Education Scholarship Program
- Individual Tax Credit/Deduction
- 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 (2019-20)
of Families with Children Income-eligible Statewide
Scholarship Organizations Awarding Scholarships (Fall 2020)
Schools Participating (2019-20)
Average Scholarship Value (2020–21 projected)
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 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 ($48,470 for a family of four in 2020–21). 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 ($72,050 for a family of four in 2020–21). Public and private school students assigned to failing schools receive first priority for scholarships. Alabama defines a public school as failing if it meets one or more of the following requirements: 1) The school is designated as a failing school by the state Superintendent of Education, or 2) 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. No more than a quarter of first-time recipients may have already been enrolled in a private school the previous year.
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 185 percent of the federal poverty line. Only 34 percent of Alabama students are eligible for a scholarship and only 0.5 percent of students statewide actually use a scholarship. The average scholarship size is about $6,800, which is about three-fourths of the average expenditure per student at Alabama’s district schools, but the cap on scholarship values is somewhat higher ($6,000 in grades K–5, $8,000 in grades 5–8 and $10,000 in grades 9–12). Tax credits are worth 100 percent of the value of the contributions to scholarship organizations, but only $30 million in tax credits are available annually, which is equivalent to only 0.37 percent of Alabama’s total K–12 revenue.
In order to expand access to educational choice, Alabama policymakers should dramatically increase the available tax credits and expand eligibility to all students (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.
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 “failing” school provision altogether to bring clarity to the application process.
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: 100%
- Per Donor Credit Cap: 50% liability up to $50,000 (individual) / 50% liability (business)
- Budget Cap: $30 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 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 failing 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
On April 2014, a U.S. District Judge dismissed a separate 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)
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)