Student Funding

Use of Funds

Awarded funds from the low-income corporate credit can be used to pay the cost of attending a private school full-time in Arizona.

Funding Amount and Source

Private donors fund this program by donating to STOs and receiving tax credits for their donation, up to certain limits. Each STO determines the number of scholarships it distributes. Scholarships were capped at $6,300 in grades K–8 and $8,100 in grades 9–12 for 2024–5024. Those amounts increase annually by $200. Corporate taxpayers who contribute to STOs may claim a tax credit equal to the full amount of their contribution. Donation pre-approval is required. Tax credits are worth 100% of the value of the contributions to scholarship organizations. Total credits claimed cannot exceed $135 million, meaning roughly 35,000 students can participate, or less than 3% of Arizona’s K–12 student population.

(Last updated July 15, 2024)

Student Eligibility

All students who receive scholarships under this program must come from families whose household incomes are equal to or below 185% of the federal Free and Reduced-Price Lunch program (FRL) guideline ($106,782 for a family of four in 2024-2025). Additionally, students must either be (1) enrolling or enrolled in private school kindergarten; (2) enrolled in a private preschool program for students with disabilities. Pre-kindergarten students must have a Multidisciplinary Evaluation Team or IEP, 504 plans do not qualify; (3) a public school enrollee for at least 90 days in the previous fiscal year or one full semester of the current school year; (4) a dependent of an active-duty member of the military stationed in Arizona; (5) homeschooled before enrolling in a qualified school; (6) moved into Arizona from another state or country and transferred directly into an Arizona private school; or (7) a prior scholarship recipient under this program, the individual tax-credit scholarship program, or the switcher tax-credit scholarship program and the child continued to attend a private school in subsequent years. A student may not participate in the Empowerment Scholarship Account (ESA) program and receive a tax-credit award. A previous participant in the ESA program who meets the income requirements may elect to receive a tax-credit award instead of continuing in the ESA program. Students may receive multiple tax-credit scholarship awards or receive awards from multiple tax credit scholarship programs as eligible.

(Last updated July 15, 2024)

EdChoice Expert Feedback

Arizona’s low-income corporate-donor tax-credit scholarship program helps tens of thousands of students access schools that are the right fit for them, but policymakers could do more to expand educational opportunity. Eligibility for the scholarships is limited to 342.25 percent of the federal poverty line. Nearly 60 percent of Arizona students are eligible to receive a scholarship via this program, and all students are eligible to receive a scholarship via the individual-donor scholarship program. Statewide, fewer than 10 percent of students participate in one of Arizona’s private educational choice options (including the universal-eligibility Original Individual-Donor Tax-Credit Scholarship Program, the “Switcher” Tax-Credit Scholarship Program, Lexie’s Law for Disabled and Displaced Students Tax-Credit Scholarship Program and the Empowerment Scholarship Account Program). The average scholarship size is only about $2,971, which is only about 34 percent of the average total expenditure per student at Arizona’s district schools, but there is no cap on scholarship values and students may receive more than one scholarship. Students with special needs, students in foster care and those who have switched from the public school system can also receive scholarships via the other tax-credit scholarship programs, in addition to the original scholarship program that is available to all students. Tax credits are worth 100 percent of the value of the contributions to scholarship organizations, but only $158.5 million in tax credits are available annually, which is equivalent to only 1.3 percent of Arizona’s total K-12 revenue. To expand access to educational choice, Arizona policymakers should increase the amount of tax credits available and restore the automatic “escalator” that allowed the total tax credit cap to grow over time to meet demand. Arizona’s scholarship program generally avoids unnecessary and counterproductive regulations. (Last updated December 14, 2023) 

Rules and Regulations

Program Guidelines

• Income Limit: 185% x FRL
• Prior Year Public School Requirement: Yes, with exceptions
• Enrollment Cap: None
• Scholarship Cap: $6,000 (K–8), $7,900 (9–12) in 2023 (Escalator)
• Testing Mandates: None
• Credit Value: 100%
• Per Donor Credit Cap: None
• Budget Cap: Approximately $158.5 million in 2023 (Escalator)
• Special Needs Pathway: Pathway (Pre-k)

Participant and Family Guidelines

• Education Requirements: N/A
• Parent Supplemented Funds/Scholarships: Allowed
• Miscellaneous: N/A

Education Provider Guidelines

• Accreditation/Approval: State or regional
• Employment Standards: Background checks
• Nondiscrimination: Comply with applicable state and federal anti-discrimination laws
• Calendar/Curriculum/Attendance: N/A
• Financial: N/A
• Miscellaneous: N/A

Scholarship Organization (STO) Guidelines

• Scholarship to Contribution Ratio: Use at least 90% of contributions for scholarships
• State Reporting: Must annually report to the state:
  • Data on accepted contributions, grants awarded, and the amount of money being held for identified student scholarships in future years
  • A list of participating schools with the number and dollar amount of scholarship awards received;
  • The salaries of the STO’s top three officials for the fiscal year and proof of independent review of financial statements by a certified public accountant
• Financial: CPA audit
• Award Priority: Conditional
• Miscellaneous:
  • Make scholarships available for more than one school
  • Must allow the state to verify that scholarships are awarded to students who attend a qualified school

(Last updated December 12, 2024)

Governing Statutes

Ariz. Rev. Stat. §§ 43-1183; 43-1501 through 1507; and 20-224.06

(Last updated July 15, 2024)

Legal History

On March 12, 2009, the Arizona Court of Appeals upheld Arizona’s corporate tax-credit scholarships and the Arizona Supreme Court refused to hear an appeal. Green v. Garriott, 212 P.3d 96 (Ariz. App. 2009).

 (Last updated July 15, 2024)