Corporations with an Arizona income tax or insurance premium tax liability can contribute up to 100% of their tax liability to a certified School Tuition Organization, such as AESOP, and receive dollar-for-dollar tax credits for their contribution. The statewide cap on corporate tax credits is legislated to increase by 20% each year. This funding will be used to support scholarships for low-income students in Arizona.
Scholarships are awarded to students who are income eligible for the federal government's free or reduced lunch program.
The process for corporations to enroll is very simple, and AESOP can handle all the paperwork for you. Information on eligibility is also available on the Arizona Deparment of Revenue (ADOR) website.
For a corporation to take advantage of this unique opportunity to help economically disadvantaged children, a corporation should begin by simply contacting AESOP and pledging to make a contribution. From there, AESOP will complete an application that is submitted to the ADOR on behalf of the corporation. As long as the tax credit cap has not been met, the ADOR approves the request within 20 days.
The corporation has 20 days from the date of approval by the ADOR to make the contribution. The contribution may not be designated for any specific student(s). The coporation takes the tax credit on its tax return, but may carry unused credit forward for up to five years.
In 2009, the Arizona legislature passed "Lexie's Law," a law that allows corporations to redirect their tax liability to a state approved School Tuition Organization (STO), such as AESOP, and receive dollar-for-dollar tax credits for their contribution.
Lexie's Law, named after a special-needs student, is designed to provide educational options for disabled and foster children in Arizona.
The passing legislation in 2009 also presented the opportunity for insurance companies to become part of the educational solution by allowing them to redirect their insurance premium tax liability to fund scholarships.
As a result, corporations with an Arizona corporate tax or insurance premium tax liability can receive a 100 percent tax credit for redirecting their tax liability to a state approved STO on behalf of Lexie's Law. These funds are then redistributed as scholarships for disabled and displaced children to attend a private school.
Corporations can help students like Lexie, who at age 7 has autism, cerebral palsy and mild learning disabilities. Lexie relies on the scholarship to attend a small private school that best meets her learning needs.
The statewide cap on corporate tax and insurance premium tax credits for disabled and displaced student scholarships is $5 million. During the 2010-11 school year, nearly 150 students benefitted from this opportunity.