LOWER YOUR BUSINESS’S TAX OBLIGATIONS
Receive big tax credits & deductions
HOW IT WORKS
Calling all business owners: when you donate to OSF, you can lower your tax obligation and support kids across Oklahoma. This smart tax decision causes a ripple effect by helping low-income families access the school which best fits their children’s learning needs.
Benefits are limited to the amount outlined by tax regulations; we strongly recommend consulting your tax advisor.
See below for two pathways to capitalize on contributions to OSF.
1) Treat the Transaction as a Donation.
Apply the federal and state charitable tax deduction to the amount remaining after the tax credit is deducted.
2) Treat the Transaction as a Necessary Business Expense.
Apply the tax credit PLUS use the entire transaction amount as a non-itemized deduction for state and federal taxes.
The above assumes a non-itemized tax deduction, treated as a business expense with a two-year commitment of $20,000/year.
FREQUENTLY ASKED QUESTIONS
How does the IRS define a “necessary business expense?”
A business entity can deduct payments to scholarship granting organizations (SGOs) like OSF per the IRS’s final regulations:
“Section 1.162-15(a)(1) mirrors the language of §1.170A-1(c)(5), which has been in effect since 1970. Section 1.170A-1(c)(5) provided that if the taxpayer’s payment or transfer bears a direct relationship to its trade or business, and the payment is made with a reasonable expectation of commensurate financial return, the payment or transfer may constitute an allowable deduction as a trade or business expense under section 162, rather than a charitable contribution under section 170.”
Click here to view the full IRS regulations.
What form do I submit to claim my tax credits?
To claim your tax credits, you are required to fill out and submit Form 511-CR. Click here to download the form.
How much money will my business receive in tax credits?
One-year commitments receive 50% of the total amount donated and two-year commitments receive 75% of the total amount donated up to $100,000.
What is a qualified business entity, and what are its tax credit limitations?
The law states a “qualified business entity” includes limited and general partnerships, corporations, subchapter S corporations and limited liability companies filing as a partnership, corporation, subchapter S corporation or sole proprietorship.
The law does not address “sole proprietorships” or any other form of business structure, including trusts. If a donor/taxpayer believes their business should be treated as a “qualified business entity,” each taxpayer must seek a separate private letter ruling from the Oklahoma Tax Commission. See OTC Rules Chapter 1: Administrative Operations, 710:1-3-73-f, Opinions and letter rulings.
When filing as a qualified business, you can receive up to $100,000 in tax credits each year.
Do tax credits carry over?
You have 3 years to apply your tax credits, and the clock starts the year after your donation. So, for example, tax credits received from 2021 donations must be used by 2024.
What is a “proration carryover” and how does it work?
Tax credit proration occurs when Scholarship Granting Organizations (SGOs) like OSF collectively exceed the tax credit cap allowed by law. Between tax years 2013 and 2021 donors were subject to a “proration” due to exceeding the then $5 million tax credit. Donors who wished to use their tax credits could not use the full amount. For one year, the remaining credit was carried over to the next tax year. Click here to view proration information dating back to 2013 (expand the tab labeled, “What is the Oklahoma Equal Opportunity Education Scholarship Credit?”).
In 2022, the tax credit was raised collectively from $5 million to $50 million.
What does Oklahoma SB 1659, the Oklahoma Equal Opportunity Education Scholarship Act, say about tax credits?
The Oklahoma Equal Opportunity Education Scholarship Act (68 Okla. Stat. §2357.206) (SB1080) allows individuals and businesses to receive Oklahoma state income tax credits for donating to a scholarship granting organization (SGO) recognized by the Oklahoma Tax Commission. The SGO then uses those contributions to provide scholarships for eligible students to attend an accredited private school. Bill language states: “Tax credits which are allocated to such equity owners shall only be limited in amount for the income tax return of a natural person or persons based upon the limitation of the total credit amount to the entity from which the tax credits have been allocated and shall not be limited to One Thousand Dollars ($1,000.00) for single individuals or limited to Two Thousand Dollars ($2,000.00) for married persons filing a joint return.” Click here to view the full statute.