Catholic Tuition Organization seeks corporate commitment

New tax law clears way for businesses to contribute to private school scholarships

By Robert DeFrancesco
The Catholic Sun

A new Arizona tax law will allow corporations to earmark part of their state tax money for funding private school scholarships, providing more students with the opportunity to receive a Catholic education.

The Arizona Corporate Tax Credit, set to begin next month, permits corporations to claim a dollar-for-dollar income tax credit for contributions made to a student tuition organization. The Catholic Tuition Organization is banking on this new law in its efforts to provide additional scholarships to children of low-income families.

“For the Catholic Tuition Organization and for families of students who attend Catholic schools in the Diocese of Phoenix, this means that there may be another pool of money to apply for scholarship awards,” said Karen Shepherd, executive director of the Catholic Tuition Organization.

The corporate tax credit law has a $5 million cap statewide each fiscal year for five years. There is no cap per corporation and there are more than 50 student tuition organizations vying for a piece of the newly available funds.

Due to the way the law was written, however, these student tuition organizations are scrambling to have corporations signed up by July 1. Currently it states that all corporate contributions must be submitted starting at the beginning of next month and will be available to student tuition organizations on a “first come, first serve” basis, according to Shepherd.

This quirk could mean that only one or two student tuition organizations — those “first in line” at 12:01 a.m., July 1, for instance — could get the lion’s share of the anticipated $5 million.

Lobbyists are working to get some “fixes” into the budget reconciliation bill, Shepherd said, that would allow some time for the Arizona Department of Revenue to review the corporate contributions as well as provide some proportionality among the many state tuition organizations seeking a stake. More concrete information on the Arizona Corporate Tax Credit law is expected by the end of the month when the legislative session adjourns.

In the mean time, the Catholic Tuition Organization has created an ad hoc committee pulled together from various areas of the diocese to contact local corporations seeking their tax credit contribution.

“At this time we do not know how much each STO will receive. But what we need to do now is get corporations on board and committed to participating,” said Shepherd, “so that we can maximize the amount that the Catholic Tuition Organization will receive in order to assist as many students as possible.”

Individual Arizona taxpayers have been helping families pay private school tuition while getting an identical credit on their state tax liability since 1998.

“The law will allow corporations to do what individual taxpayers do, put part of their state tax money to work in the form of private school scholarships,” said Debra A. Castro, assistant executive director for the Catholic Tuition Organization. “More students will have the opportunity to receive a Catholic education.”

Last year the Catholic Tuition Organization awarded $7 million in scholarships and is looking to award $9.25 million in the next academic year. Of the 8,000 students who applied, about 7,000 students received scholarships.

Since its inception in 1998, the organization has awarded upward of $50 million to students seeking a Catholic education.

It is still too soon to predict how the new corporate tax credit law will boost scholarship spending, according to Shepherd.

The Arizona Catholic Conference, the legislative arm of the Phoenix, Tucson and Gallup, N.M., dioceses, played a large role in advocating for the corporate tuition tax credit.

“This credit will help many economically disadvantaged students attend the school of their choice,” said Ron Johnson, executive director of the ACC. He pointed out that the new law is targeted exclusively to low-income parents who switch from public schools or start kindergarten in a private school.

Scholarship amounts max out at $4,200 per student for kindergarten through eighth grade and $5,500 for high school students.

Applications for corporate commitments to the Catholic Tuition Organization must be made before July 1.

“Time is of the essence,” Castro said.