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ARIZONA HOUSE OF REPRESENTATIVES57th Legislature, 2nd Regular Session |
Senate: FIN DP 4-3-0-0 | Third Read 16-11-3-0House: WM DP 5-2-0-1 |
SB 1142: federal tax credit; authorization; scholarships
Sponsor: Senator Bolick, LD 2
Caucus & COW
Overview
Establishes that Arizona elects to participate in the federal tax credit for taxpayers who make qualified contributions to Scholarship Granting Organizations (SGO) and outlines requirements for SGO's eligibility in the program.
History
The Internal Revenue Code provides a new credit for an individual’s qualified contribution to a SGO that provides qualified elementary and secondary scholarships (Section 25F of the Internal Revenue Code).
H.R. 1, created a federal tax credit starting in 2027 for cash donations to SGOs that fund K-12 private or public-school expenses. Donors can claim a nonrefundable, dollar-for-dollar credit of up to $1,700 per year.
Arizona law currently provides 2 similar tax credits to state taxpayers filing individually or married filing jointly: 1) the Original; and 2) the Switcher tax credits for donations to SGOs. For Tax Year 2026: 1) the Original tax credit is capped at $787 for individual taxpayers and $1,570 for married taxpayers filing jointly; and 2) the Switcher tax credit is capped at $784 for individual taxpayers and $1,561 for married taxpayers filing jointly (AZDOR.gov).
Provisions
1. Establishes that Arizona elects to participate in the federal tax credit for individuals who make qualified contributions to SGOs. (Sec. 1)
2. Requires the Department of Revenue (DOR) to comply with all federal laws and regulations to administer this federal tax credit to ensure Arizona is eligible to participate in taxable years beginning January 1, 2027, and annually submit all the required information to the United States Secretary of the Treasury for participation. (Sec. 1)
3. Allows a nonprofit organization in Arizona that is exempt or that has applied for exemption from federal taxation can apply to DOR for certification as a scholarship granting organization. (Sec. 2)
4. Requires DOR to certify that the SGO meets the requirements of section 25F of the Internal Revenue Code and the applicable regulations or guidance issued by the United States Secretary of Treasurer. (Sec. 2)
5. Requires DOR by January 1 of each year to:
a. submit to the United States Secretary of the Treasury a list of the scholarship granting organizations that are certified for nonprofit exemption status and that are located in Arizona; and
b. post the list submitted to the United States Secretary of the Treasury on DOR's website. (Sec. 2)
6. Requires DOR to adopt rules and publish and prescribe forms and procedures necessary to administer SGO certification. (Sec. 2)
7. Allows an SGO that is certified by DOR and on the list submitted to the United States Secretary of the Treasury, to provide scholarships to eligible students for any qualified elementary or secondary education expenses to the extent allowed under federal law starting January 1, 2027. (Sec. 3)
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11. Initials VP/CS SB 1142
12. 3/11/2026 Page 0 Caucus & COW
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