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Bill increases tax credits for Accountability Act donors

By MARY SELL, Alabama Daily News

Legislation in the Alabama State House would increase the allowable tax credit for individuals and corporations that donate to private school scholarships through the Alabama Accountability Act.

The 2013 law allows for tax credit-funded scholarships for families leaving the state’s lowest-performing public schools. There also is a separate $30 million-per-year scholarship fund for private school tuition. Businesses and individuals who donate to the fund receive income tax credits — money that would otherwise go to the state education budget. Scholarship granting organizations, or SGOs, collect and distribute the money to low-income families. Those students are not required to come from failing schools.

House Bill 559 by Rep. Charlotte Meadows, R-Montgomery, does not change that $30 million cap but expands the allowable credit from 50% of an individual’s tax burden to 75%, capped at $75,000.

Corporations also could pledge up to 75% of their income tax liability to scholarships, up from 50% now.

The bill also extends from one calendar year to three the amount of time SGOs have to expend their scholarship money. Meadows said this will allow the SGOs to better plan for years when donations dip. When that happens, scholarships get cut and new ones can’t be offered.

“That was a real problem this last year,” Meadows said.

“… It’s a timing issue to make sure that students who have the scholarship can continue to get it if  (the SGOs) have enough money in reserve. Right now, there’s not any money in reserve.”

That $30 million cap has been reached once in 2018, according to the Alabama Department of Revenue. But donations the next year were only about $16 million.

Meadows said she’d like to see the donor base to SGOs grow, but until that happens, allowing current donors to claim more in tax credits will increase donations.

“That’s the goal, to get closer to the $30 million,” Meadows said. “And also to make sure they don’t have to spend it all within 12 months — that they can hold some in case there’s another bad year.”


Total tax credits claimed for donations to scholarship granting organizations

  • 2013 – $23.1 million
  • 2014 – $8.8 million
  • 2015 – $25.7 million
  • 2016 – $19.8 million
  • 2017 – $24.7 million
  • 2018 – $30 million
  • 2019 – $15.9 million

Source: Alabama Department of Revenue


In 2017, Sen. Del Marsh, R-Anniston, sponsored a credit expansion bill that he said was needed to get more donations to the scholarship program. It cleared the Senate but was voted down in the House.

The Alabama Education Association, which represents teachers and school workers, opposed Marsh’s bill and opposes the current one from Meadows.

“This bill diverts additional revenue from local school districts,” AEA Executive Director Amy Marlowe told Alabama Daily News. “This bill allows the groups behind private school vouchers to take money out of public schools and hold on to it for up to three years before it’s even used for those vouchers. As a result, tens of thousands of public school students will suffer decreased funding to their classrooms.”
The American Federation for Children supports the law and school choice in general. National Director of Government Affairs Ryan Cantrell disputed AEA’s funding claims pointing to an Auburn University at Montgomery study showing that the average scholarship amount is lower than the per-pupil expenditure from the state.
“The Accountability Act serves thousands of low-income families in Alabama, allowing them to choose a school that works best for their child,” Cantrell said. “At a time when the public school system in Alabama is set to receive more than $2 billion in extra funding from the federal government, we should be doing more as a state to fund students instead of systems and this legislation would go a long way toward doing that.”

The law requires that private schools annually administer either the state’s or a nationally recognized assessment in math and language arts to all students receiving the scholarships. The Alabama Department of Revenue must report on that performance data every two years.

The latest report by The Institute for Social Science Research at the University of Alabama analyzed academic achievement of scholarship recipients through the 2018-2019 academic year but noted “the lack of a uniform achievement test among schools continued to constrain” comparisons.

The report found:

  • In grades four through eight, scholarship students’ rates of academic achievement proficiency were lower than economically disadvantaged public school students for math but were not different for reading.
  • Eleventh grade scholarship students’ proficiency rates for English and math were comparable to economically disadvantaged public school students and higher than this group for reading.

About achievement over time, the report said on average, participating in the scholarship program was not associated with significant improvement on standardized tests scores.

“The lack of change over time followed the same pattern seen in public school students in Alabama and is likely not attributable to participation in the scholarship program,” it said.

Meadows said that for the families using it, the act is working very well.

“The whole idea was to provide school choice,” she said.

“… If parents have a choice, they’re more likely to be involved and therefore their kids are more likely to do better,” she said.

Meadows is a former Montgomery Public Schools board member and founder and board chair of LEAD Academy, a charter school in Montgomery. She said some families leave traditional schools because of bullying and safety concerns.

The act mandates schools in the lowest 6% of performance on standardized tests be listed as failing. Those who attend a failing school are eligible for a tax credit if they want to transfer to a private school. Families also can transfer a student from a failing school to other public schools.

There are about 75 schools dubbed as failing each year.

Co-sponsors on House Bill 559 include Rep. Terri Collins, R-Decatur. It has been assigned to the House Ways and Means Education Committee.

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