June 12, 2009
Scholarship Tax Credits Program Summary
How Would It Work?
Individuals and corporations who contribute to a qualified scholarship program would be able to deduct 50 percent of the amount of that donation from their state tax liability.
Example: A donor who gave $5,000 to a participating scholarship program would be able to claim a $2,500 credit against what the donor owed in state income tax liability.
The SGO program received $5,000 in the private donation, which would then be used to fund scholarships for lower-income students.
A $2,500 state tax credit helped leverage $5,000 in private scholarship donations.
Scholarship Granting Organizations (SGOs) would establish their own eligibility rules, application procedures, and scholarship amounts within the income limits and other administrative rules within the legislation. The state department of revenue would establish procedures for reporting and monitoring participation in the program, as well as tax credit application processes for private donors to the SGOs.
What would this produce as far as scholarships?
The program’s $5 million statewide cap would allow for $10 million in total private contributions to participating SGOs . . .
If the average scholarship is $2,500, up to 4,000 scholarships could be funded each year.
What about other states?
Scholarship tax credit programs are currently in use in 11 states.
Scholarship tax credits provide a net savings for the state
Example: An average scholarship of $2,500 or less the state would realize at least $13.4 million in net savings in the first year alone. (Source: Friedman Foundation for Educational Choice, May 2009 Study.)
(Source: School Choice Indiana Network)