Corporate Tax Credit - Scholarship
Some States, such as Florida, have passed laws establishing a Corporate Tax Credit for donations to educational institutes for the purposes of scholarships.
Corporate Tax Credit - Scholarship
Several States including Florida, Arizona, and Rhode Island have tax credits for the purpose of providing scholarships to students from low income families. This tax credit is an example of how tax credits can be used in a proactive manner to encourage activities that might otherwise not be done by Corporations or individuals. The Florida law was passed in 2001 and signed into law by Jeb Bush.
The Florida program uses organizations known as SFOs. The SFOs are Scholarship Funding Organizations. The Corporations make contributions directly to the SFO and the SFO identifies eligible students and distributes the funds. The scholarships amount to around $3750 and are given to students to pay for tuition to private schools. The scholarships will also pay up to $500 for the cost of transportation to out of district schools.
The Corporate Tax Credit for Scholarships in Florida is an example of a politically charged tax credit that would be acceptable in some States, but more than likely resisted and opposed in other States. The idea is to give low income students access to private schools and this is objectionable to some taxpayers who are already being heavily taxed to support a public school system. The implication that a better education can be received at a privately run school and that tax credits would fund students to escape the public school system or go out of district to find a better school is disturbing to some taxpayers.
The use of tax credits to encourage an activity that might not otherwise be well funded is a common practice among the several States. It is certainly in the best interest of the tax payer to be aware of the tax credits offered by their individual State as well as the Federal Tax credits. This is true both for individual taxpayers and business tax payers. Many States have high taxes for Corporations, but offer many tax credits that are intended to funnel funds from the Corporations into projects that would be hard to fund by other means.
The Corporate Tax Credit for Scholarships offered by Florida and other States is an example of a political type of tax credit. It was passed into law by the legislature of the State and there is no reason that Corporations should not take advantage of it. The lesson here though is that tax laws, tax deductions, and tax credits should not only be the concern of a citizen when it comes time to fill out his tax return. The informed citizen should be aware of tax issues when he goes to the voting booth as well.