Sounds Like Tax Evasion: “The rest of the money will be channeled to the family that raised it.”

The Orthodox Union, the Agudah, and other groups groups/religious denominations that are lobbying for state tax credits need to read this!  (Hat tip:  an anonymous reader).  The New York Times published an article yesterday that has already garnered 424 comments:  Public Money Finds Back Door to Private Schools.  The actual part that most interests me is the story, within the story, within the story.  Between the complaints from coaches about high school athletic recruiting and the complaints of state money going to support religion, is a story that sure looks like open, blatent tax evasion which could be prosecuted by the IRS.  The Internal Revenue Code most certainly prohibits itemizing donations that aren't such.  I can't speak for the state law of any state featured in the story.  


Here are some quotes that are sure to anger taxpayers and should anger of anyone who is supportive of vouchers/tax credits/greater choice in education/private education:

The program would be supported by donations to nonprofit scholarship groups, and Georgians who contributed would receive dollar-for-dollar tax credits, up to $2,500 a couple. The intent was that money otherwise due to the Georgia treasury — about $50 million a year — would be used instead to help needy students escape struggling public schools.

That was the idea, at least. But parents meeting at Gwinnett Christian Academy got a completely different story last year.

“A very small percentage of that money will be set aside for a needs-based scholarship fund,” Wyatt Bozeman, an administrator at the school near Atlanta, said during an informational session. “The rest of the money will be channeled to the family that raised it.”

A handout circulated at the meeting instructed families to donate, qualify for a tax credit and then apply for a scholarship for their own children, many of whom were already attending the school.

“If a student has friends, relatives or even corporations that pay Georgia income tax, all of those people can make a donation to that child’s school,” added an official with a scholarship group working with the school.

The exchange at Gwinnett Christian Academy, a recording of which was obtained by The New York Times, is just one example of how scholarship programs have been twisted to benefit private schools at the expense of the neediest children. 

[later] Hanaiya Hassan, whose daughter attends Hamzah Academy in Alpharetta, Ga., said she had saved $5,000 by asking four friends to donate to a scholarship organization with money earmarked for her daughter’s school. “If you collect four people for $2,500, then one of your children is free,” she said.

The friends were awarded a tax credit. Depending on their tax bracket, some donors could actually come out ahead by filing for a federal charitable deduction as well as the state credit.

The Christian Heritage School in Dalton, Ga., circulated a flier for the 2011-12 school year titled “TUITION BREAKS FOR CURRENT FAMILIES!” It stated, “The scholarship tax credit is so vital to CHS that the school is encouraging all parents to participate in the program and enlist at least two others to do the same.” Participating families would get a 10 percent tuition rebate and a $250 bonus. The rebates would be doubled or tripled depending on overall participation.

Similar deals, some nicknamed “swaps,” in which parents donated for each other’s children, have cropped up in Arizona as well, according to Mr. Thomas, the school board association general counsel there.

[A breathe of fresh air]  Johnathan Arnold, headmaster of Covenant Christian Academy in Cumming, Ga., said he viewed using the program to discount tuition for existing students as unethical.

“We, as a Christian school, felt that wasn’t the right approach,” he said. “You’re giving money out of the goodness of your heart with the intent to receive nothing in return. When you give it for the purpose of getting it back or actually make money on that, to me that doesn’t qualify for the spirit of the law.”  [Nor the letter of federal law from what I know].


Oy vey!  Discuss.