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.

Children are eligible to receive scholarships if their families qualify for the federal free and reduced-price lunch (FRL) program ($46,435 for a family of four in 2018–19). Also, qualifying students must be younger than 19 years of age. Once a student receives a scholarship, the family’s income may not exceed 275 percent of the federal poverty level ($69,025 for a family of four in 2018–19). Public and private school students assigned to failing schools receive first priority for scholarships. No more than a quarter of first-time recipients may have already been enrolled in a private school the previous year. 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.

Alabama’s tax-credit scholarship program was amended in 2015 to prohibit SGOs from accepting donations intended for a specific school—for example, a school of a particular faith or particular learning style. The exclusion of mission-based scholarship organizations is an error that Alabama should reverse. The program has a low cap ($30 million) relative to similar tax-credit scholarship programs in other states. Allowing automatic increases in the cap each year would be an improvement. Also, although it is positive that the program opens opportunities for students in “non-failing” public schools after July 31 of each year, the bifurcated process for distributing scholarships is difficult to navigate for schools, SGOs and parents. The state should consider dropping the “failing” school provision altogether to bring clarity to the application process. Currently only 76 out of more than 1,600 public K–12 schools are designated as failing by the state. The state should also heed advice from its private school leaders and ease newly imposed regulatory burdens, while allowing private schools the freedom they need to serve children at the highest level.

• 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: 100%
• Total Credit Cap: 50% liability up to $50,000 (individual) / 50% liability (business)
• 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
• Spend a portion of expenditures on scholarships for low-income students (family income does not exceed 200 percent of the federal poverty level, $48,600 for a family of four in 2016–17) equal to the percentage of low-income students in the county where the SGO expends the majority of its scholarships
• 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: 3 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

Ala. Code §§ 40-2A-7(a)(5) and 16-6D

On March 2, 2015, the Alabama Supreme Court ruled, in an 8-1 decision, that the Alabama Accountability Act enacted in 2013, which includes Alabama’s refundable tax credit and tax credit scholarship program, is constitutional. The high court overturned a May 2014 lower court ruling by the Montgomery County Circuit court which initially struck down the Alabama Accountability Act. Magee v. Boyd, 175 So.3d 79 (Ala. 2015).

Also, in April 2014, a U.S. District Judge dismissed a separate lawsuit brought by the Southern Poverty Law Center challenging the Alabama Accountability Act on grounds the school choice program violated equal protection. C.M., et al., v. Robert J. Bentley, M.D.; et al., 13 F.Supp.3d 1188 (M.D. Ala. 2014)