Have you ever wanted to make a difference in a child’s education? One of the best ways to help local schoolchildren get a quality education is to make tax credit contributions to Catholic Education Arizona (CEA). While many individuals make these meaningful contributions, so do corporations. More than 30% of CEA’s tax credit contributions are from corporations that do business in Arizona.
Naturally, you’ll have questions about this contribution program before you join it. Let’s go over some frequently asked questions about the Corporate Tuition Tax Credit and how your tax dollars can help the students at a catholic school academy.
1. Who Can Participate?
Before you can start directing your corporation’s tax dollars to CEA, you need to know if your corporation qualifies. The Corporate Tuition Tax Credit allows S-Corporations, C-Corporations, insurance companies that collect premiums, and LLCs that file their state taxes as an S-Corporpation or a C-Corporation to participate. These corporations can direct their state tax liability to qualified Student Tuition Organizations that serve private schools, such as CEA.
2. How Much Can a Corporation Donate?
Any of the corporations mentioned above can redirect 100% of their state tax liability in a given tax year to help a catholic school academy through CEA. However, there are some restrictions to be mindful of. C Corporations can donate 100% of their state tax liability as long as it doesn’t exceed the entire statewide cap for the year.
There are two types of corporate tuition tax credits, each with a different statewide cap. For the Corporate Low Income tax credit, the statewide cap is $123,042,188. For the Disabled/Displaced tax credit, the statewide cap is $5,000,000. Once the state reaches these caps from contributing corporations, which open on July 1 each year, no more corporations can direct their tax liability.
S Corporations can also direct 100% of their state tax liability in a given tax year, but they must direct a minimum of $5,000. Then, they must pass the tax credit onto their shareholders proportionately. If an S-Corporation or a C-Corporation donate more than their tax liability, they can carry it forward for up to 5 years.
3. How Does a Corporation Participate?
The process of participating in the Corporate Tuition Tax Credit program is easy and quick. All you have to do is fill out a CEA tax credit commitment form and email it to CEA. On this form, your corporation will get to pick a specific catholic school academy or up to five of these schools to receive their state tax credit funds. A corporation can also choose to direct their state tax liability to a general fund, which supports all of the schools CEA is affiliated with and prioritizes those in greatest need. The funds from corporations help make it possible for these schools to give scholarships to underserved children, setting them up for better futures. About 99% of students who go to Catholic high school graduate and of those, about 86% attend 4-year colleges.
As mentioned before, the State of Arizona limits how much corporate state tax funding can be distributed to private schools. CEA accepts corporate tax credits beginning on July 1 of each year until the statewide caps are met. CEA will notify your corporation when your tax credit application has been accepted, which is typically within 10 business days of submitting the form.
If you’re interested in directing your corporation’s state tax liability to a private Catholic school in need this year, contact CEA today.
