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business manager, who recommended it as a

The Johnsons are excited but still a bit con-

good option for his business and for him per-

cerned because Maple Middle School costs

sonally--it's a great way to help people and

$5,500 and they only have $4,500 in credits so

donate money instead of letting it be wasted by

far. They speak with the school admissions

the government school bureaucracy, he said.

advisor, and he informs them that the school

Mr. and Mrs. Garcia spoke about it that

has a scholarship fund supported by former

night, and the next day Mr. Garcia met with

students and community businesses which can

his accountant. The Garcias can claim credits

be used to help fill the gap. The Johnsons are eli-

on $22,000 of sales taxes, property taxes that

gible for up to $3,000 in scholarship funds,

fund local schools, and income taxes. They

because their tax liability is only $2,000 and

decided they want to divide the credits among

their child credit cap for each child is $5,000.

a few different scholarship organizations:

Since Mrs. Johnson's employer gave them

$15,000 would go to a scholarship organiza-

$2,500, they can use $500 in scholarship funds.

tion that works with schools that have

The Johnsons and the admissions advisor work

tremendous success raising achievement lev-

out a plan whereby the school scholarship fund

els of children from lower-income families in

will give Jack $500 and the Johnsons will pay

the city; $5,000 would go to a scholarship

the last $500 out of their own pocket without a

organization at a school that specializes in sci-

credit.

ence and math (since Mr. Garcia is an archi-

The school advisor gives them a few papers

tect and Mrs. Garcia is a biologist); and

to fill out, and the Johnsons rest easy knowing

$2,000 would go to the scholarship organiza-

that Jack will be in a school that's a better fit

tion to help families at the school where

this year. And they now know they can get

Isabel is enrolled.

more help for Jill if she needs to switch schools

The Garcias are excited to be able to spend

later on. Mrs. Johnson's employer would

their money directly on schools that work

donate another $2,500 in credits if Jill needed

and the kinds of education that they person-

to find another school, and they would be eli-

ally find important. Finally, with the Public

gible to get Jill another $2,500 in scholarship

Education Tax Credit, they are able to see

funds since they used all of their personal tax

their money make a difference rather than

credits on Jack. The school advisor assures

send it to disappear in the bureaucratic maze

them that they can work out a combination of

of the government school system.

scholarships and payments if they find that

Business. The scenario for businesses is

Maple Middle School or Oak High School is

much the same as the example for a high-

where Jill would do best.

income family, because most businesses are

Upper-Income Family. Mr. and Mrs. Garcia

S-Corps or LLCs, where business income is in

have one child, Isabel, and a family income of

many ways equivalent to individual income.

$200,000. They live in a state that spends

All corporations are allowed to claim tax

$10,000 per student in the government system.

credits for donations to scholarship organi-

Because their income is more than six times the

zations and expenses incurred in support of a

Free or Reduced-Price Lunch Program, they

qualifying student's education expenses.

can't use any Public Education Tax Credits for

The Public Education Tax Credit Act is

Isabel. But they can claim credits on 100 per-

model legislation that doesn't address each

cent of their state tax liability for donating

state's specific taxes. Businesses should, how-

money directly to another family or to a schol-

ever, be allowed to claim tax credits against

arship fund.

any state business taxes in addition to prop-

Mr. Garcia heard about the state education

erty and income taxes. In addition, business-

tax credit program on a radio news program

es could donate directly to employees or

and talked about it with a friend and business

other parents needing aid for the education

colleague over lunch. His friend said he'd

of their eligible children.

learned about it through his accountant and

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