Starting with the 1998 tax year, Arizona has a state tax credit for taxpayers who make a specific kind of donation to Saguaro (or other Arizona K-12 public schools)
for extracurricular fees. If you are an Arizona resident you are probably paying some amount in state income tax - here is a way that Saguaro can benefit!
What are the main provisions of the new credit?
A credit of up to $200 is available for payment of extracurricular activity fees. This credit is available only to individuals not partnerships, S corporations, LLCs or corporations.
What are the maximum dollar amounts available for each of the credits?
The maximum amount of credit that can be earned in any taxable year is $200.
Can two married taxpayers filing a joint return both claim the maximum credit?
No. The statutes allow only the $200 maximum for the credit for taxpayers choosing to file a joint return or married/separate returns can claim only $100 on each return.
Can a taxpayer receive a refund of this credit?
No. The credit may only be used to the extent they reduce a tax liability to zero. Any unused amounts may be carried forward for not more than five consecutive taxable years.
On the Arizona state income tax return, can a taxpayer claim both an itemized deduction and this tax credit?
No. Any amount claimed as a tax credit must be added to Arizona income if it is included in itemized deductions. However, any excess over the amount claimed as a credit, may still be claimed as an
itemized deduction.
Must a taxpayer have a child in school in order to claim this credit?
No. Any citizen may contribute regardless if they have a relative who is a student in school!
What is an extracurricular activity fee?
A fee is a dollar amount given to Saguaro for the support of an extracurricular activity that has some monetary amount levied in order to participate in the activity.
What are some examples?
Extracurricular activities means school sponsored activities before, during or after school that require enrolled students to pay a fee in order to participate. Such activities may include use of
band uniforms, use of equipment or uniforms for varsity athletics, or use of scientific laboratory equipment or materials. Generally, any activity that supplements the educational program of the
school are considered to be extracurricular activities.
If a school establishes a central fund to pay for extracurricular activities, would a payment to this central fund qualify for the tax credit?
Yes. The credit is authorized for any fees paid by a taxpayer to an Arizona public school for the support of extracurricular activities.
Can a taxpayer make a payment of fees to an organization (PTA, school foundation, school district or school club) which then gives the funds in a lump sum to the school or directly pays for
extracurricular activities?
No. It is required that the fees be paid "to a public school." Therefore, the payment must be made directly to the public school only.
Must a public school issue a receipt to the taxpayer for this payment?
Yes. The receipt should include the public school name, school district number, taxpayer name, taxpayer social security number, amount paid, date paid, and a description of the extracurricular
activity for which the fee was paid.
UPDATE...
A court case that challenges the constitutionality of the tax credit for contributions to a school tuition organization was pending in the Arizona Supreme Court. The decision cleared the way by stating there was no problem with this tax credit program.
COURT CASE UPDATE
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