HB2154 - 472R - House Bill Summary

House of Representatives

HB 2154

~~schools; property taxes; technical correction~~

(now: tuition organizations; corporate tax credit)

Sponsors: Representative Weiers J

DPAS/E	Committee on Appropriations (B)
DPA	Caucus and COW
X	As Engrossed and As Passed the House

HB 2154 establishes a corporate income tax credit for contributions by a corporation to a student tuition organization.

History

In 1997, the Legislature created two tax credits for individual taxpayers for contributions related to education. The first allows taxpayers a credit for fees or cash contributions to an Arizona public school for the support of extracurricular activities and character education programs. The second credit available to individuals is for cash contributions to a school tuition organization (STO). Current statute defines STO and Qualified School for purposes of the individual income tax credits. An STO is defined in statute as a 501(c)(3) organization that allocates at least 90 percent of its annual revenue for scholarships or tuition grants allowing children to attend a qualified private school (kindergarten through twelfth grade) of their parents’ choice. Corporations are not eligible for these credits. A Qualified School is a private primary or secondary school, or a preschool for handicapped children, which does not discriminate on the basis of race, color, handicap, familial status or national origin and satisfies the statutory requirements for private schools. This bill modifies the definition of Qualified School for corporate income tax credit purposes.

Currently, Pennsylvania and Florida allow corporations to take a dollar-for-dollar tax credit for contributions to private schools. In Pennsylvania, the corporate scholarship credit was capped at $100,000 during the first year of the program; thereafter the credit was capped at $20 million. Recently, corporations took $19 million in tax credits. These scholarships may be awarded to low income students who are already enrolled in private schools. Similarly, Florida allows corporations to take a tax credit for scholarship donations. Florida’s program is capped at $50 million annually.

HB 2154 contains a proposed strike-everything amendment that will establish a new corporate income tax credit for contributions to STO’s in this state. This bill is the same as SB 1499.

Provisions

Corporate income tax credit

· Beginning July 1, 2006 through June 30, 2011, establishes a new corporate income tax credit for contributions to Student Tuition Organizations (STO).

· The total credits cannot exceed $5 M in any year.

· Allows a five-year carry forward for any unused credit.

· The credit is in-lieu of any tax deduction and the taxpayer may not make the contribution for the direct benefit of any specific student.

· Adds the STO corporate income tax credit to the Income Tax Credit Review schedule in 2011.

· Defines Qualified School and STO.

· Qualified School is defined for purposes of the corporate STO credit by requiring the qualified school to:

· Be a nongovernmental school that is located in this state and satisfies the requirements prescribed by law for private schools.

· Annually administer a nationally standardized norm-referenced test with preference for those who administer the AIMS test and to make those scores available to the public.

· Fingerprint their teaching staff, and any other staff that has unsupervised contact with the students.

DOR Administration

· DOR will preapprove tax credits for companies that plan to make donations for tax credit purposes on a first come, first served basis. The preapproval will require participation from the STO to determine if the donation has been received in a timely manner.

· DOR must approve or deny the credit within 20 days of being notified of the contribution by the STO.

Student Tuition Organizations

· Requires the STO that receives the contribution to use at least 90% of the contributions for scholarships and tuition grants for students of low-income families. Low income is defined as 185% of the income limit to qualify for reduced lunches.

· The scholarships or grants must be used for student who either:

· attended a public school as a full-time student for the first 100 days of the prior fiscal year and transferred to a qualified school.

· enrolls in a qualified school in a kindergarten program.

· received a scholarship or tuition grant from the STO, if the child continues to attend a qualified school in a subsequent year.

· Requires scholarships and grants to be used for full-time students. If a student leaves the qualified school before completing an entire school year, the school must refund the prorated amount to the STO.

· Requires STO’s that receive corporate contributions to allow DOR to verify that the scholarships are awarded to students who attend a qualified school.

· Specifies the maximum scholarship or grant that an STO can award with corporate contributions for 2006 is $4,200 for grades K-8 and $5,500 for grades 9-12. Each year thereafter, the maximum grant or scholarship amount will increase by $100.

· Specifies that children who receive scholarships may attend any qualified school of their parent’s choice.

· Requires that STO’s must report pertinent tracking information regarding contributions to DOR by June 30 each year and allows DOR to adopt rules for this program.

· Requires an independent review of the financial statements of a STO, using general accepted accounting principals.

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· Forty-seventh Legislature