Should State Allow Tax-Credit Donations to Public Schools?

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Since 2013, Oklahoma taxpayers have been allowed to take a state income-tax credit in exchange for donations made to private schools. Now, a state lawmaker and others are wondering: Why not offer tax credits for donations to public schools?

That, in fact, is what one legislator proposed this year and a House subcommittee unanimously supported, although the bill has since gone dormant. The concept is already in place in a handful of other states, and Oklahoma already offers a little-known tax credit for donations to certain programs in public schools.

“From my district’s standpoint, the schools I represent, I don’t know why they would be treated any differently than any other school,” said Rep. Dennis Casey, R-Morrison, about his proposal in House Bill 1200.

Tax credits for private school donors are offered through two school-choice programs, including Oklahoma Equal Opportunity Education Scholarship Act.

The program allows individuals and businesses to claim tax credits for donating to a nonprofit scholarship granting organization, which uses the funds to pay students’ tuition at private PK-12 schools.

The Oklahoma Tax Commission issued more than $854,000 in tax credits for the program in 2014; statewide totals for 2015 aren’t yet available, but the largest scholarship granting organization, the Opportunity Scholarship Fund, reports it received $1.5 million between Sept. 2014 and Dec. 2015.

Casey said he drafted his proposal after a certified public accountant asked him why donations to private schools qualified for a state tax break, but donations to public schools do not.

As written, the bill would place a $1.5 million cap on total tax credits for public school donations, even though the cap for private schools is $3.5 million. Casey said he intended for the amounts to be equal. (Current law allows an additional $1.5 million in tax credits for donations to educational improvement grant organizations, which fund “innovative educational programs” at public schools. Online records show no tax credits have been awarded under this program.)

Casey’s bill contains the same taxpayer limits for credit amounts as the current private-school program. Credits would be worth 50 percent of the donation amount, unless a donor makes a two-year commitment, in which case the credits would be worth 75 percent. Tax credits would be capped at $1,000 for single filers, $2,000 for married and $100,000 for businesses per year. Donors could earmark a school but not a particular student.

Casey’s bill passed the budget and finance subcommittee, 7-0, but has been dormant since February. Casey said it’s unlikely the House will take up the bill this year due to the budget shortfall.

“It’s something that has flown under the radar a little bit. I know that leadership’s not going be interested in doing anything probably with a fiscal impact or a tax credit, and I get that,” Casey said.

Taxpayers can already receive a federal income-tax deduction for donations to public schools, including district and charter schools, as well as nonprofit private schools and scholarship granting organizations.

Casey’s proposal has found support among public education advocates.

Lori Dickinson Black, executive director of the Edmond Public Schools Foundation, said normally the organization doesn’t support tax credits because of the negative impact on revenue for public education.

But in this case, she said, Casey’s proposal places the same value on the public school system that is educating the majority of students.

Jonathan Small, president of conservative think tank Oklahoma Council of Public Affairs, opposes the proposal, saying it strays too far from the purpose of existing tax credits.

“Fundamentally, the program is to provide options that weren’t there already,” Small said, referring to the private school tuition scholarships awarded to students, some of whom come from low-income families.

Public schools receive enough contributions through taxes already, he said.

In Arizona, taxpayers can claim a public-school tax credit of up to $400 for married couples filing jointly, but the donations’ uses are limited to expenses for extracurricular activities, such as band uniforms and character education programs. These credits totaled $51 million in 2014. Casey’s proposal does not limit the purpose of the donation. Arizona also offers a private-school tax credit program that has grown to about $140 million a year.

Iowa, Minnesota and Illinois parents can claim tax credits for educational expenses, like tuition, books, after-school programs and lab or activity fees.

Another Oklahoma bill would impact the Oklahoma Equal Opportunity Education Scholarship program. Senate Bill 445, authored by Sen. Joe Newhouse, R-Broken Arrow, would allow private-school credits exceeding the state’s total cap to carry over for up to five years, from the current three years. Under the bill, if taxpayers’ total credits exceed the cap, the credits go to the innovative educational program for public schools. If that program exceeds the cap, the credits are reduced proportionately.

The bill passed the Senate appropriations committee March 1 and is available for consideration by the full Senate.