MARCH 2016

THE COUNCIL OF STATE GOVERNMENTS

CAPITOL RESEARCH
EDUCATION

Scholarship Tax Credits

As of Feb. 2, 2016, scholarship tax credits were available in 18 states. Scholarship tax credit programs are
used to provide a form of school choice, allowing
individuals or corporations to receive a tax credit
on state taxes for donations made to grant private
school scholarships. Scholarship tax credit programs
are also known as tuition tax credits and education
tax credits. Some states provide parents the opportunity to deduct all or a portion of their childs private
school tuition from their state taxes. Others provide
corporations the ability to donate to an approved
non-profit scholarship funding organization and
apply for a tax credit for the donation.
These scholarship programs target students in
K-12 education and allow students the opportunity
to choose among a list of private schools or public
schools outside of their district. The state does not
have to appropriate funding for the students to
attend public school if they attend a private school.
This also applies when students attend public schools

outside of their districts and the funding is provided

by the scholarship or by a students family.
Education tax credits vary greatly state to state.
Alabama1 and Arizona2 3 have programs codified in
statute that provide the tax credits to individuals and
corporations, while Florida4 and Kansas5 provide
tax credits only to corporations and Louisiana6 and
Nevada7 provide tax credits to individuals.
Opponents of these tax credits for education voice
concern over the lack of oversight that state education agencies have over the private schools that
receive funds from the tax credit programs and the
ability to adequately serve students with disabilities.
State education accountability systems for public
schools require standardized testing to keep public
schools accountable.8
Proponents maintain that these programs enable
more families to take advantage of a wide range
of education opportunities and lower the taxes of

The Council of State Governments

parents of school age children, giving them the ability

to keep more of their own money to spend on their
families.9
School choice, including scholarship tax credit programs, is a contentious issue but one that continues to
gain traction in legislatures across the country. While
historically, the issue of school choice runs along
partisan lines, over the past few years a shift toward
greater bipartisan support of these programs has
emerged.10 State leaders in education seek to provide
greater opportunity for students and improve student
achievement within public schools and outside of the
public sector.
Looking at the implementation of scholarship and
education tax credit programs, key policy questions
arise. Policymakers hope to find the answers to
these questions within data from existing programs
in states. For example, Florida requires the use of
standardized tests for private schools receiving
scholarship tax credit funds to assess the ability of the
program to improve student achievement.
Since the start of 2016, 12 states have introduced
legislation on the topic, including a bill in New
Hampshire to repeal an existing education tax credit
program. As states explore deeper into this issue,
data on existing programs will be a resource for
policymakers in states without these programs.
Education leaders are delving into how this issue
affects equity issues such as racial balance and special
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THE COUNCIL OF STATE GOVERNMENTS

education. Many states found greater support for

these programs when they targeted at-risk or highneed populations such as low-income families and
students with disabilities.11 The discussion around this
topic continues to focus on how to best provide every
child with the opportunity to receive a high-quality
education.
Elizabeth Whitehouse, Director, CSG Education and Workforce Policy,
ewhitehouse@csg.org
REFERENCES
Alabama Education Tax Credit law, Alabama HB 2013
https://legiscan.com/AL/text/HB84/id/788967/Alabama-2013-HB84-Enrolled.pdf
2
Arizona Education Tax Credit law for individuals, A.R.S. 43-1089
http://www.azleg.gov/ars/43/01089.htm
3
Arizona Education Tax Credit law for corporations, A.R.S. 43-1183
http://www.azleg.gov/ars/43/01183.htm
4
Florida Education Tax Credit law, F.S. 220.1875
http://www.leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&Search_
String=&URL=0200-0299/0220/Sections/0220.1875.html
5
Kansas Education Tax Credit law, 2014 KS HB 2506 - Sec. 55-61
http://www.kslegislature.org/li_2014/b2013_14/measures/documents/hb2506_enrolled.pdf
6
Louisiana Education Tax Credit law, 2012 LA HB 969
http://www.legis.la.gov/legis/ViewDocument.aspx?d=798959&n=HB969%20Act
7
Nevada Education Tax Credit law, AB 165
https://www.leg.state.nv.us/App/NELIS/REL/78th2015/Bill/1513/Overview
8
NEA Brief on School Vouchers, Special Education and Vouchers
http://www.nea.org/assets/docs/PB14_SpecEdVouchers08.pdf
9
Workman, E. 2012. Vouchers, Scholarship Tax Credits, and Individual Tax Credits and
Deductions. Education Commission of the States.
http://ecs.org/clearinghouse/01/05/28/10528.pdf
10
Workman, E. 2012. Vouchers, Scholarship Tax Credits, and Individual Tax Credits and
Deductions. Education Commission of the States.
http://ecs.org/clearinghouse/01/05/28/10528.pdf
11
Povich, E. 2013.Tax Dollars for Private School Tuition Gain in States Pew Charitable Trust.
http://www.pewtrusts.org/en/research-and-analysis/blogs/stateline/2013/08/06/
tax-dollars-for-private-school-tuition-gain-in-states
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