PRIVATE SCHOOL TUITION ORGANIZATION INCOME TAX CREDITS IN ARIZONA: A SUMMARY OF ACTIVITY FY 2011

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1 PRIVATE SCHOOL TUITION ORGANIZATION INCOME TAX CREDITS IN ARIZONA: A SUMMARY OF ACTIVITY FY 2011 Arizona has three income tax credits for taxpayer donations to school tuition organizations (STOs). One credit is for donations by individuals 1 and the other two credits are for corporate donations. 2 (The corporate donations can be claimed as a tax credit against corporate income tax or insurance premium tax.) Effective with Fiscal Year 2011 (July 1, 2010 through June 30, 2011), STOs report on a fiscal year basis after 13 years of calendar year reports. Therefore, the information contained here is a merging of calendar year and fiscal year data. CERTIFICATION Arizona law requires an STO to be certified by the Arizona Department of Revenue (ADOR) before it can begin collecting donations for tax credit purposes. The STO must be certified to collect donations from individuals and it must be certified to collect donations from corporations. For corporate donations, this certification was required to collect any donations from the effective date of the legislation requiring certification, which was July 29, However, for individual donations, certification was required from January 1, 2011 forward. Therefore, all previously-operating STOs were able to collect individual donations through the end of calendar year 2010 without certification. Appendix I lists all STOs which collected donations during Fiscal Year 2011 and their certification period. A total of 57 STOs operated in Fiscal Year 2011 and/or were certified to operate in Fiscal Year Thirteen STOs that were certified for individual donations did not seek corporate certification. Four STOs that were certified for corporate donations did not seek individual certification. Two STOs collected individual donations in the first half of Fiscal Year 2011 but decided to discontinue operation when the certification process began. TOTAL REVENUE Beginning in Fiscal Year 2011, STOs were required to report total revenues for the fiscal year in addition to total donations. Total revenues would include other income sources in addition to donations for purposes of the tax credit, like interest earned on donations, grants, employer matching funds when employees contribute, etc. STOs reported revenues of $811,833 in excess of tax-credit donations. Appendix II lists those 1 A.R.S A.R.S and 1184 or A.R.S and

2 STOs with revenues in excess of tax-credit donations. (Revenue and donations shown are from all three credits.) Twenty-eight STOs reported that their revenue equaled their donations, meaning that they had no non-tax credit revenue; these STOs are not listed on Appendix II. TOTAL DONATIONS to STOs since the beginning of the individual credit in 1998 through the end of Fiscal Year 2011 total $509.5 million. Individual donations have made up the majority of this amount, 89.4%, because of the longer period of time in which this credit has been available and because of a greater volume of donations. The following table shows total donations from each credit type. Low-Income Student Corporate Disabled-Displaced Corporate Time Period Individual Total CY $1,815,798 $1,815,798 CY ,781,341 $13,781,341 CY ,701,284 $17,701,284 CY ,897,444 $24,897,444 CY ,512,683 $26,512,683 CY ,445,596 $29,445,596 CY ,846,494 $31,846,494 CY ,196,206 $42,196,206 CY ,012,326 $7,260,800 $58,273,126 CY ,304,968 14,258,000 $68,562,968 CY ,260,728 9,122,121 $64,382,849 CY ,879,153 7,285,284 $781,000 $58,945,437 CY ,183,500 11,123, ,880 $55,264,037 2 nd half of FY ,818,799 2,301, ,000 $15,890,602 TOTAL $455,656,320 $51,351,665 $2,507,880 $509,515,865 Of all donations from both corporate and individual donors since 1998, the Catholic Tuition Organization of the Diocese of Phoenix has collected the most at $112.2 million or 22% of all donations. The second largest recipient of donations has been the Arizona Christian School Tuition Organization at $96.1 million or 18.9% of all donations (although this organization only accepts individual donations). Appendix III shows every 3 Activity in 1998 was artificially low due to a court case challenging the constitutionality of the credit based on separation of church and state. The credit was determined to be constitutional. 4 The maximum donation for married filing joint filers increased to $625 from $ The maximum donation for married filing joint filers increased to $825 from $ The maximum donation for married filing joint filers increased to $1,000 from $825. 2

3 organization that has received donations, with the total received by credit type, since The STOs that are highlighted are no longer operational. TOTAL SCHOLARSHIPS from STOs since the beginning of the individual credit in 1998 through the end of Fiscal Year 2011 total $444.3 million. from individual donations have made up the majority of this amount, 92.3%, because of the longer period of time in which this revenue has been available and because of fewer restrictions on scholarships from individual donations than from corporate donations. The following table shows total scholarships from each credit type. from Individual from Low-Income Student Corporate from Disabled-Displaced Corporate Time Period Total CY1998 $103,790 $103,790 CY1999 2,196,734 $2,196,734 CY ,561,981 $13,561,981 CY ,484,958 $16,484,958 CY ,826,746 $22,826,746 CY ,420,057 $24,420,057 CY ,025,083 $28,025,083 CY ,863,153 $30,863,153 CY ,594,978 $49,380 $40,644,358 CY ,561,687 4,597,823 $53,159,510 CY ,205,394 7,615,639 $61,821,033 CY ,127,262 7,849,824 $625,335 $60,602,421 CY ,344,443 9,260, ,424 $57,319,933 2 nd half of FY ,796,410 3,379,685 68,512 $32,244,607 TOTAL $410,112,676 $32,752,417 $1,409,271 $444,274,365 As with donations, the Catholic Tuition Organization of the Diocese of Phoenix has paid the most in scholarships since 1998 at $99.4 million, or 22.4% of all scholarships. The STO paying out the second largest amount in scholarships is the Arizona Christian School Tuition Organization at $88.7 million or 20% of all scholarships. Appendix IV shows every organization that has paid scholarships, with the total paid by credit type, since The STOs that are highlighted are no longer operational. SALARIES PAID STOs are required by statute to report the names, job titles and salaries of the three highest-paid employees. The 55 STOs that were certified in Fiscal Year 2011 reported this information. Out of these 55 STOs, 37 (67.3%) were staffed by volunteers. Arizona Private Education Scholarship Fund did not have any employees; however, they did 3

4 contract with another organization to provide staff. Appendix V lists the 18 STOs that reported salaries. AUDIT OR REVIEW PROCESS STOs certified in Fiscal Year 2011 have reported using 30 CPA firms. (Four STOs did not need an audit or review because they did not receive donations in Fiscal Year One STO, Just Friends of Education, has failed to provide letters of engagement at this point.) Those CPAs are listed in Appendix VI. Estimates of the cost of the audit or review range from $500 to $17,000. Final figures for the cost of the audit or review will not be available until Fiscal Year INDIVIDUAL INCOME TAX CREDIT PROGRAM There were 51 STOs that received donations in Fiscal Year (Two of these, Flagstaff Scholarship Fund and Foundation for Lutherans Interested in Funding Education, were only active until December 31, 2010 and did not get certified for further operations.) A total of $51.7 million in revenue was reported in the fiscal year and $51.4 million in tax credit donations from 74,687 taxpayers. The following table shows the number of STOs operating in each period, the number of donations and the amount of tax credit donations. Percent change is calculated for prior calendar year amounts reported. As this is the first fiscal year time period being reported, no percent change can be calculated for this year. Time Period # of STOs # of Amount % change CY ,248 $1,815,798 CY ,023 $13,781,341 CY ,249 $17,701, CY ,696 $24,897, CY ,203 $26,512, CY ,122 $29,445, CY ,830 $31,846, CY ,239 $42,196, CY ,617 $51,012, CY ,065 $54,304, Activity in 1998 was artificially low due to a legal challenge of the constitutionality of the credit, which failed. 8 The maximum donation for married filing joint filers increased to $625 from $ The maximum donation for married filing joint filers increased to $825 from $ The maximum donation for married filing joint filers increased to $1,000 from $825. 4

5 Time Period # of STOs # of Amount % change CY ,434 $55,260, CY ,430 $50,879,153 (7.9) CY ,941 $43,183,500 (15.1) FY ,687 $51,408, Appendix VII shows donations for each STO for Fiscal Year 2011 (and scholarships for each STO as well). Appendix VIII shows donations for STOs that collected money in the 2 nd half of Fiscal Year 2011 plus four years of calendar year donation history. It is important to remember when reviewing this table that the first column of donations is for a 6-month period and is not directly comparable to the calendar year history shown. Showing the donations for all of Fiscal Year 2011 would result in double-counting some donations that were received between July 1 and December 31; this time period occurs in both Fiscal Year 2011 and Calendar Year The following table shows the number of STOs providing scholarships in each period, the number of scholarships and the amount of scholarships paid. (For the calendar years prior to 2003, the numbers are soft; reporting was not statutorily-required at that time.) Percent change is calculated for prior calendar year amounts reported. As with the donations table above, no percent change is calculated for Fiscal Year 2011 as this is the first fiscal year reporting period. Please note that the number of scholarships paid does not equate to the number of students receiving scholarships. Many families seek scholarships from multiple STOs, resulting in one child being counted several times in the scholarship counts. Time Period # of STOs # of Amount % change CY $103,790 CY ,207 $2,193,734 CY ,081 $13,561, CY ,049 $16,484, CY ,582 $22,826, CY ,134 $24,420, CY ,146 $28,025, CY ,529 $30,863, CY ,678 $40,594, There are 6 months that overlap between Calendar Year 2010 and Fiscal Year Some of the donations showing for Fiscal Year 2011 are already shown for Calendar Year

6 Time Period # of STOs # of Amount % change CY ,153 $48,561, CY ,327 $54,205, CY ,592 $52,127,262 (3.8) CY ,433 $47,344,443 (9.2) FY ,312 $47,098, Appendix IX shows scholarships paid in the 2 nd half of Fiscal Year 2011 and four calendar years of scholarship history. Refer to Appendix VII for a list of all STOs that paid scholarships in Fiscal Year The range of average scholarship amounts paid by STOs is from $ (Chaparral Mission Scholarship Fund) to $13, (School Choice Arizona). Average scholarship ranges and the number of STOs with scholarships falling in each range is shown in the following frequency distribution. Avg. Scholarship Range # of STOs Avg. Scholarship Range # of STOs $531 to $1,000 8 $3,001 - $4,000 5 $1,001 - $1,500 9 $4,001 - $5,000 2 $1,501 - $2, $5,001 - $7,500 2 $2,001 - $2,500 8 $10,000 - $13,414 2 $2,501 - $3,000 4 Arizona Scholarship Fund provided scholarships to 146 schools, more than any other STO. Appendix X lists the number of schools to which each STO provided scholarships and the average scholarship the STO paid out. The information on the number of schools to which each STO paid scholarships is aggregated in the following table. As shown, seven STOs gave scholarships to only one private school. # of Private Schools # of STOs giving to this number of private schools There are 6 months that overlap between Calendar Year 2010 and Fiscal Year Some of the donations showing for Fiscal Year 2011 are already shown for Calendar Year

7 # of Private Schools # of STOs giving to this number of private schools or more 4 STOs provided scholarships and grants to 351 private schools throughout Arizona. One private school, Christ Lutheran School in Phoenix, received scholarships or grants from 12 STOs. The following table shows the number of STOs contributing scholarship money to the private schools. In other words, referring to the table below, 142 private schools received scholarship money from one STO. This many private schools received scholarships or grants from This many private schools 143 One STO 77 Two STOs 44 Three STOs 32 Four STOs 18 Five STOs 19 Six STOs 6 Seven STOs 6 Eight STOs 2 Nine STOs 3 Ten STOs 1 Twelve STOs Five private schools received more than $1 million in total from all STOs. The most scholarship money received by one private school from all STOs was $1,483,187 for 635 scholarships to Cornerstone Christian Academy/Pusch Ridge Academy. (This is one school but kindergarten through sixth grade is Cornerstone Christian Academy and seventh grade through twelfth grade is Pusch Ridge Academy.) Appendix XI lists the 351 private schools that received scholarship money, the number of scholarships, the amount of scholarships and the average scholarship amount. The smallest average scholarship paid by an STO to a private school was $50 paid by the Arizona Scholarship Fund to Atonement Lutheran School in Glendale. Ten private 7

8 schools received average scholarships from STOs for more than $10,000. The highest average scholarship paid by an STO to one private school was $19, paid by School Choice Arizona to the Foundation for Blind Children School. The following table presents the distribution of average scholarships. For example, the average scholarship received by four private schools (from all STOs) was between $1 and $250. Five private schools received scholarships on average of between $10,000 and $20,000. Avg. Scholarship Range # of Private Schools with Avg. in this Range Avg. Scholarship Range # of Private Schools with Avg. in this Range $1 - $250 4 $2,500 - $3, $251 - $500 9 $3,001 - $4, $501 - $1, $4,001 - $5, $1,001 - $1, $5,001 - $7, $1,501 - $2, $7,501 - $10,000 4 $2,001 - $2, $10,001 - $20,000 5 In terms of where the scholarship money went within Arizona, the most money went to schools within the City of Phoenix. About 35% of the scholarships went to 75 private schools in Phoenix and almost 34% of the money. As would be expected, 67% of the scholarships and of the scholarship money went to schools in Maricopa County. The following table shows the number of scholarships, the amount of scholarships and the average scholarship paid out by county in Fiscal Year County # of Scholarship $ Avg. Scholarship Apache 189 $359,012 $1,900 Cochise 322 $488,523 $1,517 Coconino 193 $379,974 $1,9698 Gila 179 $354,559 $1,9818 Graham 21 $25,121 $1,196 Greenlee 0 $0 $0 La Paz 3 $6,525 $2,175 Maricopa 16,460 $31,570,510 $1,918 Mohave 180 $301,090 $1,673 Navajo 476 $785,849 $1,651 8

9 County # of Scholarship $ Avg. Scholarship Pima 4,819 $9,930,516 $2,061 Pinal 277 $442,493 $1,598 Santa Cruz 65 $47,791 $735 Yavapai 763 $1,479,477 $1,939 Yuma 615 $926,659 $1,507 Appendix XII shows the cities and towns within which the scholarship money was received, the number of scholarships, total scholarships and the average scholarship amount. The statutory guidelines that became effective January 1, 2011 had a new requirement for the STOs participating in the individual income tax credit program. From January 1, 2011 forward, family income information must be collected on all recipients of scholarships from individual donations. The STOs are required to annually report the amount of scholarships going to students with family incomes up to 185% of poverty level and the amount of scholarships going to students with family income from more than 185% of poverty level to % of poverty level. All STOs did report this information but it was only for scholarships paid from January 1, 2011 through June 30, Since this information is not for a full fiscal year and could be distorted as a result of scholarship time tables for each STO, it will not be reported in this report. It will be published in all future fiscal year reports. All STOs certified to collect individual donations in Fiscal Year 2011 were evaluated to see their status in relation to the requirement that 90% of all revenue must be paid out in scholarships. From an administrative viewpoint, no STO is expected to pay out in scholarships 90% of donations it receives in the current year. There will always be a lag between revenue received and revenue paid out. Having said that, many STOs are able to accomplish this 90% payout. That does not mean that an STO with a percentage of less than 90% is in violation of the law. ADOR is not currently concerned with the percentage of any STO. These percentages are being monitored annually, however, and if the STOs with low percentages do not improve within a year or two, ADOR will be compelled to review that program to determine the reason. Percentages for STOs certified to receive individual donations in Fiscal Year 2011 are shown below. 9

10 School Tuition Organization Ratio School Tuition Organization Ratio Alternative Schools Scholarship Fund 90.2 HIGHEReducation School Tuition Org Arizona Adventist 98.6 Institute for Better Education 88.0 Arizona Christian School Tuition Org Jewish Education Tax Credit Org Arizona Education Scholarship Found Jewish Tuition Organization 96.2 Arizona Episcopal Schools Foundation 86.6 Just Friends of Education Arizona Independent Schools Scholarship Foundation 94.7 Life Development Institute Education Fund 85.3 Arizona International Academy Scholarship Fund 87.4 Lutheran Education Foundation 94.6 Arizona Lutheran Scholarship Org Montessori Scholarship Organization 91.6 Arizona Private Education Scholarship Fund 85.0 New Valley Education Partners 77.2 Arizona Scholarship Fund 86.0 Northern Arizona Christian School Scholarship Fund 87.4 Arizona School Choice Trust 98.1 Orme Primavera Schools Foundation 88.9 Arizona Tuition Organization 93.8 Pappas Kids Schoolhouse Foundation 82.8 Arizona Waldorf Scholarship Fund 97.9 Pinetop Tuition Support Organization 67.4 BEST Student Fund 96.9 for Education Excellence Brophy Community Foundation 81.8 School Choice Arizona 86.3 Catholic Tuition Organization of the Diocese of Phoenix 90.7 School Tuition Association of Yuma 91.0 Catholic Tuition Support Organization 86.7 Schools With Heart Foundation 92.7 Chabad Tuition Organization 88.9 Shepherd of the Desert Education Found 89.5 Christ Lutheran School Foundation 77.0 Southern Arizona Found. for Education 98.6 Christian Scholarship Foundation 95.6 Tempe Montessori Parent s Organization 96.0 Christian Scholarship Fund of Arizona 86.3 Tuition Organization for Private Schools 89.7 Cochise Christian School Tuition Org Valley Lutheran Scholarship Org Dynamite Montessori Foundation 84.7 White Mountain Tuition Support Found Higher Education for Lutherans Prog Yuma s Education Scholarship Fund for Kids 98.4 CORPORATE INCOME TAX OR INSURANCE PREMIUM TAX CREDIT PROGRAM SCHOLARSHIPS FOR LOW-INCOME STUDENTS The low-income student corporate income tax credit and insurance premium tax credit for contributions to school tuition organizations are governed by A.R.S , A.R.S and Chapter 15 in Title 43. (This section does not cover the corporate income tax/insurance premium tax credit for scholarships for disabled/displaced students, A.R.S and ) ADOR certified 42 STOs to receive corporate donations during Fiscal Year

11 to STOs for the purpose of receiving the low-income student corporate income tax credit or insurance premium tax credit are limited by statute for each fiscal year. For fiscal year 2007, the first year of the program, the limitation was $10 million. This limitation increases by 20% per year. In Fiscal Year 2011, the limitation was $ million. The following table shows the amount approved in each fiscal year as opposed to the amount received. Fiscal Year Statutory Limitation # of Corps $ Approved $ Received 2007 $10,000, $9,740,800 $9,535, $12,000, $12,116,000 $11,996, $14,400, $10,816,006 $10,495, $17,280, $8,121,508 $8,100, $20,736, $11,376,351 $11,324,351 Of the 42 STOs certified to receive corporate donations in Fiscal Year 2011, 17 reported receiving revenue of $11,673,886 related to the low-income student corporate credit during that period. Actual revenue for the period was $11,373,886; one STO that received $300,000 transferred that money to three other STOs. Therefore, both STOs reported the $300,000. The actual revenue of $11,373,886 can be compared to total donations for that period of $11,227,351, a difference of $146,535. There were 109 donations approved and received in Fiscal Year 2011 for the lowincome student corporate/insurance premium credit; one donation approved in Fiscal Year 2010 was not received until Fiscal Year Fourteen STOs received the 110 donations ($11,227,351) from 69 corporations. (Ten of the 69 corporations are insurance companies.) Of the 69 corporations, 50 donated once; the remaining 19 donated from two to five times. The following table shows the number and amount of donations received by each STO in Fiscal Year School Tuition Organization # of Low-Income Student Corporate Total Low- Income Student Arizona Episcopal Schools Foundation 1 $25,000 Arizona Independent Schools Scholarship Foundation 3 $830,000 Arizona Private Education Scholarship Fund 2 $54, The entire $12 million was approved in the fiscal year. Two corporations, each donating $2,000, requested a refund after the fiscal year ended when it became clear that the program does not work for S corporations that pass their tax liability through to shareholders. 11

12 School Tuition Organization # of Low-Income Student Corporate Total Low- Income Student Arizona School Choice Trust 4 $500,000 Brophy Community Foundation 12 $1,307,000 Catholic Tuition Organization of the Diocese of Phoenix 33 $3,544,510 Catholic Tuition Support Organization 23 $1,455,641 Foundation for Corporate Tax Credits 1 $195,000 Independent Schools Corporate Tax Foundation 1 $195,000 Institute for Better Education 11 $826,200 School Choice Arizona 10 $1,978,500 School Tuition Association of Yuma 1 $40,000 Tuition Organization for Private Schools 1 $176,500 Valley Lutheran Scholarship Organization 1 $100,000 Appendix XIII shows donations for STOs that collected money in the 2 nd half of Fiscal Year 2011 or during the four prior calendar years. It is important to remember when reviewing this table that the first column of donations is for a 6-month period and is not directly comparable to the calendar year history shown. Showing the donations for all of Fiscal Year 2011 would result in double-counting some donations that were received between July 1 and December 31 as this time period occurs in both Fiscal Year 2011 and Calendar Year Corporate donations ranged from $200 to over $1 million. donations made to an STO is shown in the following table. The range of separate Donation Size # Donation Size # $1,000 or less 6 $50,000 to $99, $1,001 to $4, $100,000 to $249, $5,000 to $9,999 7 $250,000 to $499, $10,000 to $24, $500,000 and over 5 $25,000 to $49, The Catholic Tuition Organization of the Diocese of Phoenix received the most corporate donations for the low-income student corporate/insurance premium credit, 33 donations from 28 corporations, for a total of $3,544,510. Five STOs received only one donation. Unlike scholarships from individual income tax credit donations, low-income student corporate income tax and insurance premium tax credit scholarships under this program 12

13 are restricted to certain students. Recipients of these corporate scholarships must meet the following guidelines: 1. Family income cannot exceed 185% of the income limit required to qualify a child for reduced priced lunches under the national school lunch and child nutrition acts. (Maximum annual income of $76,494 for a family of four in 2011.) 2. The student receiving the scholarship must meet one of the following : a. Attended a governmental primary or secondary school full-time for at least the first 100 days of the prior fiscal year and then transferred to a qualified private school in a subsequent year. b. Enroll in a qualified private school in a kindergarten program. c. Received a scholarship under one of the two previous guidelines and continues to attend a qualified private school in a subsequent year. 3. For the 2011/2012 academic year, a school tuition organization cannot issue a scholarship in an amount that exceeds: a. $4,700 for students in kindergarten through grade 8. b. $6,000 for students in grades 9 through 12. Twenty STOs reported paying scholarships in Fiscal Year These STOs reported 4,578 scholarships totaling $9,189,905, for an average of $2,007. Shown below is the number and amount of scholarships from each STO and the number of schools. School Tuition Organizations # of Scholarship $ Avg. Scholarship # of Schools Arizona Episcopal Schools Foundation 11 $37,443 $3,404 2 Arizona Independent Schools Scholarship Foundation 86 $464,305 $5,399 3 Arizona Private Education Scholarship Fund 3 $9,000 $3,000 2 Arizona School Choice Trust 495 $647,315 $1, Brophy Community Foundation 440 $965,271 $2, Catholic Tuition Organization of the Diocese of Phoenix 1,442 $1,987,799 $1, Catholic Tuition Support Organization 843 $1,751,128 $2, Christian Scholarship Foundation 8 $13,844 $1,731 2 Cochise Christian School Tuition Organization 13 $9,140 $703 1 Corporate Tax Foundation 16 $44,365 $2,773 1 Flagstaff Scholarship Fund 152 $514,319 $3,384 2 Foundation for Corporate Tax Credit 37 $163,705 $4,

14 School Tuition Organizations # of Scholarship $ Avg. Scholarship # of Schools Independent Schools Corporate Tax Foundation 39 $174,305 $4,469 2 Institute for Better Education 378 $587,477 $1, Jewish Education Tax Credit Organization 63 $295,495 $4,690 4 Northern Arizona Christian School Scholarship Fund 4 $3,208 $802 1 Pappas Kids Schoolhouse Foundation 4 $11,126 $2,781 2 School Choice Arizona 371 $1,089,799 $2, School Tuition Association of Yuma 39 $37,341 $957 5 Tuition Organization for Private Schools 134 $383,520 $2, The Catholic Tuition Organization of the Diocese of Phoenix provided the most scholarships. The Arizona Independent Schools Scholarship Foundation provided the highest average scholarship. The Institute for Better Education provided scholarships to the most schools. Three STOs provided scholarships to only one school. Appendix XIV shows low-income student scholarships paid in the 2 nd half of Fiscal Year 2011 and four calendar years of scholarship history. Corporate scholarship money went to 190 schools in Fiscal Year Amounts received by school ranged from $10 (Blessed Sacrament Kindergarten) to $828,605 (St. Mary s High School). Appendix XV shows the amount of corporate scholarship money that went to each school, along with the number of scholarships and the average scholarship. In terms of where the corporate scholarship money went within Arizona, the most money went to schools within the City of Tucson. About 36% of the scholarship money went to private schools in Tucson. As would be expected, 49% of the scholarship money went to schools in Maricopa County. The following table shows the number of scholarships, the amount of scholarships and the average scholarship paid out by county in Fiscal Year County # of Scholarship $ Avg. Scholarship Apache 73 $27,910 $382 Cochise 66 $92,178 $1,397 Coconino 161 $539,064 $3,348 14

15 County # of Scholarship $ Avg. Scholarship Gila 12 $26,000 $2,167 Graham 0 $0 $0 Greenlee 0 $0 $0 La Paz 0 $0 $0 Maricopa 2,394 $4,499,446 $1,879 Mohave 43 $58,505 $1,361 Navajo 77 $107,890 $1,401 Pima 1,287 $3,421,619 $2,659 Pinal 83 $96,449 $1,162 Santa Cruz 19 $35,466 $1,867 Yavapai 114 $165,362 $1,451 Yuma 82 $120,024 $1,464 Appendix XVI shows the cities and towns within which the scholarship/grant money was received, the number of scholarships, total scholarships and the average scholarship amount. All STOs certified to collect corporate donations in Fiscal Year 2011 were evaluated to see their status in relation to the requirement that 90% of all revenue must be paid out in scholarships. From an administrative viewpoint, no STO is expected to pay out in scholarships 90% of donations it receives in the current year. There will always be a lag between revenue received and revenue paid out. ADOR is not currently concerned with the percentage of any STO. These percentages are being monitored annually, however, and if the STOs with low percentages do not improve within a year or two, ADOR will be compelled to review that program to determine the reason. Percentages for STOs certified to receive and participating in the low-income student corporate credit in Fiscal Year 2011 are shown below. School Tuition Organization Ratio School Tuition Organization Ratio Arizona Episcopal Schools Foundation 82.2 Institute for Better Education 92.3 Arizona Independent Schools Scholarship Foundation 75.1 Independent Schools Corporate Tax Foundation 86.0 Arizona Private Education Scholarship Fund Jewish Education Tax Credit Organization 54.2 Arizona School Choice Trust 81.1 Northern Arizona Christian School Scholarship Fund Brophy Community Foundation 75.0 Pappas Kids Schoolhouse Foundation 75.5 Catholic Tuition Organization of the Diocese of Phoenix 72.9 School Choice Arizona

16 School Tuition Organization Ratio School Tuition Organization Ratio Catholic Tuition Support Organization 66.3 School Tuition Association of Yuma 69.9 Christian Scholarship Foundation 97.9 Tuition Organization for Private Schools 81.1 Corporate Tax Foundation 44.4 Valley Lutheran Scholarship Org Foundation for Corporate Tax Credits 82.4 CORPORATE INCOME TAX OR INSURANCE PREMIUM TAX CREDIT PROGRAM SCHOLARSHIPS FOR DISABLED/DISPLACED STUDENTS The corporate income tax credit and insurance premium tax credit for contributions to school tuition organizations for scholarships for disabled/displaced students are governed by A.R.S , A.R.S and Chapter 15 in Title 43. ADOR certified 42 STOs to receive corporate donations during Fiscal Year to STOs for the purpose of receiving the corporate income tax credit or the insurance premium tax credit are limited by statute for each fiscal year. The statutory limitation for donations made for the disabled/displaced tax credit is set at $5 million per fiscal year. The following table shows the amount approved in each fiscal year as opposed to the amount received. Fiscal Year Statutory Limitation # of Corps $ Approved $ Received 2010 $5,000,000 6 $1,478,880 $1,478, $5,000,000 8 $1,079,000 $1,029,000 Of the 42 STOs certified to receive corporate donations in Fiscal Year 2011, only 5 reported revenue of $1,205,067 during that period for disabled/displaced corporate donations. This compares to donations of $1,204,000, a difference of $1,067. There were 14 donations approved and received in Fiscal Year 2011; one donation approved in Fiscal Year 2010 was not received until Fiscal Year Five STOs received the 15 donations from 8 corporations. Five of the 8 corporations were insurance companies, donating $984,000. Of the 8 corporations, 5 donated once; the remaining 3 donated from two to five times. 14 This is the first year Valley Lutheran Scholarship Organization has participated in the low-income student corporate donation program. As is normal with first-year participation, revenue was received but no scholarships were yet paid out. 16

17 School Tuition Organization # of Corporate Disabled/Displaced Total Disabled/Displaced Arizona School Choice Trust 2 $118,000 Institute for Better Education 5 $210,000 New Valley Education Partners 3 $360,000 School Choice Arizona 3 $100,000 Tuition Organization for Private Schools 2 $416,000 Appendix XVII shows the history of corporate donations for disabled/displaced student scholarships. The Fiscal Year 2011 information is only for the January 1, 2011 through June 30, 2011 period, or 6 months, because the donations received in the first half of Fiscal Year 2011 are already included in the Calendar Year 2010 figures. It is important to remember when reviewing this table that the first column of donations is for a 6- month period and is not directly comparable to the calendar year history shown. Corporate donations ranged from $10,000 to over $300,000. The range of separate donations made to an STO is shown in the following table. Donation Size # Donation Size # $1,000 or less 0 $50,000 to $99,999 5 $1,001 to $4,999 0 $100,000 to $249,999 3 $5,000 to $9,999 0 $250,000 to $499,999 1 $10,000 to $24,999 4 $500,000 and over 0 $25,000 to $49,999 2 The Institute for Better Education received the most corporate disabled/displaced donations, 5 donations from 2 corporations while the Tuition Organization for Private Schools was the largest recipient of corporate disabled/displaced donations at $416,000. The following table shows the number and amount of disabled/displaced corporate donations received by each STO in Fiscal Year Recipients of disabled/displaced scholarships must meet the following guidelines: 1. The student must have an Arizona individualized education plan (IEP), 504 plan or have been placed in the Arizona foster care system. 2. The student receiving the scholarship must meet one of the following : a. Received a grant or scholarship from the former Arizona Department of Education program in the 2008/09 academic year; or Enroll in a qualified private school in a kindergarten program. 17

18 b. Attended a governmental primary or secondary school full-time for at least the first 100 days of the prior fiscal year and then transferred to a qualified private school; or c. Received a scholarship under one of the two previous guidelines and continues to attend a qualified private school in a subsequent year. 3. The amount of the scholarship shall not exceed the lesser of the cost of tuition or 90% of the amount of state aid that would have been computed for the student to attend public school. Five STOs reported paying out scholarships in Fiscal Year These STOs reported 115 scholarships totaling $561,029 for an average of $4,878. Shown below is the number and amount of disabled/displaced scholarships from each STO and the number of schools. School Tuition Organizations # of Scholarship $ Avg. Scholarship # of Schools Arizona School Choice Trust 1 $19,872 $19, Financial Assistance for Independent Schools 24 $95,822 $3, Institute for Better Education 57 $76,490 $1, School Choice Arizona 2 $13,792 $6, Tuition Organization for Private Schools 31 $355,052 $11, The Institute for Better Education provided the most scholarships at 49.6% of the total scholarships awarded. The Arizona School Choice Trust provided the highest average scholarship of $19,872. The Institute for Better Education provided scholarships to the most schools. Two STOs provided scholarships to only one school. Appendix XVIII shows disabled/displaced student scholarships paid since the beginning of the program. Note that the Fiscal Year 2011 figures are only those scholarships paid out in the second half of the fiscal year; scholarships paid out in the first half of the fiscal year are included in the Calendar Year 2010 figures. Corporate disabled/displaced scholarship money went to 44 schools in Fiscal Year Amounts received by school ranged from $250 (Immaculate Heart High School) to $267,833 (Lauren s Institute for Education). Appendix XIX shows the amount of corporate disabled/displaced scholarship money that went to each school, along with the number of scholarships and the average scholarship. 18

19 In terms of where the disabled/displaced corporate scholarship money went within Arizona, the most money went to schools located in Maricopa County. About 82% of the scholarship money went to private schools in Maricopa County. The following table shows the number of scholarships, the amount of scholarships and the average scholarship paid out by county in Fiscal Year County # of Scholarship $ Avg. Scholarship Maricopa 62 $459,261 $7,407 Mohave 2 $2,100 $1,050 Navajo 1 $1,000 $1,000 Pima 41 $61,755 $1506 Pinal 1 $20,560 $20,560 Yavapai 9 $16,353 $1.817 The next table shows the cities and towns in which the disabled/displaced corporate scholarship money was received, the number of scholarships, total scholarships and the average scholarship amount. For Fiscal Year 2011, the most disabled/displaced corporate scholarship money went to a private school located in the Town of Gilbert. City/Town # of Scholarship $ Avg. Scholarship Chandler 1 $3,200 $3,200 Cottonwood 8 $12,771 $1,596 Ft. Mohave 1 $1,000 $1,000 Gilbert 16 $267,834 $16,740 Glendale 4 $11,711 $2,928 Goodyear 3 $1,500 $500 Lake Havasu City 1 $1,100 $1,100 Marana 1 $500 $500 Maricopa 1 $20,560 $20,560 Oro Valley 1 $1,000 $1,000 Phoenix 9 $33,385 $3,709 Prescott 1 $3,582 $3,582 Scottsdale 26 $99,822 $3,839 Show Low 1 $1,000 $1,000 Tempe 3 $41,809 $ Tucson 39 $60,255 $1,545 All STOs certified to collect corporate donations in Fiscal Year 2011 were evaluated to see their status in relation to the requirement that 90% of all revenue must be paid out in scholarships. From an administrative viewpoint, no STO is expected to pay out in 19

20 scholarships 90% of donations it receives in the current year. There will always be a lag between revenue received and revenue paid out. ADOR is not currently concerned with the percentage of any STO. These percentages are being monitored annually, however, and if the STOs with low percentages do not improve within a year or two, ADOR will be compelled to review that program to determine the reason. Percentages for STOs certified to receive corporate donations and participating in the disabled/displaced student corporate credit in Fiscal Year 2011 are shown below. School Tuition Organization Ratio Arizona School Choice Trust 57.8 Institute for Better Education 38.3 New Valley Education Partners 44.5 School Choice Arizona 13.7 Tuition Organization for Private Schools 59.6 PRIVATE SCHOOLS IN ARIZONA The final table at the end of this report, Appendix XX, lists every private school that has received scholarship revenue from the private school tuition organization income tax credit programs and the estimated amounts received from all three programs since The amounts are estimated for two reasons. For the first several years of the private school tuition organization tax credit program, there was no requirement for the STOs to report. Although some did report at ADOR request, some did not or only reported partially. Therefore, the early year figures are incomplete. For Fiscal Year 2011, only scholarships paid out between January 1 and June 30 are included in the totals. Some STOs did not break out the amounts by school into the two 6-month periods; therefore, those numbers were estimated. Arizona Department of Revenue, Office of Economic Research and Analysis, 1/17/2012 For questions about this report or the School Tuition Organization credits, contact Georganna Meyer ( ) or Karen Jacobs ( ). 20

21 APPENDIX I SCHOOL TUITION ORGANIZATIONS CERTIFIED TO RECEIVE DONATIONS FOR TAX CREDIT PURPOSES IN FISCAL YEAR 2011 School Tuition Organization Corporate- Certified Individual- Certified 1 st Half 2 nd Half of FY Alternative Schools Scholarship Fund X 1/1/2011 Arizona Adventist X 1/1/2011 Arizona Christian School Tuition Organization X 1/1/2011 Arizona Education Scholarship Foundation 9/29/2010 X 1/1/2011 Arizona Episcopal Schools Foundation 7/29/2010 X 1/1/2011 Arizona Independent Schools Scholarship Foundation 7/29/2010 X 1/1/2011 Arizona International Academy Scholarship Fund X 1/1/2011 Arizona Leadership Foundation 3/9/2011 Arizona Lutheran Scholarship Organization X 1/1/2011 Arizona Private Education Scholarship Fund 7/29/2010 X 1/1/2011 Arizona Scholarship Fund X 1/1/2011 Arizona School Choice Trust 7/29/2010 X 1/1/2011 Arizona Tuition Organization 7/29/2010 X 1/1/2011 Arizona Waldorf Scholarship Foundation X 1/1/2011 Arizona Youth Education 7/29/2010 1/1/2011 BEST Student Fund X 1/1/2011 Brophy Community Foundation 7/29/2010 X 1/1/2011 Catholic Tuition Organization of the Diocese of Phoenix 7/29/2010 X 1/1/2011 Catholic Tuition Support Organization 7/29/2010 X 1/1/2011 Chabad Tuition Organization 7/29/2010 X 1/1/2011 Christ Lutheran School Foundation 7/29/2010 X 1/1/2011 Christian Scholarship Foundation 7/29/2010 X 1/1/2011 Christian Scholarship Fund of Arizona 7/29/2010 X 1/1/2011 Cochise Christian School Tuition Organization 2/24/2011 X 1/1/2011 Corporate Tax Foundation 4/14/2011 Dynamite Montessori Foundation 8/18/2010 X 1/1/2011 Flagstaff Scholarship Fund X Foundation of Lutherans Interested in Funding Education X Foundation for Corporate Tax Credit 4/15/2011 H.E.L.P. Scholarship Foundation 2/3/2011 X 2/3/2011 HIGHEReducation School Tuition Organization 3/23/2011 3/23/2011 Independent Schools Corporate Tax Foundation 3/23/2011 Institute for Better Education 7/29/2010 X 1/1/2011 Jewish Education Tax Credit Organization 7/29/2010 X 1/1/2011 Jewish Tuition Organization 6/14/2011 X 1/1/

22 School Tuition Organization Corporate- Certified Individual- Certified 1 st Half 2 nd Half of FY Just Friends of Education 7/29/2010 1/1/2011 Life Development Institute Education Fund 7/29/2010 X 1/1/2011 Lutheran Education Foundation 7/29/2010 X 1/1/2011 Montessori Scholarship Organization X 1/1/2011 New Valley Education Partners 7/29/2010 X 1/1/2011 Northern Arizona Christian School Scholarship Fund 10/7/2010 X 1/1/2011 Orme Primavera Schools Foundation X 1/1/2011 Pappas Kids Schoolhouse Foundation 8/3/2010 X 1/1/2011 Pinetop Tuition Support Organization 8/16/2010 X 1/1/2011 for Educational Excellence Foundation X 1/3/2011 School Choice Arizona 7/29/2010 X 1/1/2011 School Tuition Association of Yuma 7/29/2010 X 1/1/2011 Schools With Heart Foundation 8/19/2010 X 1/1/2011 Shepherd of the Desert Education Foundation 7/29/2010 X 1/1/2011 Southern Arizona Foundation for Education- Lutheran X 1/1/2011 TEMPO 10/14/2010 X 1/1/2011 The Leadership Consortium 7/29/2010 1/1/2011 Tuition Organization for Private Schools 7/29/2010 X 1/1/2011 Valley Lutheran Scholarship Organization 8/3/2010 X 1/1/2011 White Mountain Tuition Support Foundation 9/2/2010 X 1/1/2011 Yo Creo Competitive America 6/16/2011 6/14/2011 Yuma s Education Scholarship Fund for Kids x 1/1/

23 APPENDIX II SCHOOL TUITION ORGANIZATIONS REPORTING REVENUE IN EXCESS OF TAX CREDIT DONATIONS IN FISCAL YEAR 2011 School Tuition Organization Total Revenue Total Arizona Christian School Tuition Organization $10,990,509 $10,987,576 Arizona Independent Schools Scholarship Foundation $1,663,986 $1,662,713 Arizona Native Scholastic Enrichment Resource Foundation $1,000 $0 Arizona Private Education Scholarship Fund $1,732,279 $1,715,905 Arizona Scholarship Fund $4,166,963 $4,098,022 Arizona Tuition Organization $1,223,036 $1,222,877 Brophy Community Foundation $2,413,091 $2,383,741 Catholic Tuition Organization of the Diocese of Phoenix $12,592,298 $12,565,725 Catholic Tuition Support Organization $5,952,238 $5,636,173 Christ Lutheran School Foundation $189,502 $186,178 Christian Scholarship Foundation $230,860 $230,392 Christian Scholarship Fund of Arizona $261,266 $256,561 Corporate Tax Foundation $100,000 $0 Dynamite Montessori Foundation $54,745 $54,724 Flagstaff Scholarship Fund $187,582 $159,500 Foundation for Corporate Tax Credit $295,000 $195,000 H.E.L.P. Scholarship Foundation $974,919 $974,042 Independent Schools Corporate Tax Foundation $295,000 $195,000 Lutheran Education Foundation $100,846 $100,755 New Valley Education Partners $751,001 $750,730 Northern Arizona Christian School Scholarship Fund $307,491 $307,081 School Choice Arizona $2,222,620 $2,216,521 Schools for Educational Excellence Foundation $51,780 $51,755 School Tuition Association of Yuma $293,678 $293,533 Schools With Heart Foundation $311,792 $311,720 Shepherd of the Desert Education Foundation $159,739 $157,388 TEMPO $125,367 $125,301 Valley Lutheran Scholarship Organization $192,445 $191,448 White Mountain Tuition Support Organization $163,953 $162,953 Yuma s Education Scholarship Fund for Kids $705,670 $705,509 23

24 APPENDIX III TAX CREDIT DONATIONS BY SCHOOL TUITION ORGANIZATION SINCE 1998 School Tuition Organization 1 ST Year Total Individual Total Low-Income Student Corporate Total Disabled- Displaced Total Alternative Schools Scholarship Fund 2003 $114,156 $0 $0 $114,156 Arizona Adventist 1999 $4,090,575 $0 $0 $4,090,575 Arizona Christian School Tuition Organization 1998 $96,091,018 $0 $0 $96,091,018 Arizona Education Scholarship Foundation 2010 $9,600 $0 $0 $9,600 Arizona Episcopal Schools Foundation 1999 $7,928,325 $675,500 $0 $8,603,825 Arizona Independent Schools Scholarship Foundation 1998 $8,055,875 $1,495,053 $0 $9,550,928 Arizona International Academy Scholarship Fund 2001 $454,573 $0 $0 $454,573 Arizona Lutheran Scholarship Organization 2002 $1,156,830 $0 $0 $1,156,830 Arizona Native Scholastic and Enrichment Resource Foundation 1999 $386,921 $0 $0 $386,921 Arizona Private Education Scholarship Fund 1999 $8,442,587 $69,000 $0 $8,511,587 Arizona Scholarship Fund 1998 $35,338,247 $52,000 $0 $35,390,247 Arizona Scholarship & Grants Organization 1999 $6,775 $0 $0 $6,775 Arizona & Tuition 1998 $23,075 $0 $0 $23,075 Arizona School Choice Trust 1998 $15,423,481 $5,127,000 $208,000 $20,758,481 Arizona Tuition Organization 2004 $7,401,233 $0 $0 $7,401,233 Arizona Waldorf Scholarship Fund 2001 $1,111,260 $0 $0 $1,111,260 Arizona Youth Education Scholarship Fund 2011 $0 $0 $0 $0 24

25 School Tuition Organization 1 ST Year Total Individual Total Low-Income Student Corporate Total Disabled- Displaced Total BEST Student Fund 2001 $1,877,732 $0 $0 $1,877,732 Bret Reed Freesmeyer Memorial Scholarship Fund 2001 $426,736 $0 $0 $426,736 Brophy Community Foundation 1998 $11,092,795 $6,343,900 $0 $17,436,695 Carden Schools Scholarship Fund 1998 $57,980 $0 $0 $57,980 Catholic Tuition Organization of the Diocese of Phoenix 1998 $100,404,541 $11,784,449 $0 $112,188,990 Catholic Tuition Support Organization 1999 $40,236,982 $11,646,530 $0 $51,883,512 Chabad Tuition Organization 2000 $1,324,768 $0 $0 $1,324,768 Chaparral Mission Scholarship Fund 2001 $1,460,480 $3,000 $0 $1,463,480 Children s Scholarship Network of Arizona 2008 $164,211 $330,000 $0 $494,211 Christ Lutheran School Foundation 2000 $2,020,661 $0 $0 $2,020,661 Christian Scholarship Foundation 1999 $2,475,414 $66,000 $0 $2,541,414 Christian Scholarship Fund of Arizona 1998 $4,439,085 $50,000 $0 $4,489,085 Classical Christian Scholarship Fund 2003 $249,968 $0 $0 $249,968 Cochise Christian School Tuition Organization 2002 $2,234,492 $135,000 $0 $2,369,492 Corporate Tax Foundation 2011 $0 $100,000 $0 $100,000 Dynamite Montessori Foundation 2001 $250,209 $0 $0 $250,209 Educare Scholarship Fund 1999 $847,957 $0 $0 $847,957 Engelhardt/Pappas Foundation 1999 $1,219,231 $0 $0 $1,219,231 Flagstaff Scholarship Fund 2001 $1,752,439 $1,392,500 $0 $3,144,939 Foundation for Corporate Tax Credit 2011 $0 $295,000 $0 $295,000 Foundation for Lutherans Interested in Funding Education 2002 $432,551 $0 $0 $432,551 Foundation for Montessori 1999 $522,654 $0 $0 $522,654 Higher Education for Lutherans Program 1998 $9,401,687 $0 $0 $9,401,687 25

26 School Tuition Organization 1 ST Year Total Individual Total Low-Income Student Corporate Total Disabled- Displaced Total HIGHEReducation School Tuition Organization 2011 $2,176 $0 $0 $2,176 Independent Schools Corporate Tax Foundation 2011 $0 $295,000 $0 $295,000 Institute for Better Education 1998 $28,160,432 $1,996,033 $385,000 $30,541,465 Investing in Children of Arizona Scholarship Fund 2003 $6,875 $0 $0 $6,875 Jewish Education Tax Credit Organization 1999 $5,792,245 $650,000 $0 $6,442,245 Jewish Tuition Organization 1999 $15,731,816 $135,600 $0 $15,867,416 Just Friends of Education 2009 $4,700 $0 $0 $4,700 Life Development Institute Education Foundation 2006 $56,600 $0 $0 $56,600 Lutheran Education Foundation 1998 $2,578,347 $0 $0 $2,578,347 Maranatha Christian Co-Op Tuition Fund 1998 $21,630 $0 $0 $21,630 Montessori Centre School Tuition Organization 2000 $361,549 $0 $0 $361,549 Montessori Scholarship Organization 2000 $2,493,504 $0 $0 $2,493,504 Montessori School Tuition Organization 1999 $43,400 $0 $0 $43,400 New Valley Education Partners 2000 $2,320,970 $5,000 $560,000 $2,885,970 Northern Arizona Christian School Scholarship Fund 1998 $2,455,148 $70,000 $0 $2,525,148 Orme Primavera Schools Foundation 1999 $1,904,315 $0 $0 $1,904,315 Pappas Kids Schoolhouse Foundation 2005 $963,692 $80,000 $0 $1,043,692 Patagonia Scholarship Fund 1999 $76,154 $0 $0 $76,154 Pinetop Tuition Support Organization 2006 $68,600 $0 $0 $68,600 for Educational Excellence Foundation 2009 $126,630 $0 $0 $126,630 School Choice Arizona 2006 $533,539 $7,423,500 $100,000 $8,057,039 26