Rep. Fattah’s Bill Allows Tax Credit for Scholarship Trust Contributions

Congressman Chaka Fattah (D-Pa), author of the recently enacted tuition tax credit which will help millions achieve their dream of a college education and the architect of the college awareness and access program GEAR UP, has introduced “Communities Committed to College Tax Credit Act of 2009,” H.R. 1579, that provides a 50 percent tax credit for donations to qualifying local scholarship trusts. The trusts must operate in partnership with a local school district and award need-based scholarships.

“In communities across the country individuals are joining forces to form organizations to provide their local students with financial aid for college,” Rep. Fattah said. “These programs are also developing college-going cultures that nurture students whose college days are still years away.”

Fattah added, “This new trust fund legislation will encourage communities all across the nation to follow successful local models and set up their own trusts for our most underserved and deserving young people. We are providing a pathway and an incentive for pumping local capital directly toward the education of local students.”

Fattah cited several community scholarship programs, including CORE Philly in his home town of Philadelphia, the Pittsburgh Promise and the Kalamazoo Promise, as locally based efforts that have enabled high school graduates to continue on to college.

For donors to be eligible for the tax credit, the community scholarship trust must be registered with the Secretary of the Treasury as a 501(c)(3) nonprofit corporation. It must be organized into an irrevocable trust that partners with a local school district.

Trust donors - including individuals and profit-making corporations as well - will receive a 50 percent tax credit in addition to their regular deduction, a healthy return for a worthy investment. Income from these trusts may be used only to provide college scholarships to students who have demonstrated financial need.

There is a $1 billion limit on credits that can be distributed and no trust can receive more than $200 million. The amount of the tax credit each organization is eligible to receive is dependent upon the number of children served by the trust.

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