Statutory Tax Credit Allowance
The corporate tax credit was established in 2006 with the primary purpose of assisting students of families with low to moderate income switching from a public school to a private school. Corporate Tuition Tax Credit contributions can be accepted in accordance with the provisions of A.R.S. 43-1183. The Corporate tax credits are available only to corporate taxpayers, corporate partners, exempt organizations subject to corporate income tax on unrelated business taxable income (UBTL), or S corporation individual shareholders. The fiscal year cap is available to all School Tuition Organizations combined and is approved on a first come, first serve basis. The cap is regenerated on July 1 each year.
There are two separate nonrefundable corporate tuition tax credits for donations made to Certified School Tuition Organizations which provides scholarships for students to attend Arizona private schools. Due to the statutory caps on the aggregate amount of credits allowed in a fiscal year, both the low-income corporate tax credits and the disabled/displaced corporate tax credits must be pre-approved by the Arizona Department of Revenue.
| Program | Fiscal Year 2025 Cap | Cap Status | Amount Available as of July 1, 2024 |
|---|---|---|---|
| Low Income | $135,000,000 | Taking applications currently | $135,000,000 |
| Disabled/Displaced | $6,000,000 | Taking applications currently | $6,000,000 |
Partnerships
A partnership may pass the credit through only to its corporate partners, each of which may claim a pro rate share of the credit based on their ownership interest.
Exempt Organizations
An exempt organization may claim the credit only if it results from activities that generate UBTI.
S Corporations
Effective January 1, 2015 an S corporation may claim the credit against income Arizona is taking at the corporate level, or it may make an irrevocable election to pass the credit through to its individual shareholders.
- To pass the credit through, the S corporation must make minimum contributions of $5,000
- Each individual shareholder may claim only a pro rata share of the credit based on the individual’s ownership interest in the S corporation.
Special Notes
- Any pro rata shares that would be distributed to non-eligible partners (individual partners in a partnership), or estates or trust (shareholders in an S corporation) is lost. Grantor trusts are considered eligible. Pro rata shares of a credit distributed to shareholders that do not file an Arizona tax return will be lost.
- The corporation may take the fill state tax credit, but should check with it’s accountant for the amount.
- The donation must be mailed (postmarked) before the corporations year end.
- A corporation may not recommend a specific student, but may recommend a qualified private school.
- The school tuition organization will review all qualified student applications and award scholarships to those students qualified based on financial need and the availability of funds.
- The statutory allowance has been depleted in a short period of time over the past few years, so it is recommended that application requests be made with the school tuition organization before the end of June for the opening of the 2021 allowance.
Contribution Process
- Contact YES Fund for Kids (928)314-0033 of email contact@yesfundforkids.org to complete the application.
- YES Fund For Kids will submit the application to Arizona Department of Revenue via email.
- A.D.O.R. then has 20 days to approve and notify YES Fund for Kids regarding the application approval.
- YES Fund for Kids will then notify the corporation of approval status, and the corporation will then have 20 days to submit the contribution to YES Fund for Kids.