SB123 Alabama 2017 Session

Summary

Primary Sponsor

Del Marsh

Republican

Session

Regular Session 2017

Title

Accountability Act of 2013, cap on income tax credits increased, credit against utility gross receipts tax liability for donations to scholarship granting organizations created, audits of scholarship granting entities required, Secs. 16-6D-3, 16-6D-4, 16-6D-6, 16-6D-8, 16-6D-9 am'd.

Summary

SB123 expands Alabama's school scholarship system by adding trusts and estates to tax credits, increasing caps, creating a utility tax credit for donations, and requiring audits and strict reporting for scholarship organizations.

What This Bill Does

It allows trusts and estates to claim income tax credits for donations to scholarship granting organizations and increases the overall cap on these credits. It creates a new credit against the utility gross receipts tax for donations to scholarship organizations, with a defined process for reserving and using those credits. It requires scholarship granting organizations to obtain annual audited financial statements and to undergo audits at least every three years, and it imposes detailed governance, reporting, testing, and transparency requirements to ensure funds go to scholarships and are used properly. It also strengthens transfer options for students from failing schools to nonfailing or nonpublic schools, including how costs are funded and allocated to the previous failing school.

Who It Affects

• Individual taxpayers and married couples who donate to scholarship granting organizations and may claim credits against their Alabama income tax.
• Corporate taxpayers and Alabama S corporations or Subchapter K entities, which may claim credits against corporate income tax (including passthrough to owners where applicable).
• Trusts and estates that donate to scholarship granting organizations and may claim credits.
• Scholarship granting organizations, which must meet audit, reporting, governance, and accountability requirements and may receive funds only if compliant.
• Qualifying nonpublic schools and participating public schools, which must meet accreditation, health and safety, nondiscrimination, and governance standards to participate and receive funds.
• Parents and students (especially those in failing or underperforming schools) who may transfer to nonfailing/nonpublic schools and qualify for related tax credits and funding arrangements.
• Local school systems and the Department of Revenue, which administer the tax credits, track donations, and enforce compliance and reporting.

Key Provisions

• Expands tax credits to include trusts and estates and extends eligibility for donations to scholarship granting organizations.
• Increases and clarifies caps on income tax credits for donations to scholarship organizations (with specific annual and per-taxpayer/corporate limits, plus carryforward provisions).
• Creates a utility gross receipts tax credit for donations to scholarship granting organizations, including a reservation and direct-pay permit process tied to the taxpayer's utility tax liability.
• Imposes a statewide cap on total credits ($30,000,000 annually) with a portion reserved for individual filers, and allows unclaimed credits to be used against utility taxes in following years.
• Requires scholarship granting organizations to obtain audited financial statements annually and be audited by the Department of Revenue or its agent at least every three years; audit costs are borne by the organizations.
• Sets strict governance and financial accountability standards for scholarship granting organizations (e.g., 95% of donation revenue spent on scholarships, portability of funds, nondiscrimination, background checks, and reporting requirements).
• Requires participating nonpublic schools to meet health/safety, accreditation, nondiscrimination, and governance requirements; establishes reporting and verification duties with the Department of Revenue.
• mandates academic accountability measures, including testing of scholarship recipients, reporting test results to parents and Revenue, and a biennial independent analysis of learning gains with public dissemination.
• Outlines transfer and funding rules for students moving from failing to nonfailing/nonpublic schools, including how attendance costs are funded and how prior failing schools may receive a portion of the state cost of attendance.
• Prohibits certain restricted donor practices and preserves eligibility and desegregation protections; broad rules about enrollment terms and equal treatment in participating schools.

AI-generated summary using openai/gpt-5-nano on Feb 24, 2026. May contain errors — refer to the official bill text for accuracy.

Subjects

Education