Carl Davis, the research director at the Washington-based Institute on Taxation and Economic Policy, has written extensively about ETCs as tax shelters.
Nationwide, about $1 billion in potential tax dollars is diverted each year into these scholarship organizations, according to a 2016 ITEP report by Davis. What kinds of tax credits states allow under ETC programs, and how generous they are, vary widely. But in at least nine states, the types of credits allow donors to stack state and federal tax breaks – and come out ahead.
Davis points out that scholarship organizations, wealth managers and schools will advertise ETC programs in those states using phrases like “profit” and “make money.” One Georgia accountant, for example, blogged for the accounting firm True Wealth Management that “if you are a taxpayer stuck in Alternative Minimum Tax (AMT), this charitable contribution can make you money! That’s right, AMT filers are ahead by 28% on these contributions.”
“This isn’t an appeal to people’s charitable side. It’s advice about how to make a buck,” Davis said. Read more