mpfe eistc presentation
TRANSCRIPT
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Overview: 65% in Virginia Tax Credits
According to Virginia’s new Education Improvement Scholarships Tax Credits program, donations to approved foundations will provide scholarships for low-income new students at Virginia non-public schools.
Individual or Business Donors then receive Virginia TAX CREDITS equal to 65% of the donation.
As of January 2014, tuition tax credit programs exist in 13 states.
Virginia has allocated $25 million in tax credits for each year.
The Virginia Education Improvement Scholarships Tax Credits program will continue until January 1, 2028.
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Benefits for Donors
Individuals can use the Tax Credits against their Virginia personal income tax liability.
Businesses can claim the Education Improvement Scholarships Tax Credits against:
− Virginia Corporate Income Taxes
− Virginia Bank Franchise Tax
− Virginia Insurance Premiums License Tax
− Virginia Public Service Corporations Tax
− Personal Income Taxes via pass-through entities such as S-Corporations, LLCs and Partnerships
IMPORTANT: Donors should consult their tax advisors to determine their specific tax savings.
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Additional Tax Savings
In addition to a 65% Tax Credit, individuals and businesses may also receive federal and state deductions for a charitable contribution, and therefore achieve tax savings in two ways:
− Donors who itemize are able to take a deduction of the full amount of the contribution against taxable income as a charitable donation on both federal and state income taxes.
• The tax reduction equals the contribution amount times the tax rate of the applicable tax (federal or state).
• Subject to rules governing deductibility of charitable contributions
IMPORTANT: Donors should consult their tax advisors to determine their specific tax savings.
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Tax Benefit to Individuals: Example #1
Individual circumstances may vary. Please consult your tax advisor to discuss your specific tax savings.
Donation Amount (Federal non-AMT taxpayer)
$1,000 $5,000 $10,000
Tax Savings:
VA Tax Savings at 5.75% rate 58 288 575
Federal Tax Effects at 33% rate *
Savings from Federal charitablededuction
330 1,650 3,300
Less – Cost of reduceddeduction for VA taxes
-233 -1,167 -2,335
VA Tax Credit – 65% 650 3,250 6,500
Total Tax Savings 804 4,020 8,040
Net Cost of Donation $196 $980 $1,960
Individual taxpayer NOT subject to Federal Alternative Minimum Tax
* Pease Limitation, reinstated Jan. 1, 2013, may impact actual federal tax savings.
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Tax Benefit to Individuals: Example #2
Donation Amount (Federal AMT taxpayer)
$1,000 $5,000 $10,000
Tax Savings:
VA Tax Savings at 5.75% rate 58 288 575
Federal Tax Savings at 28% rate * 280 1,400 2,800
VA Tax Credit – 65% 650 3,250 6,500
Total Tax Savings 988 4,938 9,875
Net Cost of Donation $13 $63 $125
Individual taxpayer who IS subject to Federal Alternative Minimum Tax
Individual circumstances may vary. Please consult your tax advisor to discuss your specific tax savings.
* Pease Limitation, reinstated Jan. 1, 2013, may impact actual federal tax savings.
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Tax Benefit to Businesses: Example
Donation Amount $1,000 $5,000 $10,000
Tax Savings:
VA Tax Savings at 6% rate 60 300 600
Federal Tax Effects (at 34% rate) *
Savings from Federal charitablededuction
340 1,700 3,400
Less – Cost of reduceddeduction for VA taxes
-241 -1,207 -2,414
VA Tax Credit – 65% 650 3,250 6,500
Total Tax Savings 809 4,043 8,086
Net Cost of Donation $191 $957 $1,914
Business taxpayer at 34% Federal and 6% Virginia rates
Individual circumstances may vary. Please consult your tax advisor to discuss your specific tax savings.
* Pease Limitation, reinstated Jan. 1, 2013, may impact actual federal tax savings.
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Donating Appreciated Stock: ExamplePlease consult your tax advisor to discuss your specific savings. Non-AMT Taxpayer AMT Taxpayer
Market Value of Donated StockCost Basis of Stock
Capital Gain
$10,0003,0007,000
$10,0003,0007,000
Savings from Not Having to Pay Taxes on the Capital Gain
Federal Tax Savings (23.8% Rate) * 1,666 1,666
Virginia Tax Savings (at 5.75% Rate) 403 403
Total Savings from Not Having to Pay Tax on Capital Gains 2,069 2,069
Tax Savings from Donation (Excluding Savings on Capital Gains) **
Virginia Tax Credit (65%) 6,500 6,500
Federal Tax Savings (33% Rate non-AMT/28% Rate AMT) 3,300 2,800
Less – Cost of reduced deduction for Virginia taxes (2,335) n/a
Virginia Tax Savings (at 5.75% Rate) 575 575
Total Savings from Donation (Excluding Savings on Capital Gains) 8,040 9,875
Total Savings from Donation of Appreciated Stock 10,109 11,944
Excess of Tax Savings Over Value of Stock Donated $109 $1,944
* Long Term Capital Gains Tax of 20% plus Affordable Care Act Surcharge of 3.8%.** Pease Limitation, reinstated Jan 1, 2013, may impact actual federal tax savings.
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Eligible Donations
The minimum donation to receive Tax Credits through this program is $500.
The maximum annual donation for individuals is $125,000.
There is no maximum limit for any business entity, including sole proprietorships.
Donations may be monetary or marketable securities.
The amount of the Tax Credits may not exceed the Virginia tax liability for the year in which the credits are claimed, however…
− Tax Credits may be carried over for the next five succeeding years.
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Administrative Costs
By statute, at least 90% of the donation must be used to provide scholarships.
Foundations may use up to 10% of the donation to cover the costs of administering the scholarship program.
MPFE will make every effort to minimize its administrative costs, in order to provide the maximum in tuition assistance for Catholic school students.
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Student Eligibility - Financial
Students without a disability Students with a disability (the
student has an educational program in accordance with federal IDEA)
Persons in family/
household
Federal Poverty
guideline
300% of Federal Poverty guideline
300% of PovertyIncome Range
400% of Federal Poverty guideline
400% of PovertyIncome Range
1 $11,490 $34,470 $45,960
2 $15,510 $46,530 $0 - $46,530 $62,040 $0 - $62,040
3 $19,530 $58,590 $46,531 - $58,590 $78,120 $62,041 - $78,120
4 $23,550 $70,650 $58,591 - $70,650 $94,200 $78,121 - $94,200
5 $27,570 $82,710 $70,651 - $82,710 $110,280 $94,201 - $110,280
6 $31,590 $94,770 $82,711 - $94,770 $126,360 $110,281 - $126,360
7 $35,610 $106,830 $94,771 - $106,830 $142,440 $126,361 - $142,440
8 $39,630 $118,890 $106,831 - $118,890 $158,520 $142,441 - $158,520
In order to qualify for a scholarship under this program, students’ family income must fit into one of these categories:
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Student Eligibility – New to the School
In addition, students receiving the scholarships must be residents of Virginia, and fit one of these criteria:
− are eligible to enter kindergarten or first grade, OR
− attended a Virginia public school for at least half of the current or prior school year, OR
− were not Virginia residents during the preceding school year, OR
− were prior recipients of a scholarship under this program.
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Scholarship Allocation
Scholarships are allocated by MPFE to students from qualifying families in the spring and summer prior to the upcoming school year.
Families seeking financial aid complete a FACTS application, including supporting documents, by March 1 for existing families or June 1 for new families and families with non-W2 income.
As the statute requires, distribution of the donated scholarship funds must be completed no later than June 30 of the fiscal year following the fiscal year in which the donation was made.
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Scholarship Amounts:Example #1 – Richmond area
The Commonwealth of Virginia has established maximum scholarship amounts per student, determined by the student’s city or county of residence.
VA School Division (where student
resides)
2013-14 State Share of SOQ Funding*
Projected 2013-14 ADM*
2013-14 Scholarship Limit based on 100% State Share of SOQ Funding Per Pupil*
Richmond (city) $97,740,800 21,796 $4,484
Henrico County $218,415,343 49,365 $4,424
Chesterfield County $263,517,907 57,835 $4,556
Hanover County $77,853,445 17,871 $4,356
Petersburg $22,961,207 4,001 $5,739
Colonial Heights $11,860,586 2,753 $4,308
*Note 1: 2013-14 state share of Standards of Quality (SOQ) funding and Projected Average Daily Membership (ADM) based on the Reenrolled HB 1500 amendments to the 2012-2014 Biennial Budget. *Note 2: Section 58.1-439.28 E., Code of Virginia, reads: "The aggregate amount of scholarships provided to each student for any single school year by all eligible scholarship foundations from eligible donations shall not exceed the lesser of (i) the actual qualified educational expenses of the student or (ii) 100 percent of the per-pupil amount distributed to the local school division (in which the student resides) as the state's share of the standards of quality costs using the composite index of ability to pay as defined in the general appropriation act."
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Scholarship Amounts:Example #2 – Tidewater
The Commonwealth of Virginia has established maximum scholarship amounts per student, determined by the student’s city or county of residence.
VA School Division (where student
resides)
2013-14 State Share of SOQ Funding*
Projected 2013-14 ADM*
2013-14 Scholarship Limit based on 100% State Share of SOQ Funding Per Pupil*
Virginia Beach $292,740,903 68,054 $4,302
Portsmouth $74,564,584 14,253 $5,232
Suffolk $65,965,369 13,804 $4,779
Newport News $140,074,907 27,292 $5,132
Chesapeake $186,769,795 38,665 $4,830
Norfolk $148,175,997 29,821 $4,969
*Note 1: 2013-14 state share of Standards of Quality (SOQ) funding and Projected Average Daily Membership (ADM) based on the Reenrolled HB 1500 amendments to the 2012-2014 Biennial Budget. *Note 2: Section 58.1-439.28 E., Code of Virginia, reads: "The aggregate amount of scholarships provided to each student for any single school year by all eligible scholarship foundations from eligible donations shall not exceed the lesser of (i) the actual qualified educational expenses of the student or (ii) 100 percent of the per-pupil amount distributed to the local school division (in which the student resides) as the state's share of the standards of quality costs using the composite index of ability to pay as defined in the general appropriation act."
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Scholarship Amounts:Example #3 – Southwest VA
The Commonwealth of Virginia has established maximum scholarship amounts per student, determined by the student’s city or county of residence.
VA School Division (where student
resides)
2013-14 State Share of SOQ Funding*
Projected 2013-14 ADM*
2013-14 Scholarship Limit based on 100% State Share of SOQ Funding Per Pupil*
Lynchburg (city) $37,307,077 8,024 $4,649
Bedford County $45,800,607 9,326 $4,911
Roanoke (city) $58,794,126 12,623 $4,658
Amherst County $21,573,407 4,109 $5,250
Bristol (city) $11,678,246 2,176 $5,367
Danville (city) 32,626,869 6,074 $5,372
*Note 1: 2013-14 state share of Standards of Quality (SOQ) funding and Projected Average Daily Membership (ADM) based on the Reenrolled HB 1500 amendments to the 2012-2014 Biennial Budget. *Note 2: Section 58.1-439.28 E., Code of Virginia, reads: "The aggregate amount of scholarships provided to each student for any single school year by all eligible scholarship foundations from eligible donations shall not exceed the lesser of (i) the actual qualified educational expenses of the student or (ii) 100 percent of the per-pupil amount distributed to the local school division (in which the student resides) as the state's share of the standards of quality costs using the composite index of ability to pay as defined in the general appropriation act."
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A Great Deal for Virginia Taxpayers
Donation Amount $4,985
90% of donation becomes scholarship 4,484
Donor receives 65% of donation in tax credits 3,240
Virginia budget savings per student $1,244
Richmond example
Virginia Beach example
Donation Amount $4,780
90% of donation becomes scholarship 4,302
Donor receives 65% of donation in tax credits 3,107
Virginia budget savings per student $1,195
Roanoke example
Donation Amount $5,176
90% of donation becomes scholarship 4,658
Donor receives 65% of donation in tax credits 3,364
Virginia budget savings per student $1,294
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Diocese of Richmond Scholarships
The McMahon Parater Foundation for Education (MPFE) is one of 15 foundations approved by the Virginia Department of Education to receive donations under this program.
MPFE provides scholarships to students attending the 29 Catholic schools in the Diocese of Richmond.
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Donating Scholarships
Contributions to MPFE under this program are used to provide scholarships to Catholic schools in the Diocese of Richmond.
Donors may request that their contributions support scholarships at specific Catholic schools. However, if there are not enough qualified applicants at the specified school, the scholarships will be awarded to students at other Catholic schools in the Diocese.
Donors may not direct their funds to support a specific student.
Direct contributions to a school for other purposes or other scholarships do not qualify for Tax Credits under this program. Only gifts given to MPFE that have been pre-approved specifically for this program are eligible for these Tax Credits.
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Process for Obtaining Tax Credits
Obtains blank Preauthorization Form & Letter of Intent and sends the completed documents to MPFE.
Files the Preauthorization Form with the Virginia Department of Education (DOE).
Signs the numbered Preauthorization Notice and sends to MPFE with the donation payment within 180 days.
Notifies DOE that the donation has been received, and sends Donor receipt letter.
Donor
MPFE
MPFE
DOE
Donor
Authorizes and mails a numbered Preauthorization Notice to the Donor.
DOE Sends the Tax Credit certificate to the Donor.
For more information, please contact
Joyce SchreiberDirector of School DevelopmentCatholic Diocese of Richmond(804) [email protected]
www.richmonddiocese.org/mpfe
McMahon Parater Foundation for Education