Businesses allowed to get tax credits for STO gifts


By Celine Klosterman

Proponents of School Tuition Organizations (STOs) hope a new Iowa law letting corporations earn tax credits on STO donations will make raising money easier.

Governor Chet Culver signed a bill May 26 allowing corporations to receive a 65 percent tax credit on their donations to STOs, which provide grants for students to attend accredited nonpublic schools in Iowa. Individual donors have earned a 65 percent tax credit on their gifts since 2006.

Under the new law, a quarter of available tax credits may go to corporations. Iowa still caps annual STO tax credits at last year’s limit of $7.5 million, but has now widened the field of potential donors.

“For us, this means we have a better chance of issuing all our tax credits this year,” said Steve Roling, president of the STO of Southeast Iowa. That STO covers Catholic schools outside Scott County in the Davenport Diocese. The other STO in the diocese, the Mississippi Valley STO, covers Scott County Catholic schools. “We had a hard time issuing all the credits last year because of the economic downturn. And we’ve certainly had interest from corporations” in donating, Roling said.


Programs similar to STOs in states such as Florida and Pennsylvania have seen “huge” participation from corporations, said Trish Wilger, executive director with Iowa Alliance for Choice in Education and Iowa Advocates for Choice in Education.

“This is a major victory,” she said of the new law.

The Iowa Department of Revenue will determine this summer when corporations can begin receiving tax credits for donations.

For the 2009-10 school year, 828 students have been awarded STO grants to attend Catholic schools in the Davenport Diocese. Through the STO of Southeast Iowa, 486 students were awarded an average of $1,450, said Roling. Through the Mississippi Valley STO, 342 students have so far been awarded an average of $1,720, according to Liz King, MVSTO coordinator. 

Grant recipients must earn less than three times the federal poverty level. Ninety percent of donations received must go toward grants.

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