Navigating eligibility, funding, and regulations. Shareholders
Did you know?
- Members of an LLC
- Shareholders in an S-Corporation
- Partners in a Partnership
- Qualiﬁed taxpayers with income from any of the above entities is eligible to participate
Frequently Asked Questions
What is the HB 149 form and how can I take advantage of it?
S-Corps and Partnerships are allowed to file their GA income taxes at the entity level and claim up to 75% of their GA state income tax liability in tax credits through the Alyn Scholarship Fund. When this option is utilized, the income earned by the business entity will not be passed on to the shareholder(s) as the entity will pay the GA state taxes (like C-corps do). Since the individual shareholders aren't paying the taxes, the SALT cap limitation is negated.
Further, the IRS provides a safe-harbor for S-corps and multi-member LLCs, PCs (and C-Corps as well) to claim state tax credit contributions as an ordinary and necessary business expense deduction on their federal taxes. Therefore, the entire amount of the state taxes paid (whether directly or in conjunction with tax credits) is deducted and shielded from additional federal taxation. This can result in huge savings.
The full amount of the tax credit through ASF can be deducted federally as a business expense?
Yes. In August, 2020, the IRS issued final regulations 2020-17393 making it clear that C-Corps along with specified pass-through entities (S-Corps and Partnerships) can claim state tax credit payments as an ordinary and necessary business expense. Obtaining tax credits through ASF can reduce the federal taxes of S-corps & specified pass-throughs.
I'm the owner of single-member LLC, PC or sole proprietorship, how much can I contribute?
You're allowed to receive a dollar-for-dollar state income tax credit for the amount of their GA state income tax liability, up to a maximum of $25,000. Additionally, the IRS has issued guidance that you can claim state tax credit contributions as an ordinary and necessary business expense deduction on your federal taxes so long as it meets business use requirements.
What meets the Business Use requirements of the IRS?
If the contribution is made with the reasonable expectation of financial return for the business or used "in projects that improve conditions in the state" (like improving educational access & outcomes), then you meet the requirements. The IRS regulations are pretty generous in this regard and it's not a high bar to meet.
I'm a shareholder in more than one pass-through entity, can I get the full tax credit for each of them?
That depends. Shareholders are allowed a maximum of $25,000 in tax credits based on income from all pass-through entities combined.
However, if a shareholder is part of an S-Corp or Partnership that utilizes HB 149 to file their GA state income taxes at the entity level, the income from that particular pass-through is not passed on to the shareholder(s) since the entity will pay the GA state tax liability. In this instance, any taxpayer who is a shareholder in additional pass-through entities, income from those other pass-through entities that have not elected to pay their GA state income taxes at the entity level will be passed on to the shareholder(s) allowing each of them to contribute up to $25,000 for the income earned from those other pass-through entities.
What about my spouse? They're a shareholder in the pass-through entity too.
Each shareholder is allowed the maximum contribution of $25,000. So your spouse can contribute $25,000 and you may contribute $25,000 separately. The paperwork submitted to the Dept. of Revenue is in the name of each individual contributor.
I'm in a partnership with multiple owners. Can each of us contribute?
How do I know how much I can actually contribute?
All Georgia income, loss and expense from the taxpayer selected pass-through entity (or entities) will be combined to determine Georgia income for purposes of determining the tuition tax credit. The combined income will then be multiplied by 0.0575 to determine the amount of tax that was paid. The maximum amount that can be claimed as a tax credit is 5.75% of the Georgia income from pass through entity (or entities). Amounts above the 5.75% threshold may not be claimed in the current year.
How much Georgia income needs to be generated to be eligible for the full $25,000 tax credit?
A taxpayer’s Georgia income from pass through entities must be at least $434,783 to fully take advantage of the $25,000 tax credit ($434,783 x 0.0575 = $25,000).
Can I reduce my quarterly estimated tax payments by the amount I contribute?
Yes you can. You are allowed to deduct 25% of your contribution amount from each of your quarterly payments.
Can the tax credit be claimed each quarter?
Any person or business paying quarterly estimated taxes has the option to claim 25% of the contribution amount against each quarterly payment.
Can the tax credit be carried forward?
While the tax credit is a non-refundable, any portion of the tax credit that is not utilized can be carried forward for up to five years. However, if the amount of the tax credit claimed is above what the tax liability ended up being, the excess amount cannot be carried forward.
Can I choose to support more than one school with my contribution?
Absolutely. Just make that notation during the contributions process and designate how you'd like the funds to be divided and we'll honor your wishes.