Individuals subject to New Hampshire’s interest and dividends tax and businesses may receive 85 percent tax credits for donations to scholarship organizations (SOs). The average value of all non-homeschooling scholarships an SO awards cannot exceed $2,820 in 2019–20, except for students with special needs, whose scholarships cannot be less than $4,930. That amount is adjusted each year to reflect the changes in the Consumer Price Index. Homeschooling students may receive reimbursements for educational expenses.

Students must be between ages 5 and 20 and come from households where family income is less than 300 percent of the federal poverty level ($77,250 for a family of four in 2019–20). In the first two years of the program, scholarship organizations were required to award 70 percent of scholarship funds to students who previously attended a public school (“switchers”) or to switchers who already received a scholarship. However, beginning in the third year, the percentage of required switchers reduced by 5 percent each year. In 2019–20, the program will require at least 40 percent of scholarship recipients to be switchers. Additionally, 40 percent of the total scholarships SOs award must be given to students who qualify for the federal free and reduced price lunch program.

New Hampshire’s tax-credit scholarship program is the most expansive in the nation in terms of how parents may use their funds to customize their child’s education. It more closely resembles education savings accounts than other tax-credit scholarship programs. The program also avoids unnecessarily burdensome school regulations. To participate, private schools simply must be approved under state law. On funding and eligibility, however, the program has considerable room to grow. Although the average value of scholarships given to all other students is adjusted at the end of each year to reflect changes in the Consumer Price Index, the current general cap of $2,820 would be more beneficial to families if raised closer to the level of funds otherwise appropriated for a child’s education in a public school. As for eligibility, the program is limited by income and by the statewide cap on tax credits, making scholarships available to fewer than 1 percent of students statewide. Lawmakers should be applauded for allowing individuals to take tax credits against the interest and dividends tax, as this will allow the scholarship organizations to serve more students. Unfortunately, however, lawmakers eliminated the provision that automatically increased the credit cap each year.

• Income Limit: 300 percent x Poverty
• Prior Year Public School Requirement: Yes
• Geographic Limit: Statewide
• Enrollment Cap: None
• Scholarship Cap: $2,820, on average / $4,930 (special needs minimum)
• Testing Mandates: None
• Credit Value: 85 percent
• Total Credit Cap: $600,000 / $510,000
• Budget Cap: $5.1 million

SO Requirements:

• Use at least 90 percent of contributions for scholarships
• Comply with state and federal antidiscrimination and privacy laws
• Be registered with the state director of charitable trusts
• Be approved by the state
• In awarding scholarships to students who attended public school, who received a scholarship the previous year, or who are entering kindergarten or first grade, award at least 40 percent of scholarships to students who qualified for free and reduced-price lunch in the final year they were in public school
• Refrain from restricting scholarships for use at a single school and reserving scholarships for specific students
• Submit to the state:
  • Total number and dollar amount of scholarships awarded and the percentage of students eligible for free and reduced-price lunch for each of the student eligibility categories
  • Total dollar amount of donations spent on administrative expenses
  • Total carryover dollar amount
  • Total dollar amount of contributions used and not used for scholarships
  • Number of scholarships distributed per school and the dollar range of those scholarships
  • Analysis, by ZIP Code, of the place of residence for each student that receives a scholarship
  • Aggregated results of a parental satisfaction survey, designed by the state
• Number of students who graduated and the number who dropped out of school

N.H. Rev. Stat. §§ 77-G:1 through 10

On August 28, 2014, the New Hampshire Supreme Court issued a decision upholding the state’s tax-credit scholarship program. This case positioned individuals represented by the American Civil Liberties Union (ACLU) and Americans United for Separation of Church and State (AU) against the state’s new tax-credit scholarship program. In the decision, the court dismissed the lawsuit due to lack of standing by the defendants; the court reasoned they were unable to show harm caused by the program. The justices overturned a previous lower court ruling, which disallowed scholarships to schools that were religiously affiliated. Duncan v. State, 102 A.3d 913 (N.H. 2014)