You asked for a summary of Arizona’s Kids Tax Credit program. You also asked if there has been any legislation proposed to establish a similar program in Connecticut.

SUMMARY

The Arizona Kids Tax Credit Program gives taxpayers a credit against their state income tax liability for donations to public or charter schools in Arizona. The maximum credit is $ 200 for single filers and heads of household and $ 300 for joint filers for tax year 2005 and $ 400 for tax year 2006 and after. To qualify, donations must pay fees to a public school to support extracurricular activities or a character education program.

A review of legislation since 1991 shows the Connecticut legislature has seen 18 proposals to provide a state income tax credit to offset various types of K-12 educational expenses for public and private school students and parents, though none of the proposals is identical to the Arizona credit. All of the 18 bills were submitted as proposed bills, all have been submitted since 1998, and none was ever fully drafted into statutory form. Most were referred to the Finance, Revenue and Bonding Committee, which took no action on them.

ARIZONA KIDS TAX CREDIT PROGRAM

Tax Credit

In 1997, the Arizona legislature adopted a credit against the state income tax equal to the amount of any fees or cash contribution a taxpayer pays or makes during the tax year to an Arizona public school for the support of its extracurricular activities or character education programs. The maximum credit is $ 200 for those filing as singles or heads of household. For married couples filing jointly, the maximum credit is $ 300 for the 2005 tax year and $ 400 for the 2006 and subsequent tax years. Married couples filing separately may each take 50% of the credit allowable to joint filers. If the amount of the credit exceeds the taxpayer’s total tax liability for the year, the taxpayer may carry forward the unused portion of the credit for up to five consecutive years (ARS § 43-1089. 1).

Only individuals may take the credit. Partnerships and S corporations cannot pass the credit through to individual partners or shareholders. Likewise, the credit is not available to trusts, estates, or C or S corporations. A person who claims a credit is not eligible to take an education tax deduction for the same contribution.

The Arizona state income tax allows 18 other tax credits in addition to the school tax credit.

Qualifying Schools

To qualify for the credit, taxpayers must donate to a public or charter school located in Arizona. Schools must provide instruction in grades K-12. Donations to private schools, pre-schools, and higher education institutions do not qualify.

Extracurricular Activities

Payment to support fees the public school requires students to pay to participate in school-sponsored extracurricular activities are eligible for the credit. These fees can include fees charged for (1) band uniforms, (2) varsity athletic equipment or uniforms, (3) scientific lab materials, and (4) in- or out-of state travel for competitive events. Fees for recreational, amusement, or tourist travel are not eligible. A parent may claim the credit for paying extracurricular activity fees for his own child.

Character Education

To qualify for a credit for a contribution to a character education program, the program must be one developed by a school district that, at a minimum, includes instruction at least six of the following: truthfulness, responsibility, compassion, diligence, sincerity, trustworthiness, respect, attentiveness, obedience, orderliness, forgiveness, and virtue (ARS §15-719).

School Reporting Requirements

A public school receiving contributions must report to the Arizona Department of Revenue by February 28 annually, the total number and dollar amount of contributions it received and the total amount of contributions it spent during the previous year.

CONNECTICUT SCHOOL TAX CREDIT PROPOSALS

Since 1998, 18 bills have been proposed in Connecticut to provide credits against the state income tax for various elementary and secondary education expenses. Sixteen of these bills were referred to the Finance, Revenue and Bonding Committee and two were sent to the Education Committee. None was raised for a public hearing and none was reported out of committee. A year-by-year summary of the bills appears below.

1998

HB 5180 would have provided an income tax credit for the cost of public or private school tuition, books, fees, and other qualified educational expenses.

1999

HB 5893 and SB 636 would have provided a maximum $ 300 credit to parents for public or private school education expenses for their children.

2000

HB 5067 would have provided an income tax credit for educational expenses for children enrolled in private school.

HB 5098 would have provided a state income tax credit for educational expenses equal to 15% of the federal educational expense credit.

HB 5397 would have given a credit to moderate income parents for such educational expenses as after-school and extracurricular programs.

SB 42 would have given a maximum credit of $ 250 to parents for payments to public or private schools for tuition, books, uniforms, sports equipment, or related costs.

2001

HB 5188 would have provided a state income tax credit for educational expenses equal to 15% of the federal credit.

HB 5189 would have given an income tax credit for tuition for K-12 education.

HB 5190 would have allowed up to a $ 500 tax credit for K-12 tuition for those with adjusted gross incomes of $ 50,000 or under for single filers and married couples filing separately or $ 100,000 for heads for households and married joint filers.

HB 5263 would have allowed an education tax credit for parents of children enrolled in private schools.

HB 5470 would have provided a credit to moderate-income parents for educational expenses, such as those for after-school and extracurricular programs.

HB 5744 would have provided a credit for nontuition K-12 educational expenses, such as home computer hardware, educational software, tutoring, and fees for certain after-school programs that enhance education.

SB 390 would have provided a $ 250 tax credit for private and public school expenses.

2003

HB 5423 would have provided a tax credit for certain nontuition K-12 educational expenses.

HB 5424 would have provided a tax credit for education expenses of moderate-income parents.

SB 188 would have provided a $ 250 tax credit for public and private school expenses.

2004

SB 169 would have provided a $ 250 tax credit for educational expenses including books, tutors, extracurricular expenses, and tuition for public or private school.

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