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Tax credit would benefit public school foundations

February 5, 2011

Ellettsville Democrat Vi Simpson wants to create an income-tax credit for gifts to public-school foundations, which could compete with one that’s already available for private-school scholarships.

Sen. Simpson’s bill creates a 50-percent credit with a maximum of $1,000 for individuals, or $2,000 for joint returns. Corporations could get up to $10,000.

“If we’re going to give a tax credit for private-school contributions, it seems logical we would give equal credit for public-school foundations,” Simpson said.

She opposed a program created in 2009 that allows a 50-percent credit for gifts to organizations that grant K-12 scholarships. The scholarships can benefit only those students who transfer to private schools or to public schools outside their home districts.
 

Simpson Simpson

The legislation, which allows the state to award up to $2.5 million a year in credits, was a big win for school-choice advocates. Luke Messer, executive director of the Indianapolis-based Educational Choice Charitable Trust, said some donors have written bigger checks because of the tax credit.

Messer is not opposed to creating a similar incentive for public-school foundations, but he’s not willing to share the $2.5 million tax cap. That’s exactly what Simpson is eyeing, however, because any bill that affects the state’s budget doesn’t stand a chance this session.

“This looks like an effort to probably come after our program,” Messer said.

Simpson thinks she’ll come up with a tax credit benefiting public-school foundations in one form or another, in part because she has the support of Republican Sen. Brandt Hershman, chairman of the Tax and Fiscal Policy Committee.

“There’s room for negotiation there,” she said.

The initiative is well-timed for public-school fundraisers, who have grown more ambitious in recent years.

The Lawrence Township School Foundation set a goal of raising $1 million by June 30. Executive Director Ellen Robinson said that’s a “stretch” goal, as the foundation’s budget for overhead and grant-making is about $567,000.

The foundation about 18 months ago moved away from raising money through events to directly soliciting successful alumni and others who might give larger sums, Robinson said.

“We’re basically following the fundraising model of universities,” she said.

Most of the roughly 80 public-school foundations in Indiana are tiny, volunteer-led groups that provide small grants for equipment or classroom projects. A few, such as the Washington Township Schools Foundation, are trying to compensate for shrinking operating budgets by supporting district-wide programs.

Charitable causes of all sorts have sought to boost giving through state-level tax incentives, said Una Osili, research director at Indiana University’s Center on Philanthropy.

“The one challenge is awareness,” Osili said. Even in the case of the long-standing federal income-tax deduction for charitable gifts, not every household that’s eligible takes advantage.

So far, Indiana is nowhere near its $2.5 million cap for the school-choice scholarship credit. The law took effect Jan. 1, 2010, and the state awarded $215,000 in credits last fiscal year.

That came as a surprise to School Choice Indiana, which lobbied for the tax credit and expected businesspeople to jump at the additional savings, Program Director Lindsey Brown said. The credit applies to income, the financial institutions tax and insurance premiums tax.

Most donations made under the program went to the Educational Choice Charitable Trust, which is more established than other scholarship-granting organizations. The trust was founded 20 years ago by insurance executive Pat Rooney, who died in 2008. Other scholarship-granting organizations formed after the tax credit was created.

Brown said it might take some time for the other groups to make headway with donors who are used to giving to specific schools, or will support only one type of private school, such as Catholic schools.

One state that’s successfully used tax credits to drive support for K-12 education is Pennsylvania. Businesses there can claim up to $300,000 in credits and give directly to private schools, or to “public school education improvement organizations,” which are often school foundations.

School-choice advocates would like to see Indiana mirror Pennsylvania’s credit, which is 75 percent of the amount donated for one year, or 90 percent for a two-year commitment.

The Indiana Association of Public Education Foundations noted in a recent update for members that, in Pennsylvania, public schools receive $22 million a year in private support.•

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