How New Tax Credit Can Benefit Arizona Small Businesses

Date: July 14, 2015

Tuition tax credit now available to S corporations too.

With the passage of House Bill 2153 in April, small businesses in Arizona can now apply for a new tax credit program. The bill allows S corporations to participate in the Corporate School Tuition Organization Tax Credit Program, which awards credits for donations to scholarships given to low-income kids attending private schools.

The fund was created in 2006, and, at first, was only available to C corporations.

“In the first seven years of this program, it was just unknown to the point where it didn’t even get maxed,” said Sydney Hay, who handles government affairs for the American Federation for Children. “It started at $10 million and grows by 20 percent every year. So even when it was much smaller, it didn’t get maxed out or it took almost the entire year. Now it’s a large pot of money available for tax credit. It’s become well-known and popular, so companies apply very quickly.”

The pot is now about $51 million and is awarded on a first-come, first-serve basis. Hay estimates the fund could be depleted in as little as eight weeks.

“For small businesses who want to participate and get a tax credit against your tax liability to the state of Arizona, you should think about making a contribution to a school tuition organization sooner rather than later,” Hay said.

The minimum donation is $5,000, and those who are interested can apply by logging on to the Arizona Department of Revenue’s website. There, the state keeps a list of school tuition organizations, scholarship brands and organizations that are certified to accept theses tax credit contributions.

“Those are school tuition organizations that meet certain audit requirements,” Hay said. “The Department of Revenue knows that 90 percent of that money is going to go directly to scholarships for low-income kids that would not have been able to attend private school without this help.”

Farrell Quinlan, NFIB’s Arizona state director, called the tuition tax credit program an outstanding opportunity for small business owners to directly focus their state income tax dollars toward improving Arizona students’ educational outcomes and future prosperity. “NFIB looks forward to continuing to spread the word about the existence of this laudable program to our members who file their taxes as S corps. It’s critically important that these small-business job-creators act now before this year’s limit is reached.”

Related Content: Small Business News | Arizona

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