July 10, 2009

School choice: What you need to know

(Editor’s note: The following is a primer on the school choice tax credit. The information is from the School Scholarship Tax Credit—House Bill 1001a (2009). The fact sheet is provided by the Indiana Catholic Conference.)

What is a scholarship granting organization?

A scholarship granting organization is a 501 (c-3) non-profit organization which would be created for the purpose of receiving donations and granting scholarships.

A scholarship granting organization could be established within a county, city or diocese, and must provide scholarships to multiple schools. The scholarship granting organization would provide scholarships to multiple schools, including public and private institutions.

The CHOICE Charitable Trust in Indianapolis is currently the only scholarship granting organization in Indiana. Scholarship granting organizations will be created throughout the state to serve low- to moderate-income families.

Who is eligible for a scholarship?

Scholarship eligibility is based primarily on a family’s income.

Income eligibility is based on 200 percent or twice the income for the federal free and reduced lunch program.

For example, a family of four could have an annual maximum income level of $78,000. Larger families with higher income levels may also be eligible.

A student must be enrolling in kindergarten or enrolled in a public school during the preceding school year to be eligible.

If a student has received a scholarship in the previous year from a qualifying scholarship granting organization, they may also be eligible.

Who can get a scholarship tax credit?

A donor who gives $5,000 to a participating scholarship program would be able to claim a $2,500 credit against what they owed in state income tax liability.

The scholarship granting organization program receives $5,000 in the private donation, which would then be used to fund scholarships for lower-income students. Thus, a $2,500 state tax credit helped leverage $5,000 in private scholarship donations.

What’s next?

Glenn Tebbe, ICC executive director, and diocesan education officials will be meeting with Catholic and other

non-public school leaders within their dioceses, and begin discussing how to create scholarship granting organizations in their area.

The Indiana Department of Revenue and Indiana Department of Education will begin the rule-making process to provide specific guidelines for the scholarship granting organizations that are created. †

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