FAQs - Invest in Kids

Q: What is the Invest in Kids Act?

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.

Q: How many credits are available?

The Department can issue up to $75 million in tax credits per calendar year.

Q: How are credits awarded?

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.

Q: What are the geographic boundaries?

For the purpose of awarding credits, Illinois is divided into five regions. The five regions and their estimated proportionate share of tax credits are as follows:

Click here for a listing of counties in each region

Q: Who is an eligible student?

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 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

Q: What are the responsibilities of the Illinois Department of Revenue for managing the Invest in Kids Act?

The Department administers the income tax credit, approves entities applying to be SGOs, and approves Contribution Authorization Certificates for taxpayers who want to make contributions to SGOs.

Q: What is the timeline for implementation?

SGOs:

• 2022-2023: The online application process to become an SGO for the 2022-2023 school year is closed.
  
• 2023-2024: The online application process to become an SGO for the 2023-2024 school year is open from December 1, 2022 through January 17, 2023. SGOs must have been approved by IDOR before accepting contributions or issuing Certificates of Receipts (CORs) to donors.

Businesses/Individuals: The online application process for taxpayers to apply for a Contribution Authorization Certificate (CAC) is now accepting applications. Approval is granted automatically as long as the regional and statewide thresholds have not been met.

NOTE: Taxpayers wishing to apply for this credit must have a MyTax Illinois account for filing either individual income tax or business income tax. Sign up for your MyTax Illinois account now. If you have a MyTax Illinois account already, click here to apply for the Invest in Kids tax credit.

Q: What is a qualified school?

“Qualified school” means a non-public school located in Illinois and recognized by the Board pursuant to Section 2-3.25o of the School Code or that is registered and becomes recognized by the Illinois State Board of Education pursuant to Section 2-3.25o of the School Code prior to receiving scholarship funds pursuant to the Act.

NOTE: "Qualified schools" also include "technical academies". A "technical academy" is defined as a non-public school located in Illinois that registers with the Board pursuant to Section 2-3.25 of the School Code and operates or will operate a jointly administered CTE (Career Technical Education) program as the primary focus of the school.

Students: The school you select must be a qualified school. It must either be recognized by the Board or registered with the Board and awaiting approval of recognition by the Board. The Board will maintain a list of registered schools awaiting recognition. See “Applications for Initial Nonpublic School Recognition Received” on the Board’s website. Students can choose schools on the list of applications but schools on the list cannot receive scholarship money until they are recognized by the Board and listed in the recognized school category. Please consult the list for updates. If you pick a school on the list of applications and the school does not become recognized by the Board, the SGO cannot release scholarship funds for you to attend the school.

Contributors: Contributions can be made to an SGO and, if the contribution is made by an individual, dedicated to a particular qualified school on the list of applications. However, you may want to advise the SGO whether it can dedicate the funds to an alternative school or can use the funds to award scholarships to eligible students to attend any school on the recognized list in case the school awaiting recognition is not recognized by the Board prior to distribution of scholarship.

Q: What is a Scholarship Granting Organization (SGO)?

SGOs are non-profit organizations 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 Illinois students.

Q: What are the requirements to be an SGO?

SGOs must be exempt from tax under Section 501(c)(3) of the Internal Revenue Code. In addition, they must:

distribute at least 95% of the qualified contributions received to qualified schools for scholarships;
provide scholarships to eligible students according to the Act;
deposit and hold the qualified contributions and any income derived from the contributions in an account that is separate from the organization’s operating fund or other funds until contributions or income are withdrawn for use; and meet additional requirements under the Act.
SGOs must be approved by the Department before accepting contributions or issuing Certificates of Receipt (CORs) to donors. For more detailed information, see publication FY2018-12-A, Invest in Kids - SGO.

Q: How does an organization apply to become an SGO?

Applications must be submitted electronically through MyTax Illinois available on the Department’s website.

NOTE: The application process to become an SGO for the 2022-2023 school year has closed. The application process to become an SGO for the 2023-2024 school year is open from Thursday, December 1, 2022 through Tuesday, January 17, 2023.

Q: When are applications accepted?

Organizations that want to be approved as an SGO for the 2023 tax year can apply beginning December 1, 2022. Applications to become an SGO for the 2023-2024 school year must be received by January 17, 2023. 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.

Q: When can SGOs begin granting scholarships?

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 of each year for the following school year. Scholarships are paid directly to the qualified school by the SGO on behalf of the student.

Q: As part of our scholarship application, we screen for income/socioeconomic need in a way that aligns with the requirements of the Act.

Do we have to modify other existing selection criteria (e.g., academic qualifications, grit, tenacity, etc.) in order for students to qualify for scholarships paid with funds from the Invest in Kids Act contributions?

Yes. 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.

Q: Under our current scholarship programs, we reserve the right to retract scholarships from students who are not meeting academic expectations.

Can we maintain this policy of retracting scholarships with students who receive scholarships through the Invest in Kids Act?

No.

Q: If we are approved to be a SGO, can we limit the schools to which we provide scholarships?

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.

Q: May SGO's accept payment from a donor advised fund?

Individual A receives a Contribution Authorization Certificate. Individual A may not direct a donor advised fund to make a contribution to an SGO. A donor advised fund is a charitable organization, and Individual A receives a charitable deduction at the time a contribution is made to the fund. The fund is exempt from income tax under Internal Revenue Code section 501(c)(3). If the fund receives a Certificate of Receipt in exchange for its contribution to the SGO, the Certificate of Receipt could not be transferred to Individual A, nor could Individual A, having already claimed a charitable deduction, subsequently claim a credit under IITA section 224.

Q: How do I get approved for the credit?

Taxpayers must apply online to the Department for approval to make contributions through our free online tax portal at MyTax Illinois. Approval is granted automatically as long as the regional statewide thresholds have not been met. Beginning June 1, approval is granted automatically as long as the statewide threshold has 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. For individual taxpayers, it can take between 7-10 days for your MyTax Illinois account to be set-up.

Q: What benefits are received by taxpayers for making a qualified contribution?

Beginning with the tax year 2018, Illinois taxpayers who are approved to participate in the Invest in Kids program can receive a state income tax credit in the amount of 75 percent of their total qualified contributions made to one or more Scholarship Granting Organizations (SGOs) during a taxable year. Income tax 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 income tax credit.

Q: Are there limitations on the 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.

Q: My spouse and I file a joint individual income tax return. How do we claim this income tax credit?

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 on the joint return.

Q: If I don’t use all my income tax credit, can I get a refund or can I carry-forward the extra amount not claimed to another year?

You cannot receive a refund for any unused tax credits. Any income tax 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. Income tax credits are applied to the earliest year for which there is a tax liability. Credits cannot be carried back to a tax year prior to the issuance of the Contribution Authorization Certificate (CAC).

Please note: You must apply beginning in January of each year to be approved for a new Invest in Kids income tax credit. If you are claiming unused income tax credits from a prior year, approval for use of these credits is not required.

Q: Can I get a refund if my tax credits are more than my tax liability for the year?

No, but Invest in Kids tax credits may be carried-forward and applied to your tax liability in the subsequent five taxable years.

Q: When can I submit an application to be approved for the tax credit?

The Invest in Kids income tax credit application for individual and business taxpayers is now available. Income 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 for contributions made in 2018 may be taken beginning with the filing of your 2018 income tax return. To receive a tax credit for your contribution, the payment must be received by the SGO by the last day of your filing period and the approved SGO must confirm receipt of the contribution.

Q: When should I make the approved contribution to the SGO?

The Department will send you a CAC within three business days after its issuance. The CAC will be issued electronically to your MyTax Illinois account. You must make your contribution to the SGO within 60 days after the date of the issuance of the CAC. Be sure to provide a copy of the CAC to the SGO. Within 30 days of receiving your contribution, the SGO will issue you a Certificate of Receipt (COR) that you will need to retain in your books and records to support any income tax credit you take on your income tax return.

Q: Can taxpayers contribute stock or securities to an SGO?

Yes. However, the SGO must liquidate the stock or securities and issue a COR to the taxpayer within 30 days of the receipt of authorized contribution as required by Section 1000.500(c) for the net amount realized by the SGO from the sale of the stock or securities.

Q: As part of a unitary business group, how can we claim the credit?

For purposes of the credit, a unitary business group is considered one taxpayer and would be subject to the $1 million cap per combined return, not each individual member. Members of a unitary business group shall be treated as one taxpayer for purposes of any return or amended return*.

* IITA section 502(e)

Q: What is a qualified school?

“Qualified school” means a non-public school located in Illinois and recognized by the Board pursuant to Section 2-3.25o of the School Code or that is registered and becomes recognized by the Illinois State Board of Education pursuant to Section 2-3.25o of the School Code prior to receiving scholarship funds pursuant to the Act.

Students: The school you select must be a qualified school. It must either be recognized by the Board or registered with the Board and awaiting approval of recognition by the Board. The Board will maintain a list of registered schools awaiting recognition. See “Applications for Initial Nonpublic School Recognition Received” on the Board’s website. Students can choose schools on the list of applications but schools on the list cannot receive scholarship money until they are recognized by the Board and listed in the recognized school category. Please consult the list for updates. If you pick a school on the list of applications and the school does not become recognized by the Board, the SGO cannot release scholarship funds for you to attend the school.

Contributors: Contributions can be made to an SGO and, if the contribution is made by an individual, dedicated to a particular qualified school on the list of applications. However, you may want to advise the SGO whether it can dedicate the funds to an alternative school or can use the funds to award scholarships to eligible students to attend any school on the recognized list in case the school awaiting recognition is not recognized by the Board prior to distribution of scholarship.

Q: What are the qualified school’s responsibilities for participation in the program?

Qualified schools that accept Invest in Kids scholarship students must:

• provide to a Scholarship Granting Organization (SGO), upon request but no later than April 1 of each year, all documentation required for the student’s participation, including the cost and student’s fee schedules; and
• be academically accountable to the parent or legal guardian for meeting the educational needs of the student by, at a minimum, annually:
  • provide the custodian a written explanation of the student’s progress, and
  • administer assessments required by the Act.

For more specific information on qualified school responsibilities, visit isbe.net.

Q: Which schools are eligible to participate?

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.