit-eligible donations, an SGO must be a 501(c)(3) organization located in Idaho. It must use at least 90 percent of its donations for scholarships, with the remaining 10 percent available for administrative expenses. It cannot grant scholarships to only one school, allow donors to specify a particular student that will receive a scholarship, or award scholarships to a relative of the SGO’s staff or board members. SGOs must report to the State Department of Education the number and dollar amount of all donations received and scholarships issued, as well as the name and address of each school that scholarship recipients attend.
Private schools that accept a tax-credit scholarship must either be accredited or in the process of becoming accredited. The school must administer either the state’s annual student assessment or a nationally norm-referenced test, provide academic reports to parents on a regular basis, and comply with federal nondiscrimination requirements.
H507 now heads to the Senate Committee on Local Government and Taxation.