Legislative Spotlight: North Carolina

Legislation: House Bill 1104

Title: Scholarship Funding Corporate Tax Credit

Primary Sponsors: Majority Leader Paul Stam (R), Representative William Brisson (D), Representative Mike Hager (R), Representative Marcus Brandon (D)

Bill Status: Referred to Committee on Education

The North Carolina legislature is considering House Bill 1104, which would create a scholarship tax credit program that would provide scholarships to students from low-income families to attend the private or public school of their parents’ choice.  The program, which has strong bipartisan support, would be the thirteenth scholarship tax credit program in the nation.  Last year, North Carolina created a tax credit for children with disabilities that allows for a tax deduction on education expenses, including private school tuition.

Program Type

Corporate Scholarship Tax Credit

Student Eligibility

• Family income cannot exceed 225 percent of the federal poverty level
• Attended public schools the previous year or entering kindergarten or first grade

Scholarship Funding Organization (SFO) Requirements

• Certified by the Division of Nonpublic Education of the Department of Administration
• Apply annually to participate in the program
• Use at least 91 percent of contributions for scholarships
• SFOs with fewer than 24 months of certification must use 100 percent of contributions for scholarships
• Does not discriminate on the basis of race, color, ethnicity, or national origin
• Make scholarships available to more than one school
• Submit to the state:
• Annual financial and compliance audit by certified public accountant
• Annual report on data of scholarship recipients, donations, and participating schools

School Requirements

• Undergo criminal background checks for staff members with the highest decision-making authority
• Provide annual student progress reports to parents, including scores on standardized assessments
• Submit to the state scores on nationally standardized achievement tests of participating students
• Required by schools with at least 25 participating students
• Undergo a financial review by an independent certified accountant

Scholarship Cap

• $4,000

Tax Credit Value

• 100 percent of donation

Donor Tax Credit Cap

• 100 percent of state tax liability

Statewide Cap

• $2,000,000 (2012)
• $40,000,000 (beginning in 2013)
• Beginning in 2014, the cap is allowed to increase by 35 percent in any year after 90 percent of the cap is reached

Accountability Check

SGO Administrative and Financial Accountability

• Background Checks                                                 
• Submit Donation and Scholarship Details
• Annual Financial Reporting

School Administrative and Financial Accountability

• Health and Safety
• Nondiscrimination
• Background Checks
• Proof of Financial Viability

Academic Accountability

• Standardized Assessments
• Public Reporting of Results
• Independent Evaluation

- American Federation for Children | Alliance for School Choice, MSG