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.
The Department can issue up to $75 million in tax credits per calendar year.
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.
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.
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.
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.
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.
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.
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.
Applications must be submitted electronically through MyTax Illinois available on the Department’s website.
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 after receipt of the application. Organizations must apply for renewal each year as an SGO.
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.
No. These students must apply for a scholarship under the Invest in Kids Act.
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.
Generally, SGOs can only grant scholarships, subject to the availability of funds, to qualified schools within the region or regions for which they have been approved to offer scholarships. 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.
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.
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.
Yes. You cannot take a tax credit under this Act if you claimed any portion of this contribution as a federal income tax deduction.
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.
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.
No, but Invest in Kids tax credits may be carried-forward and applied to your tax liability in the subsequent five taxable years.
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.
Your contribution must be made to the SGO within 60 days after the issuance date on your Certificate of Contribution (CAC). (The CAC is issued to you by the Department within three days of approving your application.) Be sure to provide a copy of the CAC to the SGO when you make your contribution. Within 30 days of receiving your contribution, the SGO will issue you a Certificate of Receipt (COR) that you will need to file with your income tax return to verify the credit.
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.
Qualified schools that accept Invest in Kids scholarship students must:
For more specific information on qualified school responsibilities, visit isbe.net.
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.