Alabama's new tax credits limited to transfers

MONTGOMERY, Ala. (AP) -- Alabama's Department of Revenue determined the state's new private school tax credits don't apply to students who are already in private schools, even if they live in zones where failing public schools operate.

The department has been developing regulations to implement the new Alabama Accountability Act since it was signed into law in March. The law provides tax credits for parents who choose to move their child from a failing public school to a public school that is not failing, or to a private school.

The new law generated questions about whether the tax credits, worth about $3,500 annually per child, would apply to a student living in a zone where a failing public school is operating but who already attends a private school.

"The language in the legislation clearly states a student needs to transfer," state Revenue Commissioner Julie Magee said Tuesday. She said the transfer requirement will apply to the upcoming school year, and that students will need to have attended a failing school for at least a semester to transfer and qualify for a tax credit. Enrolling for a few days in August and then transferring won't work, she said.

The chief author of the tax credits in the Alabama Accountability Act, Senate President Pro Tem Del Marsh, R-Anniston, was hoping the law would have a broader application.

"I would like to see the tax credits apply to those who are currently sacrificing to send their children to a better school. But giving even a limited number of parents with children in failing schools more options for a better education is clearly a step in the right direction," Marsh said.

Another supporter of the law, House Speaker Mike Hubbard, R-Auburn, said, "I believe that every Alabama parent and family that struggles and has to make the tough financial decisions necessary to give their child a better education should be eligible for the tax credit."

An opponent of the tax credits, teacher lobbyist Henry Mabry, said the department's interpretation of the law "is the best we could have hoped for." His organization, the Alabama Education Association, had estimated that applying the law to those already in private schools would reduce state tax collections by more than $200 million annually. He said AEA has no estimate on the impact now.

Magee said the Department of Revenue doesn't either.

The department announced its interpretation of the law on the same day the state Department of Education announced that 78 schools qualify as failing under the new law.

The Alabama Accountability Act also provides tax credits for individuals and businesses who donate to scholarship programs for students who need help in attending private school. The Department of Revenue determined that for parents of a student to get a tax credit, a private school must participate in the scholarship program and it must be accredited by a state-recognized accrediting agency.

To participate in the scholarship program, a private school must meet several requirements, including giving a state achievement test or nationally recognized test in math and English to scholarship recipients for the same grades that are tested in public schools.

Revenue officials said about 70 of Alabama's private schools are currently in a position to qualify for the scholarship program, and the application forms will be ready July 1.

Magee said the department's regulations will be published on the department's website and will be open for public comment as well as a public hearing tentatively planned for Aug. 5 in Montgomery. She said the goal is to have everything in place for the start of classes in mid-August.

In addition to the tax credits, the Alabama Accountability Act gives schools the option to try new approaches to learning provided they get approval from state education officials and show that the changes improve student performance.

Online: http://revenue.alabama.gov/