Education Scholarship Program
- Tax-Credit Scholarship
- Enacted 2013
- Launched 2013
Alabama’s Education Scholarship Program is a tax-credit scholarship, which 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.
We do not administer this program.
Scholarships Awarded (2021–22)
of Families with Children Income-eligible Statewide
Scholarship Organizations Awarding Scholarships (2021–22)
Schools Participating (2020–21)
Average Scholarship Value (2021–22)
Value as a Percentage of Public School Per-student Spending
Alabama’s Education Scholarship Program Participation
Scholarship amounts are determined by SGOs. Scholarships are capped at the lesser of the qualifying school tuition and fees or $10,000 per student. Scholarship recipients may choose to attend a qualifying school, which includes a (non-priority) public school outside their resident school district, or an accredited private school.
Qualifying expenses for students with unique needs include: Tuition and fees at a qualifying school; textbooks required by a qualifying school; payment to a licensed or accredited tutor; payment for the purchase of curriculum or instructional material; tuition and fees for an approved nonpublic online learning program; educational services for an eligible student with unique needs from a licensed or accredited practitioner or provider; or contracted services from a public school district, including individual classes.
(Last updated June 13, 2023)
Children are eligible to receive scholarships if their family household income does not exceed 250 percent of the federal poverty level ($75,000 for a family of four in 2023–24). Also, qualifying students must be younger than 19 years of age. Once a student receives a scholarship, the family’s income may not exceed 350 percent of the federal poverty level ($105,000 for a family of four in 2023–24). Public and private school students assigned to priority schools receive first priority for scholarships. Alabama defines a public school as priority if it meets one or more of the following requirements: 1) The school is designated as a priority school by the state Superintendent of Education, or 2) the school does not exclusively serve a special population of students and has received a D or an F on the most recent state report card. 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 priority. No more than a quarter of first-time recipients may have already been enrolled in a private school the previous year.
Students with unique needs are also eligible if they have an IEP or 504 plan, and attended a primary or secondary school within Alabama during the immediately preceding school year.
(Last updated June 13, 2023)
EdChoice Expert Feedback
Alabama’s tax-credit scholarship program helps thousands of students access schools that are the right fit for them, but policymakers could do more to expand educational opportunity.
Eligibility for the scholarships is limited to 250 percent of the federal poverty line. Just over half of Alabama students are eligible for a scholarship and less than 1 percent of students statewide actually use a scholarship. The average scholarship size is about $6,100, which is about 60 percent of the average expenditure per student at Alabama’s district schools, but the cap on scholarship value is somewhat higher ($10,000 per student). Tax credits are worth 100 percent of the value of the contributions to scholarship organizations, but only $40 million in tax credits are available annually, which is equivalent to only 0.4 percent of Alabama’s total K–12 revenue. Legislators added an automatic escalator in 2023, which increases the budget cap by $10 million per year if 90 percent of available credits are issued in three out of four consecutive years, up to a maximum cap of $60 million.
Alabama policymakers increased the available tax credits and expanded eligibility in 2023. They could do even more to expand access to educational choice, by making all students eligible (prioritizing scholarships based on need). The program could also be converted into an education savings account to ensure that all students have access to the education that’s the right fit for them, whether private school or a customized course of education. Policymakers did take the positive step of adding flexible use for students with unique needs in 2023.
Additionally, Alabama’s scholarship program has some unnecessary and counterproductive regulations. The 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. Additionally, the program has a bifurcated process for distributing scholarships based on the performance of a student’s assigned district school that can be difficult for families, scholarship organizations, and schools to navigate. The state should consider dropping the “priority” school provision altogether to bring clarity to the application process.
(Last updated January 11, 2023)
Rules and Regulations
- Income Limit: 250 percent x FPL
- Prior Year Public School Requirement: Yes, with exceptions
- Geographic Limit: Statewide
- Enrollment Cap: None
- Scholarship Cap: $10,000
- Testing Mandates: State test or Nationally norm-referenced tests (unique needs exempt)
- Credit Value: 100%
- Per Donor Credit Cap: 100% liability up to $100,000 (individual) / 100% liability (business)
- Total Tax Credit Cap: $40 million; automatic escalator up to $60 million
- 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 at least 75 percent of first-time scholarship recipients were not enrolled in priority schools or 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 assigned to attend a priority school 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
- Reimburse the local school system for all contracted services provided to an eligible student and an eligible student with unique needs
- Qualify students with unique needs
- Maintain 10% reserve balance
(Last updated June 13, 2023)
- If public:
- Not a priority school;
- Outside the recipient’s resident school zone.
- If non-public:
- Accredited by one of the enumerated regional or national accrediting agencies;
- Submit letter of intent to participate;
- Must obtain accreditation within three years of letter of intent to participate;
- Approved schools awaiting accreditation must:
- In operation at least three years (may be waived depending on governance structure);
- Daily attendance at least 85%;
- 180 day school year or hourly equivalent;
- 6.5 hour school day;
- Stanford Achievement Test or equivalent;
- American College Test before graduation;
- Comply with credit requirements for high schoolers;
- Students with unique needs exempt from standard testing and curricular requirements;
- Maintain website with school and tuition information;
- Affidavit of financial and academic status;
(Last updated June 13, 2023)
On April 8, 2014, a U.S. District Court judge dismissed a claim 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 (N.D. Ala. 2014)
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)
(Last updated January 5, 2023)