FREQUENTLY ASKED QUESTIONS
Description of the Program
What is a School Tuition Organization?
It is a charitable organization that receives voluntary cash contributions from individual Iowa taxpayers and then allocates those funds in the form of tuition assistance to eligible families that attend accredited nonpublic schools represented by the STO. Taxpayers who contribute to an STO receive a tax credit certificate, issued by the STO, equal to 65% of the donation. The contribution is also eligible for a federal tax deduction as well. (Please consult your tax advisor for your specific tax implications.) At least ninety percent of the money donated must go back out to eligible families in the form of tuition assistance. Families are eligible for tuition assistance if their adjusted gross income (as found on line 15 of the Iowa State Income Tax Form 1040) is less than 300% of the poverty rate. The
law creating STOs was enacted by the Iowa Legislature in 2006 of organizations was passed by the Iowa Legislature in 2006.
Does this program interface with the existing tuition tax credit offered to taxpayers in Iowa?
No. The tuition tax credit program is completely separate from the donations to an STO. The tuition tax credit program provides a tax credit to parents/guardians for the first 25% of tuition paid by the parents up to a maximum credit of $250 per child in grades K-12.
How much of my donation will be given to eligible families?
The law requires that at least ninety percent of the money
donated must be disbursed to qualifying families within twelve months of receipt of the gift. The STO may use up to ten percent of the proceeds for out of pocket expenses such as printing costs, mailing fees, and administration of the program.
What is the total dollar amount of tax credits that can be issued statewide by all of the approved STO’s?
Statewide, tax credits equaling $12 million in 2013 can be issued.
What is the total dollar amount of tax credits that can be issued by the “Iowa Independent School Tuition Organization”?
Based upon the total number of students enrolled in STO member schools statewide, the STO has been authorized by the Iowa Department of Revenue to issue up to $127,058 in tax credits for 2013.
Which schools are part of the Iowa Independent School Tuition Organization?
The Iowa Indpendent School Tuition Organization serves 4 schools with approximately 415 qualified students in grades kindergarten through twelfth grade. The four schools include: Maharishi School of the Age of Enlightenment (Fairfield), the Iowa Mennonite School (Kalona), Bergman Academy (Des Moines) and Scattergood Friends School (West Branch).
How is this new STO incorporated?
This STO is incorporated under the laws of the state of Iowa and is exempt from federal and state income taxes under section 501(c)3 of the Internal Revenue Service code.
How will donors know that the money will be used for its intended purpose of tuition assistance to eligible families?
An annual review and/or audit of the funds and distributions will take place by certified public accountants to ensure compliance.
May gifts to the “Iowa Independent School Tuition Organization” be restricted to an individual School?
Yes. It is possible for a donor to restrict their gift to an individual school. It is important to note, however, that once the identified needs of the families attending that school have been met any unused restricted donations must be made available to other needy families at other STO schools where the local need has not been met. For example, if there are restricted gifts totaling $10,000 to School A, and the families who need scholarships at School A are eligible for a total of $7,000, the unused $3,000 of restricted gifts must be made available to other eligible families in the STO schools that need support. Unlike an endowment fund, donations by law cannot be held to support future needs. Therefore, the STO must raise funds annually and present scholarships annually to support the ongoing needs of the eligible families.
Is there a limit on the tax credit?
The law requires that tax credits will issue equal to 65% of the gift received. Corporations can donate and is it expected that in 2013 LLCs will also be able to donate.
Should existing donors see this as new giving or a replacement of gifts already given?
Donors should be encouraged not to replace existing giving because the net result will not increase opportunities for student assistance.
Distribution of Tuition Assistance
What are the steps for families who wish to apply for tuition assistance through this program?
The application, which will require a copy of the previous year’s Iowa income tax return and other information, will be completed by the family and then mailed to the IISTO. All information will be kept confidential. A report will be generated by the IISTO documenting eligibility. Member Schools will allocate tuition assistance awards to eligible applicants. Notification will take place prior to the start of the fall semester. Questions related to the completion of the financial aid application can be directed to the plan administrator.
In addition to income level and number of dependants, will other factors be considered to determine the level of assistance to be awarded?
The amount of tuition assistance awarded to individual families will take into consideration such factors as; income level and number of dependants, as well as, tuition level of the school, family circumstances, cost of living for the area, and the ability to meet all local admissions requirements.
Who is eligible to apply?
All families enrolled at the member schools are eligible to apply. However, only those families whose adjusted gross income falls below 300% of the poverty rate, and meet all local admissions requirements, qualify for assistance through this program. Families who do not qualify for this program but feel they need additional assistance will need to contact their school directly to see if additional assistance is available.
Do tuition grants received by a family through this program impact local tuition assistance gifts to that same family?
The STO will issue gifts to families based upon that families’ identified need. Any additional assistance presented to that family would be a decision made by the school the child is attending.
Is there an appeal process if the total level of tuition assistance is perceived to be insufficient?
No. There will be no additional funds available for a broad-based STO appeal process.
What are the deadlines for the application process?
The deadline for the applications will be May 1 of each year with award letters being sent in June.