SB1312 - 501R - Senate Fact Sheet

ARIZONA STATE SENATE

Fiftieth Legislature, First Regular Session

AMENDED

FACT SHEET FOR S.B. 1312

STOs; credits; administration

Purpose

Allows credits against luxury tax and severance tax for contributions made to school tuition organizations (STOs) for scholarships awarded to low-income, displaced and disabled students, in addition to the credit already afforded to income tax and premium insurance tax.

Background

The Arizona Department of Revenue was aware of 53 STOs operating in Arizona in 2009, two less than in 2008. For calendar year 2009, $50.9 million has been reported by 53 STOs, an 8 percent decrease over the donations reported for 2008.

Arizona Christian School Tuition Organization is the largest school tuition organization in terms of number and amount of donations received. Arizona Christian School Tuition Organization reported $10.4 million in donations, 20.4 percent of the total. The Catholic Tuition Organization of the Diocese of Phoenix reported $9.2 million in donations, 18 percent of the total reported. These two organizations received more than 38 percent of the total donations. Of the 53 STOs reporting in 2008 and 2009, 38 saw a decline in donations from 2008.

STOs reported 27,582 scholarships paid for $52.1 million in 2009, an average of $1,889 per scholarship. This is a 2.6 percent decrease in the number of scholarships reported over calendar year 2008 and a 3.7 percent decrease in the total scholarship paid.

The smallest average scholarship paid by an STO to one private school was $40 paid by the Arizona Scholarship Fund to Bethany Christian School in Lake Havasu City. Seven private schools received average scholarships from STOs for more than $10,000. The highest average scholarship paid by an STO to one private school was $21,500 paid by Arizona Scholarship Fund to Ethos School.

Eight private schools received more than $1 million total from all STOs. The most scholarship/grant money received by one private school from all STOs was $1,585,390 for 1,006 scholarships ($1,576 average) to Northwest Christian School in Phoenix. In terms of where the scholarship/grant money went within Arizona, the most money went to schools within the city of Phoenix. About 32 percent of the scholarships went to 76 private schools in Phoenix and almost 35 percent of the money.

According to the Department of Revenue (DOR), the increase in the cap for individual contributions to STOs will have a fiscal impact of $25 million. Although the cap for contributions to STOs made by corporations will not be increased, this legislation expands the eligible corporations able to claim the credit; thus, allowing for a potential fiscal impact due to the existing gap, ($9.18 million), between last year’s aggregate contributions approved and received and the credit cap.

Provisions

1. Allows a credit for contributions to a STO for awarding scholarships to low-income, displaced and disabled students against the luxury tax liability imposed on: wholesalers of spirituous, vinous or malt liquors; domestic farm wineries selling vinous liquor at retail or to a retail licensee; and domestic microbreweries selling malt liquor at retail or to a retail licensee and against the severance tax liability imposed on a person engaging in the business of mining.

2. Specifies that the amount of the credit will equal the amount of the taxpayer’s voluntary cash contribution.

3. Stipulates that the procedures, conditions, limitations and requirements for contributions made to STOs apply to:

a) those who claim a credit including wholesalers, domestic farm wineries, domestic microbreweries and any person engaged in the business of mining;

b) school tuition organizations that receive these contributions;

c) schools that qualify to receive these contributions;

d) students who receive scholarships from these monies.

4. Allows the amount of the credit in excess of the taxpayer’s luxury and/or severance tax liability to be carried forward for no more than five consecutive taxable years to offset the taxpayer’s subsequent luxury and/or severance tax liability.

5. Increases the amount of the credit allowed for contributions to STOs to:

a) $750 (from $500) for a single individual or head of household; and

b) $1,500 (from $1,000) for a married couple filing a joint return.

6. Includes the luxury and severance tax credits allowed in the existing caps:

a) $10 million in any fiscal year for contributions to STOs for scholarships for low-income students; and

b) $5 million in any fiscal year for contributions to STOs for scholarships for displaced students and students with disabilities.

7. Requires DOR to pre-approve tax credits relating to luxury and severance tax, for contributions to STOs for scholarships for low-income, displaced and disabled students.

8. Requires DOR to allow pre-approved tax credits relating to the luxury tax credit and the severance tax credit, for contributions to STOs for scholarships for low-income, displaced and disabled students on a first come, first served basis.

9. Requires that the taxpayer notify the STO of, not only the total amount of contributions they intend to make, but also the tax against which the credit would apply.

10. Stipulates that if DOR pre-approves the taxpayer’s intended contribution amount, the STO shall notify the taxpayer that the intended amount was pre-approved as a credit against the specifically identified tax.

11. Clarifies the existing stipulation that to be eligible for certification and retain certification, a STO must allocate at least 90 percent of annual revenues received as voluntary cash offerings toward educational scholarships and tuition grants for low-income, displaced and disabled students, specifically from contributions made for a credit against:

a) the premium tax liability incurred by insurers;

b) the luxury tax liability incurred by wholesalers of spirituous, vinous or malt liquors; domestic farm wineries selling vinous liquor at retail or to a retail licensee; and domestic microbreweries selling malt liquor at retail or to a retail licensee;

c) the severance tax liability incurred by a severer;

d) and income tax liability.

12. Modifies the operational requirements for STOs already receiving contributions from taxpayers for income tax credits and insurance premium tax credits to include contributions for luxury tax credits and severance tax credits for low-income, displaced and disabled students.

13. Expands the rules limiting low-income students eligible to receive an educational scholarship or grant from solely corporate contributions to individual contributions as well.

14. Expands the rules limiting the dollar value a STO can award a student to include contribution made to low-income students for a luxury tax credit and a severance tax credit.

15. Removes the stipulation that STOs shall allocate any refunds it receives for educational scholarships or tuition grants in the following year.

16. Expands the special provisions qualifying students with disabilities who are eligible to receive an educational scholarship or grant to include students enrolled in a qualified school in a kindergarten or preschool program for children with disabilities.

17. Makes technical and conforming changes.

18. Becomes effective on the general effective date.

Amendments Adopted by Committee

· Conforms the sections referencing nonexistent statutes to reference the correct titles.

Senate Action

FIN 2/10/2011 DPA 4-2-1

Prepared by Senate Research

February 14, 2011

CS/KC/ly