Education Improvement Scholarships Tax Credits Program
The Education Improvement Scholarships Tax Credits Program provides state tax credits for persons or businesses making monetary or marketable securities donations to approved scholarship foundations that provide scholarships to eligible students for qualified educational expenses incurred in attending eligible nonpublic schools.
The tax credit is equal to 65 percent of the monetary or marketable securities donation, and may be claimed against the individual income tax, corporate income tax, bank franchise tax, insurance premiums license tax, or tax on public service corporations. A monetary or marketable securities donation made by an individual must be at least $500 in order to qualify for the tax credit program. An individual may not be issued less than $325 or more than $81,250 in tax credits for a taxable year. However, the $81,250 tax credit limitation does not apply to credits issued to any business entity, including a sole proprietorship.
Tax credits issued by VDOE for donations made in taxable years beginning on or after January 1, 2014, may be claimed for the taxable year in which the donation was made to a qualified scholarship foundation. Any unused tax credits may be carried over for the next five succeeding taxable years or until the total amount of the credit has been taken, whichever is sooner. The total amount of tax credits that may be issued in each program year (i.e., state fiscal year) is $25 million.
Individuals and businesses seeking to make a monetary or marketable securities donation to an approved scholarship foundation or an approved scholarship foundation on behalf of such person must request preauthorization for a specified tax credit amount from the Superintendent of Public Instruction. Tax credits are preauthorized to donors on a first come, first served basis. A preauthorization notice issued to the donor by VDOE must accompany the monetary or marketable securities donation from the donor to the scholarship foundation. The scholarship foundation must, within 20 days, return the notice to VDOE certifying the donor, the amount of the monetary or marketable securities donation, and the date it was received from the donor. In addition, for donations of marketable securities, a scholarship foundation must sell and convert such securities into cash no more than 14 days after receipt of the donation. Preauthorization notices not acted upon by the donor within 180 calendar days of issuance, or made in a timely manner but not submitted by the scholarship foundation to VDOE within 20 calendar days, will become void. Once the donation is approved, VDOE will issue a tax credit certificate to the individual or business donor which must be submitted with the applicable Virginia tax return in order to claim the credit.
A current list of approved scholarship foundations is available below.
To be eligible for participation in the Education Improvement Scholarships Tax Credits Program, scholarship foundations must apply to VDOE to be approved to receive and administer tax credit-approved funds. Any donations that are made prior to the date the application is approved by VDOE will not qualify for the tax credit. A scholarship foundation must be a nonstock, nonprofit corporation that is exempt from taxation under IRC § 501(c)(3) and established to provide financial aid for the education of students residing in the commonwealth. An organization that was established for a charitable purpose other than providing financial aid for education may still qualify for the tax credit program if its articles of incorporation or equivalent documents, or its governing rules, such as its bylaws, have been legally and validly amended to also specifically state that it will provide financial aid for the education of students residing in the commonwealth.
A scholarship foundation, in awarding scholarships from tax credit-derived funds, must provide VDOE assurance that the applicant foundation will:
- provide scholarships for qualified educational expenses only to students whose family's annual household income is not in excess of 300 percent of the current poverty guidelines or to eligible students with a disability;
- not limit scholarships to students of one school; and
- comply with Title VI of the Civil Rights Act of 1964, as amended.
For more information about the tax credit program, please review the Guidelines for the Education Improvement Scholarships Tax Credits Program provided below.
2014 Acts of Assembly, Chapter 176, Senate Bill 269
- Guidelines for the Education Improvement Scholarships Tax Credits Program (PDF) – Effective October 25, 2013
- Preauthorization Form (Word) – Use this form to request preauthorization for a specified tax credit amount.
- Approved Scholarship Foundations (PDF) – Revised Spetember 2, 2014
- Summary of Preauthorized Tax Credits (PDF) – through July 31, 2014
For Scholarship Foundations
- Application for Approval as a Scholarship Foundation (Word)
- The following links provide information related to the requirements referenced in § 58.1-439.25 and § 58.1-439.28 (C, E, and G) of the Code of Virginia.
- Annual Scholarship Foundation Report (Excel) – Use this report template to submit the annual scholarship foundation report due September 30 in accordance with § 58.1-439.28 B of the Code of Virginia, and to ensure compliance with the disbursement requirements provided in § 58.1-439.28 A of the Code of Virginia.
Todd L. Gathje, Ph.D., Tax Credit Program Specialist