Tax credits for investments in Jewish education

Several states, including Rhode Island, provide tax credits for people or corporations that invest in education through Scholarship Granting Organizations (SGOs). In Rhode Island, those who pledge and donate to such organizations two years in a row receive 90% tax credits from the R.I. Division of Taxation, in addition to charitable deductions on their federal taxes. One-year donors receive 75% tax credits. These donations are investments not just in education, but in businesses and the welfare of the state.

Effective tax-credit programs must produce some type of measurable return on investment in order to be recognized as good tax policy, especially at a time when all aspects of government taxing and spending are under such scrutiny, in particular the amount spent on K-12 education.

Tax credits were created “to serve a public purpose” by providing an incentive to create jobs and foster business growth and expansion. The current program was begun to address both the high tax and poor educational outcomes issues that are of great concern. A recent study in Florida noted that, for every $1 of corporate contributions made toward the Florida Corporate Scholarship Tax Credit Program, the state saved $1.49 in state education funding.

Rhode Island’s Corporate Scholarship Tax Credit Program, enacted in 2006, allows Rhode Island businesses to receive a corporate tax credit for contributions that provide tuition scholarships to students in families with income that’s less than 250% of the Federal poverty level. The scholarships give these students the opportunity to attend participating private K-12 schools throughout the state. Such business entities can be C-corps, S-corps, LLCs and LLPs.

Among the recipient schools are Jewish Community Day School and Providence Hebrew Day School, which benefit from donations to The Foundation for Rhode Island Day Schools, the SGO that serves the Jewish community. The schools receive allocations from the SGO to their scholarship funds, specifically for those students whose family income is within 250% of the federal poverty level. During the course of the past several years, more than $3 million dollars has been allocated to the two schools from the SGO. These donations have allowed these schools to provide fine secular and Jewish education to Rhode Islanders who could not otherwise afford to pay the full tuition.

The only problem with this program is that the number of applications for participation in it exceeds the statewide cap for such donations – currently it is $1.5 million in tax credits. Therefore, a summer drawing is held to determine which of the applications the Division of Taxation receives on July 1 will be accepted into the program.

Applications are solicited during the spring by the SGOs and submitted on July 1.

FOR MORE INFORMATION about this program, please contact Larry Katz at lkatz@jewishallianceri.org or at 401.421.4111, ext. 179.