Establishes an education investment tax credit

Summary of provisions

This bill would permit individual public schools, including charter schools, to accept and receive voluntary cash contributions. It also amends section 606 of the tax law to define a Alocal education fund@ as a charitable organization in this state that is exempt from federal taxation under section 501(c)(3) of the Internal Revenue Code and is established for the specific purpose of supporting public education within a specific public school district; a A school tuition organization@ as a charitable organization in this state that is exempt from federal taxation under section 501(c)(3) of the Internal Revenue Code, allocates at least eighty-seven percent of its annual expenditures for financial assistance to students in order that they may attend an eligible non-public school, and provides such assistance to students in more than one such school. It adds subsections to section 606 to allow a 60%- tax credit up to $6,000 in any taxable year for voluntary cash contributions to public education entities, or to school tuition organizations, or up to $75 for the purchase of instructional materials and classroom supplies for schools or nonpublic home-based instruction. Contributions to local education funds or to school tuition organizations may not be designated for the direct benefit of any particular student. It would also add a subsection to section 210 of the tax law to allow a 609.- credit up to $15,000 for cash contributions to public education entities or to local education funds, or to school tuition organizations. A subsection is also added to section 171 of the.tax law to establish an annual limit of two hundred million dollars for such credits.

Justification

One of the most vexing problems facing policy makers and educators is the funding of our educational system. When crafting annual school budgets, school officials must grapple with rising costs, fluctu- ating state and federal aid, and an often-unstable local tax base. These ever-changing dynamics result in valuable educational programs being reduced, eliminated or never actually started. It is necessary to encourage greater private sector support of educational opportunities for children. Private sector resources, from both individuals and busi- nesses, not only to help stabilize the school budget process, but allow schools to maintain, expand or begin worthwhile programs. An education investment tax credit, as established by this act, will involve the private sector, both individuals and corporations, and may encourage donations to public education entities, along with educational scholar- ship organizations benefitting students attending independent and reli- gious schools. The tax credit provided in this act is merely one of many

credits available to New York taxpayers. The intended beneficiaries of the tax credit provided in this act are the students who attend public schools, charter schools, and anyone who furthers their education using tuition scholarships from educational scholarship organizations, or who participates in a home-based educational program. The tax credit does not constitute public aid to non-public sectarian institutions; permit- ting school personnel to claim a credit for the purchase of classroom instructional materials and supplies will insure a wider availability of such materials and supplies for all students.

Legislative history

S.5146 of 2009. Reported from Investigations, Referred to Finance.

Fiscal implications

The Department of Taxation Finance has yet to project a first-year revenue reduction. However, as it would affect only the Fourth Quarter of FY 2010-11, it would be less than the $200 million allowed when fully implemented. Since the bill allows only a partial credit, it has the potential to generate $333 million in voluntary contributions to support K-12 education in New York State. Stabilizing the independent and religious sector will significantly lessen the need for local school tax increases as well as for the issuance of bonds for new public school construction, generating further savings for the state.

Effective date

This act shall take effect on the first day of January next succeeding the date on which it shall have become a law.