Arizona’s Low-Income Corporate Income Tax Credit Scholarship Program passed in 2006, and it launched in the same year. This tax-credit scholarship program allows corporate taxpayers to receive tax credits for their donations to nonprofit organizations that provide school scholarships to K–12 students from low-income families. Learn more about the program on this page, including eligibility, funding, regulations, legal history and more.
Arizona’s second tax-credit scholarship program
20,951 scholarships awarded (2016–17)
58 percent of families with children income-eligible statewide
206 participating schools (2016–17)
36 scholarship organizations awarding scholarships (2016–17)
Average scholarship value: $2,470 (2016–17)
Value as a percentage of public school per-student spending: 33 percent
Arizona’s Low-Income Corporate Income Tax Credit Scholarship Program passed in 2006, and it launched in the same year. This tax-credit scholarship program allows corporate taxpayers to receive tax credits for their donations to nonprofit organizations that provide school scholarships to K–12 students from lowincome families.
Each school tuition organization (STO) determines the amount of scholarships it distributes. Scholarships are capped at $5,500 in grades K–8 and $6,800 in grades 9–12 for 2019–20. Those amounts increase annually by $100. Corporate taxpayers that contribute to STOs may claim a tax credit equal to the full amount of their contribution. The program is limited to a total of $102.5 million in available tax credits in 2019–20, a figure that will rise by a decreasing rate until 2022–23.
All students who receive scholarships under this program must come from families whose household incomes are equal to or below 185 percent of the federal free and reduced-price lunch program guidelines ($88,129 for a family of four in 2019–20). Additionally, students must either be (1) enrolled in private school kindergarten, (2) enrolled in a private preschool program for students with disabilities, (3) a public school enrollee for at least 90 days in the previous year or one full semester of the current school year, (4) a dependent of an active-duty member of the military stationed in Arizona or (5) a prior scholarship recipient under this program or the individual tax-credit scholarship program.
Arizona’s corporate tax-credit scholarship program has room to grow, particularly with student eligibility limited to those with family incomes lower than 185 percent of the free and reduced-price lunch threshold. On funding power, the $105.2 million total credit cap limits both the number of scholarships that STOs can award and the amount of each scholarship ($2,470 per scholarship, on average, in 2016–17), which is far less than what students receive on average in their public schools. The program reasonably requires that schools comply with the state’s private school regulations, including health, safety and nondiscrimination requirements as well as fingerprinting teachers, but avoids unnecessary or harmful regulations. To make this program more expansive, lawmakers should lift the low-income eligibility requirement and remove or dramatically increase the cap on available tax credits.
Ariz. Rev. Stat. §§ 43-1183; 43-1501 through 1507; and 20-224.06
On March 12, 2009, the Arizona Court of Appeals upheld Arizona’s corporate tax-credit scholarships and the Arizona Supreme Court refused to hear an appeal. Green v. Garriott, 212 P.3d 96 (Ariz. App. 2009).
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