Demand for corp. scholarship tax credits exceeds resources

HANDS-ON LEARNING: Dan Corley, head of Community Preparatory School, watches as third-grader Kairi Costa plays a math-based computer game. / PBN PHOTO/MICHAEL SALERNO
HANDS-ON LEARNING: Dan Corley, head of Community Preparatory School, watches as third-grader Kairi Costa plays a math-based computer game. / PBN PHOTO/MICHAEL SALERNO

Ten years after its creation, the Rhode Island corporate scholarship tax credit program continues to attract more interest from would-be donors than it can match in state contributions.

The program, which provides tax credits to companies that contribute donations to scholarship organizations, annually provides up to $1.5 million toward private or parochial school scholarships for students from families with low incomes.

Because the program is over-subscribed, it annually holds a lottery to determine which companies will receive the tax credits for their contributions. This past July, 22 of 107 companies or entities that applied were selected to participate, drawing on the $763,550 available in 2016 for tax credits.

For the operators of the scholarship organizations, this demonstrates the need to expand the program, to create more options for school choice for parents who cannot afford a private-school education.

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Far more students are interested in a nonpublic education than can afford to attend, according to Edward Bastia, business administrator for Financial Aid for Children’s Education of Rhode Island, one of six scholarship organizations that received authorization in 2016 from the state to receive corporate donations through the program.

For the companies, they would be paying the money regardless, whether through a donation to a scholarship organization or through an increased tax burden.

“There is exhaustive demand on both sides,” he said.

FACE of RI represents 40 Catholic elementary and secondary schools.

As with other scholarship-granting organizations, it follows its own methods for distributing the proceeds. Although the state law that created the program requires the scholarships be reserved for those who earn no more than 250 percent of the federal poverty level, the individual organizations decide how to distribute them.

FACE distributes the financial aid to students based on ranked order of need.

In 2015, the most recent year for which scholarship information was available, 503 children in Rhode Island received financial support for private-school tuition through the program, according to information on the state Division of Taxation website.

FACE of RI awarded 293 scholarships in 2015 using donations made through the state tax credit program, according to its annual report. The largest number, 48, attended Bishop McVinney School in Providence, each receiving small awards, ranging up to $1,000 each.

A smaller scholarship-granting organization, called Achievement for Children with Challenges Empowered by School Scholarships, granted larger awards to a fewer number of students, also following the formula of a ranked order by need.

The scholarship organization issues grants to the Wolf School and School One. Two of the three students at the Wolf School who received scholarships through the program in 2015 were awarded grants of $48,900, according to its report.

Businesses that donate through the program receive up to a 90 percent tax credit on donations up to $100,000, if it is committed over a two-year period. Businesses that donate for a single year receive a 75 percent tax credit.

C-corporations, S-corporations, LLPs and LLCs all are eligible to apply for the credit if they have an income tax liability.

The donors cannot specify which schools receive the proceeds, and they cannot direct the money toward specific students.

The program was created in 2006, under former Gov. Donald L. Carcieri. It is among more than a dozen programs in the U.S. that provide tax credits to businesses that make donations to scholarship organizations.

Initially seeded with up to $1 million in tax credits annually, the program was expanded in fiscal 2014 to $1.5 million in credits, said Neena S. Savage, tax administrator for the R.I. Department of Revenue.

The Rhode Island program has been over-subscribed since early 2007, when the law was changed to allow individuals via pass-through entities to receive a credit, Savage said in an emailed message.

Several administrators of the scholarship organizations think Rhode Island should expand the program. They say it ultimately saves taxpayers millions of dollars because, unlike charter schools, which are public schools and receive a per-pupil funding amount, private schools and parochial schools reduce the number of children attending publicly funded schools.

Beyond that, supporters say it provides students with an opportunity to attend a school of their parents’ choosing, not dictated by neighborhood boundaries or income.

“This is money going to help poor students,” said Dan Corley, head of Community Preparatory School and president of Scholarships to Economically Poor Students, a scholarship organization that received funding in 2016 through the tax credits.

“It is a general cost savings for the taxpayer because for every student, especially every economically poor student that is able to go on scholarship to a private school, the cities and the town and the state save roughly $15,000 per child,” he said.

About 100 students a year receive support for their education through STEPS, which provides scholarships to students attending schools such as the San Miguel School and Sophia Academy in Providence.

“Parents want choice,” Corley said. “The students deserve the same options that their more-wealthy peers get.” •

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