Corporate Tax Credit FAQs
- Low-Income category corporate tax credit: $123,042,188 AND
- Disabled/Displaced category corporate tax credit: $5,000,000.
- No out-of-pocket cost to you or your corporation
- Can allocate up to 100% of your corporate state income tax liabilities
- Receive a dollar-for-dollar tax credit
- Provide scholarships for eligible K-12 Arizona private school students
- STO4KIDZ in turn awards a minimum 90% of every dollar in scholarships to eligible AZ private school students within the same school calendar year
- May also qualify to claim your contribution on your federal taxes as a donation to STO4KIDZ, a 501c3 non-profit charitable organization
(Please consult your tax advisor) http://www.azdor.gov/TaxCredits/CorporateTuitionTaxCredits.aspx
- S-Corporations & LLCs that file as an S-Corp
- Insurance Companies that pay premium taxes in Arizona
C-Corporations can allocate up to 100% of their state income tax liabilities for the given tax year as long as it does not exceed the statewide cap for the year. Credit can be carried forward for up to 5 years.
S-Corporations, (as defined in section 1361 of the Internal Revenue Code) can either claim the credit against income taxes at the corporate level (income tax reported on an Arizona 120S corporate income tax return) or it may make an irrevocable election to pass the credit through to its individual shareholders. The S-Corp must make a minimum aggregate contribution of $5,000 within their taxable year in order to pass the credit through to its shareholders and may allocate up to 100% of their state income tax liability for the given tax year, receive a dollar-for-dollar tax credit; then pass the credit on to its shareholders proportionately. If a corporation allocates more than their tax liability, it can be carried forward for up to 5 years. The contribution must be made by the S-corp, not a shareholder, in order to be eligible for the corporate tax credit. Each individual shareholder may claim only a pro-rata share of the credit based on the individual’s ownership interest in the S-corp. (A.R.S. § 43-1089.04).
LLCs that are taxed as S-corporations for federal and state purposes are eligible to contribute for tax credit.
Insurance companies that pay Arizona state tax liability on their premium income can allocate up to 100% of their premium tax liabilities.
- A credit is allowed against the premium tax liability incurred by an insurer pursuant to section 20-224, 20-837, 20-1010, 20-1060, or 20-1097.07 for the amount of voluntary cash contributions made by the insurer during the tax year to a school tuition organization.
- The amount of the credit is the total amount of the insurer’s contributions for the tax year under subsection A of this section that is preapproved by the department of revenue pursuant to section 43-1183, subsection D.
(Use tax form 335 to claim your credit)
Can a corporation contribute after the end of its fiscal year and still claim the credit on its prior fiscal year tax return?
No. Corporations can only claim their contribution in the tax year in which the contribution is made (plus, five years for carry forward purposes). The law allows your corporation to allocate your tax liability to a School Tuition Organization (STO) such as STO4KIDZ, designating a private school, not a specific student. However, if there are not enough eligible students at your designated school, the money will be awarded among eligible students attending other qualifying private schools in Arizona.
- K-12 Students with a demonstrated financial need
- Pre-K–12 Students with Disabilities
- Kindergarten Students with a demonstrated financial need
- US Armed Forces Dependents
- Foster Children
- Students Transferring from a Public or Charter School with a demonstrated financial need
- Previous Corporate or Switcher Scholarship Recipients
1. Determine your business tax liability and how much to would like to allocate for scholarships vs paying to the state for the current year.
3. STO4KIDZ will prepare and submit a Contribution Approval Request to ADOR. (ADOR will only accept applications submitted by an STO such as STO4KIDZ).
4. ADOR will respond to the request form, and it will be approved if the cap has not been met. Otherwise, ADOR will place applications on a waitlist based on the order requests are received.
5. STO4KIDZ will notify your company of their approval the same day ADOR sends its approval, along with instructions. Your company has 20 days from its approval date to fund STO4KIDZ.
6. Once STO4KIDZ receives your contribution funds, ADOR will be notified and STO4KIDZ will provide your company a receipt to claim your tax credit.
STO4KIDZ awards a minimum of ninety percent of every contribution in scholarships to eligible Arizona K-12 students twice a year, at the beginning of each semester.
We sincerely welcome and appreciate your support and participation in this most worthwhile program at no out-of-pocket cost to you.