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Invest in Kids Act – Income Tax Credit

General Information on Invest in Kids
Information for Scholarship Granting Organizations
Information for Taxpayers Wanting to Take the Invest in Kids Tax Credit
Information for Qualified Schools

General Information on the Invest in Kids Act

Q: What is the Invest in Kids Act?

Public Act 100-0465 created the Invest in Kids Act (35 ILCS 40/1). This Act allows income tax credits for taxpayers who make authorized contributions to a Scholarship Granting Organization (SGO). The SGOs, in turn, provide scholarships for eligible Illinois students to attend qualified, non-public schools in Illinois.

Q: How many credits are available?

The Department can issue up to $75 million in tax credits per calendar year.

Q: How are credits awarded?

Credits shall be awarded on a first-come, first-served basis in a manner that is geographically proportionate to enrollment in qualified, non-public schools in Illinois.

Q: What are the geographic boundaries?

For the purpose of awarding credits, Illinois will be divided into five regions whose boundaries are the same as the Illinois Appellate Court districts. The five regions and their estimated proportionate share of tax credits are as follows:

For a listing of counties in each region, visit Illinois Courts.

Q: Who is an eligible student?

Eligible students are members of a household whose federal adjusted gross income the year before he or she initially receives a scholarship under this program, as determined by IDOR, does not exceed 300% of the federal poverty level and, once the child receives a scholarship, does not exceed 400% of the federal poverty level. The student must be eligible to attend a public elementary school or high school in Illinois in the semester immediately preceding the semester for which he or she first receives a scholarship or is starting school in Illinois for the first time when he or she first receives a scholarship. Students must reside in Illinois while receiving a scholarship. For more information on federal poverty levels, visit the U.S. Department of Health & Human Services website.

Q: What are the responsibilities of the Illinois Department of Revenue for managing the Invest in Kids Act?

The Department administers the income tax credit, approves entities applying to be SGOs, and approves income tax credits for taxpayers who want to make contributions to SGOs.

Q: What is the timeline for implementation?

SGOs: The online application will be available, at MyTax Illinois, starting December 1, 2017 for SGOs to apply for approval to issue Certificates of Receipts (COR). Applications to be an SGO for the 2018-2019 school year must be received by January 15, 2018.

Businesses/Individuals: The online application process for taxpayers to apply for a Contribution Authorization Certificate (CAC) will be available January 2, 2018.

NOTE: Taxpayers wishing to apply for this credit must have a MyTax Illinois account for filing either individual income tax or business income tax. In order to avoid processing delays when the system becomes available in January 2018, sign up for your MyTax Illinois account now.

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Information for Scholarship Granting Organizations

Q: What is a Scholarship Granting Organization (SGO)?

SGOs are non-profits that, after approval by the Illinois Department of Revenue, can receive qualified contributions from individuals and businesses to be disbursed to qualified, non-public schools in Illinois in the form of scholarships to eligible students.

Q: What are the requirements to be an SGO?

SGOs must be exempt from tax under Section 501(c)(3) of the Internal Revenue Code. In addition, they must:

SGOs must be approved by the Department before accepting contributions or issuing Certificates of Receipt (CORs) to donors. For more information, see publication FY2018-12, Invest in Kids - SGO.

Q: How does an organization apply to become an SGO?

Applications must be submitted electronically through MyTax Illinois available on the Department’s website.

Q: When are applications accepted?

Organizations that want to be approved as an SGO for the 2018 tax year can apply beginning December 1, 2017. Applications to become an SGO for the 2018-2019 school year must be received by January 15, 2018. The Department must respond to your application within 30 business days. Organizations must apply for renewal each year as an SGO.

Q: When can SGOs begin granting scholarships?

SGOs may begin accepting applications as soon as they are approved to be an SGO by the Department. SGOs must begin granting scholarships, subject to availability of funds, no later than February 1 for the 2018-2019 school year. Scholarships are paid directly to the qualified school by the SGO on behalf of the student.

Q: Prior to the implementation of PA 100-0465, we already selected our scholarship recipients for the next school year. Can we allocate the Invest in Kids money to these already-accepted students?

No. These students must apply for a scholarship under the Invest in Kids Act.

Q: As part of our scholarship application, we screen for income/socioeconomic need in a way that aligns with the requirements of the Act. Do we have to modify other existing selection criteria (e.g., academic qualifications, grit, tenacity, etc.) in order for students to qualify for scholarships paid with funds from the Invest in Kids Act contributions?

Yes. For applications received prior to April 1, you may only use the student eligibility criteria of the Invest in Kids Act to award scholarships under the Act. However, this does not affect any other scholarships you provide to students from other funding sources.

Q: Under our current scholarship programs, we reserve the right to retract scholarships from students who are not meeting academic expectations. Can we maintain this policy of retracting scholarships with students who receive scholarships through the Invest in Kids Act?

No.

Q: If we are approved to be a SGO, can we limit the schools to which we provide scholarships?

No. SGOs must allow an eligible student to attend any qualified school of the student’s choosing. Visit the Illinois State Board of Education’s (ISBE) website for more information and a list of qualified non-public schools recognized by the Board.

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Information for Taxpayers Wanting to Take the Invest in Kids Tax Credit

Q: How do I get approved for the credit?

Taxpayers must first apply to the Department for approval to make such contributions. You must apply online through MyTax Illinois, our free online tax portal, at MyTax Illinois. Approval is granted automatically as long as the regional and statewide thresholds have not been met. Taxpayers must include the name of the SGO and the region the taxpayer directs their contribution to benefit.

Example: A taxpayer files an online application indicating he intends to contribute $1,000 to Children Benefit from Education Scholarship Organization, SGO number 123456 for the benefit of Region 4. As long as the regional or the total statewide maximums have not been reached, the taxpayer will receive a Contribution Authorization Certificate (CAC) from the Department authorizing his $1,000 contribution to the SGO, which equates to a $750 tax credit.

Important: You must have a registered MyTax Illinois account for filing either individual income tax or business income tax in order to apply for the credit. If you want to apply for the credit approval, you are encouraged to create a MyTax Illinois account as soon as possible to avoid any processing delays when the application system goes live.

Q: What benefits are received by taxpayers for making a qualified contribution?

Illinois taxpayers who are approved can receive state income tax credits in the amount of 75% of their total qualified contributions made to one or more Scholarship Granting Organizations (SGO) during a taxable year. Credits cannot exceed $1 million per taxpayer, per year.

Example: A taxpayer makes a qualified contribution of $10,000 to an approved SGO. The taxpayer will be eligible to claim a $7,500 tax credit.

Q: Are there limitations on the credit?

Yes. You cannot take a tax credit under this Act if you claimed this contribution as a federal income tax deduction.

Q: My spouse and I file a joint individual income tax return. How do we claim this income tax credit?

Two individuals filing a joint return shall be considered one taxpayer for purposes of making qualified contributions.

Example: If two married individuals each donate $1,333,333 intending at the time of the contribution to file separate returns, but subsequently file a joint return, the maximum credit allowed is $1,000,000.

Q: If I don’t use all my tax credit, how long can I carry-forward the extra amount not claimed?

Any credit amount that exceeds your tax liability for the year may be carried forward and applied to your tax liability in the subsequent five taxable years. Credits are applied to the earliest year for which there is a tax liability. Credits cannot be carried back to a prior tax year.

Please note: You must apply in January of each year to be approved for a new Invest in Kids tax credit. If you are claiming unused credits from a prior year, approval for use of these credits is not required.

Q: Can I get a refund if my tax credits are more than my tax liability for the year?

No, but Invest in Kids tax credits may be carried-forward and applied to your tax liability in the subsequent five taxable years.

Q: When can I submit an application to be approved for the tax credit?

The Invest in Kids tax credit application for individual and business taxpayers will be available through MyTax Illinois on January 2, 2018, and tax credits are awarded on a first-come, first-served basis. Remember, you must have a MyTax Illinois account for filing either individual income tax or business income tax in order to apply for the credit. Approved credits may be taken beginning with the filing of your 2018 income tax return.

Q: When should I make the approved contribution to the SGO?

The Department will issue you a CAC within three days of receiving your application. The CAC will be issued electronically to your MyTax Illinois account. You must make your contribution to the SGO within 60 days after receiving the CAC. Be sure to provide a copy of the CAC to the SGO. Within 30 days of receiving your contribution, the SGO will issue you a Certificate of Receipt (COR).

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Information for Qualified Schools

Q: What is a qualified school?

A “qualified school” is a non-public school located in Illinois and recognized by the Illinois State Board of Education (ISBE) pursuant to Section 2-3.25o of the School Code. For more information, visit ISBE’s website at isbe.net regarding the process for non-public schools to register and be recognized by ISBE as a qualified school.

Q: What are the qualified school’s responsibilities for participation in the program?

Qualified schools that accept Invest in Kids scholarship students must:

For more specific information on qualified school responsibilities, visit isbe.net.

Q: Which schools are eligible to participate?

ISBE will provide a list of non-public schools, recognized under Section 2-3.25o of the School Code, to the Department each year. This list will be used to determine the calculations for the geographic distribution of the credits and identifies the schools initially eligible to participate in the program. Visit ISBE’s website at isbe.net for more information.

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