Corporate Tax Credit - FAQ
Invest in children at NO NET COST to you or your company!
Take the tax credit up to 100% of your Arizona income tax liabilities. Be the HERO and make a difference! This is truly a Win-Win for you and Arizona students.
The state of Arizona allows eligible businesses to allocate their tax liabilities and receive a dollar-for-dollar tax credit for up to 100% of their Arizona state tax liabilities. Simply redirect money that you would otherwise be paying in state income taxes and provide scholarships for Arizona K-12 students with verified finical needs. This is not a donation but a dollar-for-dollar tax credit. To participate, the company does not have to be based in Arizona, provided it pays Arizona tax liability. Submit your Non-Binding Pledge form here.
Corporate Tax Credit History & Facts: (A.R.S.§20-224.06 and § 43-1183)
In 2006 and then in 2008, the Arizona State Legislature passed into law “The Corporate Income Tax Credit” and then the Disabled/Displaced Corporate Income Tax Credit, allowing businesses with an Arizona tax liability to allocate up to 100% of their tax liability and make a contribution to a qualified School Tuition Organization such as STO4KIDZ, and receive a dollar-for-dollar Tax Credit, may also qualify to claim that amount on their federal taxes as a donation.
Who Can Participate:
- C- Corporations
- S- Corporations and LLC’s filing as an S-Corporation
- Insurance Companies that pay premium taxes in Arizona
The company does not have to be based in Arizona, provided it pays Arizona tax liability.
Who Will Benefit From The Corporate Tax Credit:
- K-12 students with a demonstrated financial need
- Preschool–12 students with disabilities
- Kindergarten students with demonstrated financial need
- Foster students
- US Armed Forces dependent
- Students transferring from a public or charter school with demonstrated financial need
- Students previously received Corporate or Switcher scholarships with demonstrated financial need
How To Proceed:
1) Determine your business tax liability for the current year. You can allocate, the total corporate tax liability amount.
2) Complete and submit your application by visiting STO4KIDZ.ORG or call for assistance at 480.823.8052.
1) STO4KIDZ will submit a Tax Credit Contribution Approval Request to the Arizona Department of Revenue (ADOR) on behalf of your company. (Applications must be submitted by an STO)
2) The request will be approved if the state cap has not yet been met. If the cap has been met, ADOR will create a waitlist based on the order in which the requests are received.
3) STO4KIDZ will notify you the same day ADOR informs us of the approval. Corporation has 20 calendar days to fund STO4KIDZ in order to keep the tax credit.
4) Once STO4KIDZ receives the contribution funds ADOR will be notified and STO4KIDZ will provide the company with a receipt to claim the tax credit.
5) When filing the company’s taxes, you will take the corporate income tax credit on the Standard 120 Form and file a 335 Form, listing the credit amount.
6) STO4KIDZ awards tuition scholarships to qualifying students.
- 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 K-12 Arizona private school students with demonstrated financial need.
- 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
To participate, the company does not have to be based in Arizona, provided it pays Arizona tax liability.
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 pre-approved by the department of revenue pursuant to section 43-1183, subsection D.
(Use tax form 335 to claim your credit)
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 demonstrated financial need
- Previous Corporate or Switcher Scholarship Recipients with demonstrated financial need
- Determine your state business tax liability for the current year.
- Complete and submit your non-binding application (Online or Printable)
- STO4KIDZ will prepare and submit your application to the Arizona Department of Revenue (ADOR) for approval.
- The same day ADOR notifies us of your approval, we will contact you with detailed information.
- You will then have 20 days to fund STO4KIDZ to preserve your tax credit for the fiscal year.
- Once STO4KIDZ receives your contribution funds ADOR will be notified and STO4KIDZ provide your company a receipt to claim your tax credit.
- When filing the company’s taxes, you will take the corporate income tax credit on the Standard 120 Form and file a 335 Form, listing the credit amount.
- STO4KIDZ awards tuition scholarships to qualifying students.
Please contact Miriam Antolik with any questions at 480.823.8052 or 602.698.8855.
We sincerely welcome and appreciate your support and participation in this most worthwhile program at no out-of-pocket cost to you.