In the United States, scholarship tax credits, also called tax credit scholarships, education tax credits or tuition tax credits, are a form of school choice that allows individuals or corporations to receive a tax credit from state taxes against donations made to non-profit organizations that grant private school scholarships. At the start of the 2014–2015 school year, fourteen states had scholarship tax credit programs.
History The first scholarship tax credit program was Arizona's Personal Tax Credits for School Tuition Organizations program, which has been in operation since 1997. In 2001, Florida created the second Scholarship Tax Credit program by enacting the Florida Tax Credit Scholarship Program.
Legal challenges On April 4, 2011, the Supreme Court of the United States upheld Arizona's Personal Tax Credits for School Tuition Organizations program in Arizona Christian School Tuition Organization v. Winn. The plaintiffs challenged that the use of tax credit scholarships to send children to religious schools violates the Establishment Clause. The district court originally dismissed the claim, but the Ninth Circuit court reversed the decision, ruling that the plaintiffs had standing to sue by citing Flast v. Cohen. The Supreme Court ruled 5-4 that the plaintiffs did not have standing to sue. Justice Kennedy, writing for the majority, explained that tax credits are not a form of government spending, and that donations to scholarship organizations are voluntary. As a result, no taxpayer is ever compelled to donate to such a program in violation of conscience and therefore no taxpayer can be harmed by the program. But plaintiffs must be able to demonstrate harm in order to have standing to sue, and so the case was dismissed for lack of standing and the scholarship program was upheld.
On March 12, 2009, Arizona's Corporate Tax Credits for School Tuition Organizations was upheld by the Arizona Court of Appeals in Green v. Garriott. The Arizona Supreme Court refused to hear the appeal.
State tax credit program comparison State Program Enacted Credit Value Means-Tested Alabama Alabama Accountability Act of 2013 Tax Credits for Contributions to Scholarship Granting Organizations 2013 100%150% Median Household Income Arizona Personal Tax Credits for School Tuition Organizations 1997 100%No Arizona Corporate Tax Credits for School Tuition Organizations 2006 100%185% Free and Reduced Lunch federal eligibility guidelines Arizona Lexie's Law Corporate Tax Credits 2009 100%No Arizona "Switcher" Individual Income Tax Credit Scholarship Program 2012 100%No Florida Florida Tax Credit Scholarship Program 2001 100%Free and Reduced Lunch federal eligibility guidelines Georgia Private School Tax Credit for Donations to Student Scholarship Organizations 2008 100%NoIllinoisEmpower Illinois2017100%185% Poverty, or 300% Poverty for residents in Focus Districts Iowa School Tuition Organization Tax Credit 2006 65%300% Poverty Limit Indiana School Scholarship Tax Credit 201050% 200% Free and Reduced Lunch federal eligibility guidelines Kansas Tax Credit for Low Income Students Scholarship Program 2014 70%100% Free Lunch Program Louisiana Tax Credit for Donations to School Tuition Organizations 2012 100%250% Poverty New Hampshire School Choice Scholarship Program 2012 85%300% PovertyOklahomaOklahoma Equal Opportunity Education Scholarships201150%300% Free and Reduced Lunch federal eligibility guidelines Pennsylvania Educational Improvement Tax Credit 2001 75%/90%$60,000 Household Income Pennsylvania Educational Opportunity Educational Opportunity Scholarship 2012 75%/90%$60,000 Household Income Rhode Island Tax Credits for Contributions to Scholarship Granting Organizations 2006 75%/90% 250% Free and Reduced Lunch federal eligibility guidelines South Carolina Educational Credit for Exceptional Needs Children 2013 100% Student must have a disability (as defined by South Carolina Department of Education) Virginia Educational Opportunity Scholarship Tax Credits 2012 65%300% Poverty As of September 2, 2014
Special needs scholarships
Children raised in the foster care system of various states are not provided the funding for school choice. Recently many states have instituted voucher programs or scholarship programs allowing a foster family to choose a private school which is paid for with a scholarship or voucher. Special needs scholarships assist children in the foster care system as well as children with disabilities.
State Program Enacted Value Arizona Empowerment Scholarship Accounts 2011 90% Florida John M McKay Scholarship 2011 100% Georgia Special Needs Scholarship 2007 100% Louisiana School Choice 2010 50% Ohio Autism Scholarship 2003 $20,000 Oklahoma Scholarship for Students with Disabilities 2010 100% Utah Special Needs Scholarship 2005 100% Other federal tax credits exist to help the special needs children including the adoption tax credit and the proposed Special Needs Tax Credit.
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