On Your Mark, Get Set, Grab Tax Credits

Dec 21, 2017

Myles Mendoza
Credit Courtesy of Myles Mendoza

Many of us enjoy a party on New Year's Eve or New Year's Day, but for a few wealthy Illinois residents, Jan. 2 will be the day to celebrate. Beginning at 8 a.m., on a first-come, first-served basis, they can reserve a hefty tax credit in return for their donation to a private school.

Under a controversial measure added during final negotiations to the state's new school funding reform law, individuals and corporations can contribute up to $1.3 million for private school tuition scholarships. In return, they get a 75 percent tax credit. The fund can accept a maximum of $100 million per year.

The money has to go through one of the five Scholarship Granting Organizations authorized by the Illinois Department of Revenue. Myles Mendoza directs the largest and perhaps most powerful one, Empower Illinois, which is linked to House Speaker Michael Madigan. Empower Illinois will handle donations directed to dozens of Catholic, Lutheran and Jewish schools across the state. He expects tax credits to be snapped up immediately, based on patterns observed in 17 other states with similar plans.

 

“We can look towards other states where minutes after midnight on the first day going live, all of the tax credits have been taken up. So they can go very, very fast,” he says. “Illinois's an unknown.”

Here, state officials decided to open the floodgates not at midnight but at 8 a.m., inadvertently causing a ripple in potential donors’ social schedule.

"There were a lot of parties that were being planned for midnight on January 2nd, and those plans have all changed because of the new 8 a.m. start time,” Mendoza says.

The credits are distributed proportionally around the state (Springfield, for example, is allotted about 10 percent).

To be eligible for the tax-credit program, a donor has to have an account set up through the IDOR’s MyTax Illinois portal. Such accounts have multiple uses, so there’s no way to determine how many account-holders might plan to click the submit button on Jan. 2nd in hopes of securing tax credits.

Anyone who doesn’t already have an account is likely out of luck, because each account involves a security verification that includes a time-consuming snail-mail delivery, and there aren’t enough business days left for the process.

Individual donors can designate the school of their choice. But Mendoza says his organization focuses on recruiting corporate donors, because those scholarships will remain undesignated — available for students to use at any K-12 private school affiliated with Empower Illinois.

Students can begin applying for scholarships on Jan. 24, and Mendoza predicts that day will be another stampede as families scramble to grab one of the 15,000 or so scholarships.

“The amount of students that apply could be double, triple, and I'm hearing sometimes even more than that,” Mendoza says. “It could go up as high as 45,000. It could be 90,000 applicants. If the metrics work out the way they do in other states, you'd expect 1.5 to two times the number of phone calls, emails and text messages from applicants.

So we could be looking at 90,000, 100,000 different inquiries that are coming in via phone, texts or email.”

His organization is already training phone bank workers to handle the expected deluge of calls — in English, Spanish, and possibly Polish. He calls it an “amazing community-driven effort.”

“I’ve never experienced anything more diverse than this,” Mendoza says.

This initial assignment of scholarships will be crucial, because in subsequent years, priority will be given to students who had a scholarship the previous year and their siblings. Students who reside in focus districts or whose household income is less than 185 percent of the federal poverty level, or $45,510 for a family of four, get priority through April.

Not everyone will is so eager to celebrate this private school program. Public school advocates point to the $75 million tax dollars that will be lost, and call this plan a gift to the rich at the expense of public school students. Dan Montgomery, president of the Illinois Federation of Teachers, says the plan is part of a national Republican-led effort to destabilize public education.

“Let’s not make any mistake: This is big money,” he says. “The people who are the big winners here are the wealthy donors, not the children.”

In fact, a proposal that would have provided a similar tax credit incentive for people who might want to donate to public school foundations got negotiated out of the school funding compromise. But Mendoza — who helped craft the tax-credit program, called Invest In Kids — says public schools will benefit from other parts of the legislation.

“I believe that the needs of public school students really were served better by school finance reform than they were through a tax credit vehicle,” he says.