This quarterly newsletter provides recent updates and education information important to Arizona STOs.

Due Date Reminders

September 30^th – FY 2018 Annual Reports are due to ADOR for each credit for which your organization is certified. The signed engagement letter for your audit or review and agreed-upon procedures engagement(s) should be received in the mail by ADOR by this date.

After Annual Report Filed- Don't forget to update your website for the scholarship data by family income disclosure for the 17/18 year.

November 15^th – Form 990, 990-EZ, or 990-N (e-postcard) is due to be filed with the IRS for fiscal years ending June 30, 2018.

Making Scholarship Plans to Maximize Students' Eligibility

Many STOs find it difficult to find qualified students for the low-income corporate or switcher scholarships since the eligibility for these scholarships is more restrictive. However, you can maximize your non-switching students' eligibility by understanding the rules and having a plan for scholarship awards.

First, keep in mind that students entering kindergarten are automatically eligible for both the switcher and low-income corporate scholarships. By giving a switcher or low-income corporate* scholarship in this first year, the student will forever be eligible for the original, switcher, and corporate* credits.

Students that aren't switching from a public school and don't have a scholarship history are only eligible for original scholarships. However, after they have received an original scholarship, the next year they may be eligible for a low-income corporate scholarship.* Once they have received a low-income corporate scholarship, they are eligible the following year to receive a switcher scholarship with no income limitations. If this plan is used, a student that has not transferred from a public school can be eligible for all three credits after just two years, which provides flexibility for the STO in future years. Please note that this order has to be followed precisely, as a non-transferring student cannot qualify for a switcher scholarship with just a previous original scholarship, only with a previous corporate scholarship.

In order to easily track which scholarships students are eligible for, STOs can also consider giving multiple scholarships in one year to a student from each of the credit programs for which the student is eligible. If this is an STO's policy, it is easy to look back at only the previous year's awards to see a student's eligibility. It also provides more flexibility in adjusting awards amounts between scholarship types to meet the STO's scholarship payout requirements.

By implementing some of these processes for your non-transferring students, your STO can ensure the most flexibility for future awards.

* - Assuming corporate income requirements are met each year

Tax Reform Affects Not-for-Profits

If your organization has employees, you may have additional reporting or tax requirements from recent tax reform. A new Internal Revenue Code (512(a)(7)) increases an exempt organization's unrelated business taxable income (UBTI) by any amount paid after December 31, 2017 for qualified transportation fringe benefits or parking reimbursements. If you pay these expenses for any of your employees, you may have an additional filing requirement or tax due.

ADOR Updates Annual Report Template

Annual Reports are due to be filed with ADOR by September 30th for the June 30, 2018 fiscal year. ADOR has updated the report template and it is now in Excel format with all four tax credit programs in the same booklet.

You will still need to mail the signed engagement letters and other supporting information to ADOR to be received by the deadline, but the completed Annual Report should be emailed.