Education

Millions in tax credits available in S.C. school-choice program

MCT

More than $7 million in S.C. tax credits are up for grabs in the state’s private-school choice program.

Taxpayers are eligible for the credits if they donate to a state program to help children with disabilities pay private-school tuition or if they pay that tuition out of their own pocket.

As of Thursday, a new nonprofit, formed by the state, had received $3.8 million in donations for the school-choice grants. Taxpayers who donate to the nonprofit can claim a tax credit reducing their state taxes owed by up to 60 percent. The state offers up to $10 million in credits for donations to the program.

The state also is offering $2 million in credits to taxpayers who pay private-school tuition out of pocket for children with disabilities. As of Thursday, taxpayers had claimed about $790,000 in those credits.

The tax credit and school-choice grants program – launched in 2014 – have proven popular with the demand for the tax credits exceeding the amount authorized by the state.

But this year, state lawmakers took direct control of the program after hearing concerns about how it was being operated. Until July 1 of this year, the state allowed nonprofit scholarship groups to raise money that was eligible for the tax credits and issue private-school tuition grants to children with disabilities.

State lawmakers “hit reset on this program for a number of reasons and because there were a number of concerns with the way the scholarship organizations operated,” state Revenue Department Director Rick Reames said. “In order to have a program that is sustainable and long term, you’ve got to run it correctly.”

The changes that took effect earlier this month banned the nonprofit scholarship groups from raising money and issuing grants for the program. The scholarship groups must cease operation and donate all their remaining money to the state’s new program by Aug. 1.

The new state law calls for the creation of a new nonprofit – Exceptional SC – to raise money and issue private school tuition grants for the scholarship program. The organization has applied for charity status and has a five-member board.

Two board members are appointed by House Ways and Means chairman Brian White, R-Anderson, with the advice of the S.C. Association of Christian Schools and the Catholic Diocese of Charleston – two organizations that ran their own nonprofits to raise money for the scholarship program.

Senate Finance chairman Hugh Leatherman, R-Florence, appoints two members with the advice of the S.C. Independent Schools Association. And Gov. Nikki Haley appoints one member with input from the Palmetto Association of Christian Schools.

The board still must appoint an executive director who will drive fundraising efforts.

The restructuring of the school-choice program was pushed by lawmakers who expressed concerns about the scholarship program’s fairness.

The largest, most successful nonprofit scholarship group in the program proved controversial. In 2014, The State reported about the financial troubles of one of the nonprofit’s leaders and complaints that private-school parents were being pressured to donate in exchange for scholarships.

The state’s tax agency recently found that arrangement to be in violation of state law, though the nonprofit’s leaders disagreed.

Private school-choice tax credits

What you need to know:

▪ S.C. taxpayers who donate to Exceptional SC – a nonprofit set up by the state to raise money and issue private-school tuition grants to students with disabilities – are eligible for a tax credit. The credit is worth the value of the donation and can cut the donor’s state taxes by up to 60 percent of the amount owed.

▪ The S.C. Department of Revenue is offering up to $10 million a year in tax credits, available on a first-come, first-served basis. Taxpayers who claim the S.C. credit also are eligible for a charitable tax deduction on their federal tax returns. After the state has reached its $10 million cap on tax credits for donations to the tuition-grants program, donations are eligible for the state and federal charitable tax deduction instead.

▪ The state tax agency also is offering up to $2 million in tax credits for tuition paid to private schools for children with special needs. A taxpayer can claim the credit for up to $11,000 in tuition paid per child.

▪ The Revenue Department updates how many credits are available daily on its website.

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