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Senate OKs continuation, expansion of STO-tax credit program

The Senate Appropriations Committee approved legislation June 9 to expand the corporate income tax credit and allow insurance companies to donate to school tuition organizations (STOs).

The panel voted, 7-4, to advance the bill, which also aims to repeal a sunset provision for the corporate tax credit program, which is set to expire on June 30, 2011, unless the legislation becomes law.

Sydney Hay, a lobbyist for Advocates for School Choice, said insurance companies were inadvertently left out of the program when the law was drafted a few years back.

Hay also said thousands of students who receive scholarships from the program would be left in the lurch if the program were allowed to end.

Sen. Rebecca Rios, a Democrat from Apache Junction, voted against the legislation, S1023.

“It amazed me how we can’t fund public education but we can sure get creative on new ways to divert money from the general fund to private schools,” she said. “I’m aghast.”

Under the existing corporate income tax credit program, the money for scholarships and grants must be awarded to students of low-income families.

Donations to school-tuition organizations are capped. The Department of Revenue is authorized to award total credits of $14.4 million in fiscal 2009 and $17.3 million in fiscal 2010.

Under S1023, the procedures, conditions, limitations, definitions and other requirements of the existing corporate income tax credit program will apply to the premium tax credit for insurance companies.

Passage of the bill in committee came on the heels of the signing of a related measure. Last month, the Legislature voted in special session to create a new scholarship program for children with disabilities and those in foster care.

That measure, H2001, allows corporations and insurance companies to contribute to student-tuition organizations that provide scholarships to special-needs students. The state caps the total amount of the tax credits at $5 million.

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