April 16, 2010

Catholic Education Outreach / John Elcesser

Scholarship tax credits are now available in Indiana

The 2009 General Assembly recently made Indiana the seventh state in the nation to offer a scholarship tax credit program. The legislation is designed to provide school options or choices for families who otherwise could not afford them.

To date, the Indiana Department of Education has approved two Scholarship Granting Organizations (SGOs)—the Educational CHOICE Charitable Trust (CHOICE Trust) in Indianapolis and the School Scholarship Granting Organization of Northeast Indiana Inc. in Fort Wayne, Ind. Efforts are also under way to establish SGOs in Evansville, the Lafayette area and northwest Indiana.

SGOs are nonprofit organizations established under the new law to receive donations eligible for a 50 percent state tax credit. The donations will fund scholarships for new kindergarten students as well as students transferring from public schools to private schools or to other public schools of their choice. Scholarship recipients must be state residents and meet income requirements—200 percent of federal free and reduced lunch income guidelines.

The tax credit is available to individuals, corporations, financial institutions and insurance companies. There is a $2.5 million annual cap on the tax credits statewide through June 30, 2010.

The CHOICE Trust, the first privately funded SGO in the state, has provided nearly $20 million in scholarships for about 10,000 nonpublic school students in Marion County since 1991. Thousands of students enrolled at Catholic schools in the Archdiocese of Indianapolis have attended their school of choice with funding from it. Some 270 students in the archdiocese received scholarships this school year alone. The law allows current CHOICE Trust-funded students to remain eligible for scholarships even though they are currently private school students.

The leaders of both the CHOICE Trust and archdiocesan schools hope that, with the added incentive of state tax credits, more donors will become involved in funding scholarships so that opportunities can be expanded to more families in Indiana.

One parent with children attending Holy Angels School in the center city of Indianapolis had this to say about school choice: “Being able to choose where my daughter is able to attend school has been one of the best choices and decisions I have ever been able to make for her. Not only has she been able to get the right education, she is also learning the right values.”

Providing these types of opportunities for families who could not otherwise afford them is the foundation of the school choice movement as well as the Indiana Scholarship Tax Credit Legislation.

The new tax credit is seen as a “win-win” situation—good for education, good for families, and good for donors and businesses because of the tax credits.

Following are some scholarship tax credit fast facts:

  • Individual and corporate donors can take a 50 percent credit against their state tax liability.
  • Applicable taxes—adjusted gross income tax, financial institutions tax, insurance premium tax, $2.5 million annual state tax credit cap through June 30, 2010, for this school year.
  • SGOs must be 501(c3) nonprofit organizations approved by the Indiana Department of Education.
  • Only donations to approved SGOs are eligible for the tax credits.
  • Students must be Indiana residents.
  • Families must meet income limits—200 percent of federal free/reduced lunch guidelines.
  • Students must be new to private schools, either by entering kindergarten or transferring from public schools, except for current CHOICE Trust recipients.
  • Participating schools must be state accredited.

For more information on scholarship tax credits, log on to CHOICE Trust at www.CHOICETrust.org, the Indiana Catholic Conference at www.indianacc.org, the Indiana Non-Public Education Association at www.inpea.org or School Choice Indiana at www.inscholarshiptaxcredit.com.

(John Elcesser is executive director of the Indiana Non-Public Education Association.)

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