Georgia’s Student Scholarship Tax Credit Program
In 2008, the state established a tax credit program to encourage donations to student scholarship organizations, which provide scholarship funding to private schools.
Individuals and corporations make a donation to the SSO and can claim a tax credit based on the amount given. The maximum amount a couple filing jointly can qualify for is $2,500, though businesses that donate can claim a credit equal to 75 percent of the taxes owed by that business.
Last year, the state set aside $51.5 million for the tax credits, and some legislators want to expand that amount.
Critics, however, allege that the program is poorly overseen and rife with abuse. SSOs and private schools, they say, are telling donors — who are often the relatives of a private school student — that they can designate a specific student for assistance and claim a tax credit. Supporters of the program say that it expands school options for parents who might not otherwise be able to afford to send their children to private school.
A 2008 law that allows Georgians to claim a tax credit after making a charitable contribution to a student scholarship organization has been widely abused, an education policy group alleges in a complaint that will be filed Monday with the state Department of Revenue.
The Southern Education Foundation alleges that student scholarship organizations and private schools throughout Georgia have raised money by telling donors that they can claim a tax credit after making a donation that is directly or indirectly used to benefit a specific student.
Since 2008, when legislation established the tax credit program as a way to help students afford private schools, more than $170 million has been set aside for tax credits that could be claimed by donors to student scholarship organizations. State Rep. Earl Ehrhart, the Powder Springs Republican who was a key sponsor of the legislation that established the tax credit program, said he plans to introduce a bill Monday to expand it.
Advocates have called for the amount of state money set aside each year for the tax credits to be increased to $100 million from the $51.5 million per year that was set aside last year.
Some legislators, however, have said they want to hold hearings to make sure the program is operating within state law.
Because tax records are not public, it’s difficult to determine how many tax credits may have been improperly claimed.
SEF officials said they considered establishing their own student scholarship organization to expand options for poor students in persistently struggling public schools. But through its own investigation, the SEF found the tax credit program to be poorly established and open to abuse.
In its complaint to the Department of Revenue, the SEF said that “it appears that tens of millions of taxpayer dollars in Georgia have been unlawfully diverted from the state treasury through student scholarship organizations during the last four years.”
SEF Vice President Steve Suitts said that amount is an estimate based on the amount of money set aside for tax credits and the number of student scholarship organizations and private schools that the SEF found to be raising money by providing misleading information.
The SEF, which has shared its findings with multiple media outlets over the past couple of years, wants the department to launch a special investigation into the program.
“The state should discontinue the program or freeze the implementation of the program pending the findings of a statewide DOR investigation,” Suitts said. “The governor and the Legislature should consider carefully the DOR investigation’s findings as well as revelations about this program’s many other deficits in order to vastly mend or end this costly state program. So far, the program has been a failed experiment.”
Student scholarship organizations and private schools contacted by The Atlanta Journal-Constitution said they have done nothing wrong.
“We make sure no donor designates any individual,” said Cary Sinnett, a board member for Pay It Forward, a Gainesville-based student scholarship organization. “We go by the letter of the law.”
Ehrhart said the SEF complaints are “frivolous and inaccurate.”
“They want to indict the whole program, which has provided hope to so many Georgia students, because of the anecdotal acts of a few,” said Ehrhart, who is the chief executive officer of a student scholarship organization, Faith First Georgia, which reported raising $1.2 million in 2011, according to federal tax forms.
Ehrhart said the SEF has a vendetta against the tax credit program because, as a supporter of public education, “it makes them look bad” when students leave public schools to attend private institutions.
SEF officials say the tax credit program has essentially served as a backdoor way for private school parents to get public money.
The group’s complaint to the Department of Revenue lists specific student scholarship organizations and private schools as providing parents with misleading or outright false information.
Quoting from information on Pay It Forward’s website, the SEF accuses the group of participating in a “give and get back” scheme.
“Do you know someone who could use a scholarship?” the group’s website asks potential donors. “Please provide the information below and we will send an email inviting them to apply for a scholarship from an anonymous donor.”
The SEF said that pitch invites a clear violation of the law.
“Pay It Forward’s claim of a so-called ‘anonymous donor’ is a thin smokescreen in its attempt to evade Georgia law and regulations,” the SEF’s report states.
It is against state law to claim a state tax credit from a charitable contribution to a student scholarship organization that was directed to your son, daughter or any other specific student.
Parents, however, have received misleading information from program supporters, the SEF says, pointing to comments state Rep. David Casas, R-Lilburn, made during a seminar with private school parents in December 2009.
“You can take this chunk of money and be able to say, ‘I want this money to go to education, and not just education, I want it to go to the school of my choice, and maybe even more detailed — the student of my choice,’ ” Casas told the parents.
Contacted Friday night, Casas said it was legal at that time to designate a student for assistance as long as the student wasn’t the child of the donor. Casas said the state law was changed in 2011 to prohibit designating any student for assistance.
But Suitts said it has always been a violation of Georgia law to claim a tax credit after making a donation that’s designated to assist a specific student.
The SEF’s complaint to the Department of Revenue said Covenant Christian Academy in Loganville gives parents the false impression that they can designate a specific student for assistance and claim a tax credit.
Michelle Deaton, the school’s financial director, said that’s not the case.
She said the school has no way of knowing whether a donor improperly claims a tax credit after making a donation that is directed to a specific student.
It is not clear how many private school parents have received tax credits for charitable contributions that ended up directly benefiting their children or other specified children. Private schools are not required to disclose their financial details.
The SEF completed its investigation last summer, finding 56 private schools throughout the state used student scholarship organizations to direct donations to specific students.
The maximum amount a couple filing jointly can qualify for is $2,500, but small business owners can make contributions and claim a credit equal to 75 percent of the taxes owed by that business.
The state now allows a maximum of $51.5 million in such credits to be claimed per calendar year.
Eric Seidel, head of the Lawrenceville-based student scholarship organization Parents Choice, said he disbanded the group last year because he did not have time to administer it.
He said his organization followed the law, which he said is confusing.
“The policies changed a couple of times,” Seidel said, “and I think the Legislature created confusion with the way they set it up.”
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