HB559 Alabama 2021 Session

Summary

Primary Sponsor

Charlotte Meadows

Republican

Co-Sponsors

Terri CollinsMike HolmesReed IngramDebbie Wood

Session

Regular Session 2021

Title

Income tax credits, contributions to scholarship granting organizations further provided for, Sec. 16-6D-9 am'd.

Summary

HB559 would expand the state income tax credit for donations to scholarship granting organizations and tighten how those scholarships are managed and reported.

What This Bill Does

It allows a tax credit of up to 75% of a taxpayer's liability (capped at $75,000 per individual or married couple) for contributions to scholarship granting organizations, with a yearly cap of $30 million; credits can pass through from S corporations and Subchapter K entities to eligible taxpayers and may be carried forward for up to three years. It changes the rule for spending donated funds on scholarships to require that funds on hand at the start of a calendar year be spent within three calendar years, with any unspent funds turning over to the State Department of Education for the At-Risk Student Program. It imposes extensive accountability standards on scholarship granting organizations and participating schools, including high spending efficiency (at least 95% of donation revenue used for scholarships, up to 5% for admin), reporting and transparency requirements, background checks, portability of scholarships, and protections against discrimination. It requires testing and reporting to measure student learning gains, with periodic independent analysis, and sets up mechanisms for DoR oversight, eligibility determinations, and public disclosure of participating organizations and annual reports.

Who It Affects

• Taxpayers (individuals, married couples, corporations, S corporations, and Subchapter K entities) who donate to scholarship granting organizations would see a higher, more flexible tax credit and new pass-through treatment.
• Scholarship granting organizations, qualifying nonpublic schools, students and families receiving scholarships, and state tax revenue/education agencies (DoR and DoE), who face stricter spending rules, reporting, testing, and eligibility requirements.

Key Provisions

• Tax credit increases to up to 75% of tax liability, with a per taxpayer cap of $75,000 and an annual program cap of $30,000,000; credits may pass through from Alabama S corporations and Subchapter K entities to eligible members/shareholders.
• Carryforward of tax credits for up to three taxable years.
• Funds on hand at the beginning of a calendar year must be expended on educational scholarships within three calendar years; unused funds may be transferred to the At-Risk Student Program through the State Department of Education.
• Administrative accountability standards for scholarship granting organizations, including notifying DoR, maintaining 501(c)(3) status, distributing payments to schools, providing receipts, ensuring eligibility determinations, and limiting administrative expenses to 5% of donated revenue.
• Financial accountability standards requiring annual CPA-audited financial reports and, for qualifying nonpublic schools receiving $50,000 or more, either a surety bond or demonstrated financial viability.
• Academic accountability standards requiring testing of scholarship recipients, covering test costs with scholarships, providing results to parents and the DoR, and reporting graduation rates and student data to support program evaluation.
• Public reporting requirements including a DoR-listed, county-by-county roster of SGOs, and annual/quarterly disclosures of contributions, scholarships awarded, and school participation.
• Provisions to ensure non-discrimination, portable scholarships, and priority for students zoned to failings schools; protections around confidentiality and compliance with federal privacy laws.
• Effective date January 1, 2022.

AI-generated summary using openai/gpt-5-nano on Feb 22, 2026. May contain errors — refer to the official bill text for accuracy.

Subjects

Education