The Alabama Senate passed Senate Bill 261 (SB261) Tuesday, raising the current cap on contributions to the Alabama Accountability Act.
The State Legislature passed the Alabama Accountability Act of 2013 which established a tax credit scholarship program for Alabama. Under the original bill, a contribution to the Accountability Act was limited to 50 percent of their income tax liability and no more than $50,000.
Under the new bill, sponsored by State Sen. Dan Roberts (R-Mountain Brook), that cap would be raised to 100 percent of the tax obligation but no more than $100,000 per individual filer.
The funds are used to reimburse parents of students enrolled in or assigned to attend a failing K-12 public school to offset the cost of transferring the student to a non-failing public or private school of the parent's choice.
This money does not go to the Education Trust Fund (ETF), giving parents of students a choice in where they educate their children.
Roberts said that the amount of tax credit is capped at $30 million and SB261 “does not raise the cap. The cap was met in 2018,” but since then that number has not been met.
“Since the Accountability Act was passed into law in 2013, it has been a resounding success raising over $176 million from the private sector to provide for educational opportunities that students otherwise could not afford,” said Roberts. “However, private sector funding of Scholarship Granting Organizations (SGO) has ebbed and flowed over the years for various reasons, including changes in the federal tax code. One of the most important elements of this bill is that it allows SGOs to have financial consistency in their budgeting and planning. This means that once a child is accepted into a participating school, the parents will have the peace of mind now in knowing that their child’s scholarship will be there to support them for years to come.
“The Alabama Accountability Act creates life-changing situations for students and their families, enabling an opportunity for school choice and enhancing the quality of life and learning for so many Alabamians. More than 97 percent of students who receive these scholarships renew them annually. That statistic alone is a true testament to the meaningful benefits this program offers to our school children. I appreciate my colleagues on both sides of the aisle for coming together to support Alabama students and families. I am confident that the Alabama Accountability Act will continue to provide transformative opportunities for students across the state, and the modifications approved by the Senate today will ensure the program continues to serve students in the best possible way.”
Roberts said the Accountability Act affects 3,431 students a year.
“There are seven scholarship-granting organizations in the state,” Roberts said. “We are allowing them to continue doing what they do. Some 120 partner schools receive these funds.
"We got to meet students at Red Mountain Theater, as a group of Senators, asking them to tell about themselves. We got to meet two sisters that are artistically driven. This is a life-changing situation for them and their families. Both of those attended Cornerstone School. A lot of the Senators got to meet those two sisters and they were just outstanding. They were so grateful for the opportunity granted them.
“It is about these children, giving them the opportunity,” Roberts said.
Roberts said that SB261 also changes the requirement that the SGOs spend all of the money contributed to them within 12 months and instead changes that to three years.
“This allows them to level fund so they can plan better,” Roberts said. “These scholarships have gone up and down over the years.”
Roberts said, “The fiscal note on this is zero.”
The fiscal note reads: “Senate Bill 261 as introduced amends the Alabama Accountability Act of 2013 to: (1) increase the income tax credit a taxpayer may claim, up to 100 percent of the individual taxpayer's liability, in an amount not to exceed $100,000 for contributors made to a scholarship granting organization for educational scholarships; and (2) extends the period for which scholarship granting organizations must expend scholarship funds to three calendar years. The provisions of this bill will not impact the Education Trust Fund due to the annual tax credit cap currently in place. Arthur Orr, Chairperson Finance and Taxation Education.”
“Eighty-five percent of the money comes from individuals and just 15% comes from corporate filers,” Roberts said. "Public policy polls show that over 80% of respondents favor options for school choice.”
SB261 passed the Senate with a vote of 23-2.
SB261 now moves to the House of Representatives for consideration.
If you are interested in your state income tax obligations going to provide scholarships for needy children rather than to the $8.1 billion Education Trust Fund (ETF) contact your accountant or tax preparer.
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