As the federal government launches a new tax credit program to encourage donations to nonprofit educational entities, including private schools, it’s time for a look back on Illinois’ Invest In Kids program.
The 2017 program created up to $75 million per year in scholarships by giving individual and corporate donors 75 cents of income tax credit per dollar donated (up to $1 million each year per filer) which impacted 9,500 students. Lawmakers opted not to renew the program in 2023.
The new federal program, according to Forbes, applies to people earning as much as 300% of their local median income who “can donate up to $1,700 to an eligible educational nonprofit and receive a dollar-for-dollar tax credit. The donation would be awarded in the form of a scholarship by private schools to fund tuition, boarding, books and other expenses for students.”
States will have to opt in to the program, set to take effect in fiscal 2027, so expect continued debate presented as fiscal policy considerations but largely distilling to political implications.
The end of Invest In Kids is relevant not just because that decision will color conversation about the federal plan, but also owing to a successor: the 2024 Illinois Gives Tax Credit. Starting this year, the program incentivizes up to $100 million over five years by offering all Illinoisans a 25% state income tax credit for any donation to the permanent endowment fund of one of the state’s 35 community foundations.
That means the Department of Revenue can issue up to $5 million in total credits per year to individuals (no one taxpayer can get more than $100,000) with a cap of $750,000 per foundation. That’s 15% of the total, which means not every foundation will be able to attain the maximum benefit every year, but it’s a solid attempt at equity in the initial phase that could be tweaked if the program continues.
But all those numbers get aside what has always been the larger point: Invest In Kids was about private schools. Illinois Gives money is available to agencies that “provide charitable grants for the benefit of residents of Illinois or charities and charitable projects located in Illinois.”
The groups that benefit provide services but also hire workers. Forefront, a statewide association for nonprofit groups and foundations, said more than 50,000 nonprofit businesses employ 11% of Illinois’ overall working population.
As I noted last summer, individual foundations bear responsibility for encouraging directed donations, then must follow up by promoting efforts that donations make possible to incentivize the General Assembly to maintain or expand the program.
Offering tax breaks to encourage donations tends to be smart politics. Prioritizing one class of beneficiaries invites accusations of playing favorites.
• Scott T. Holland writes about state government issues for Shaw Local News Network. He can be reached at sholland@shawmedia.com.
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