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* From an Institute on Taxation and Economic Policy report on the 75 percent state tax credit given to Illinoisans who donate to the Invest in Kids program…
Illinois is among the states that have chosen to open the door to a highly problematic—and legally dubious—loophole that some high-income families are using to avoid state and federal tax on their capital gains income. These families send their stock holdings, rather than cash, to voucher-bunding groups and claim that their gifts do not give rise to capital gains income, even though they received a payout from the state worth most of their stock’s value. Fenwick High School, just outside of Chicago, has encouraged families to exploit this convoluted scheme, calling it “double tax savings.” When capital gains tax avoidance is stacked on top of the tax credit itself, the combined revenue loss to Illinois can go beyond 75 percent of the amount contributed.
* From Fenwick’s site. Pay special attention to the last paragraph…
The IL Tax Credit Scholarship program is in place for at least two more years: 2022 and 2023! You can “pay” your Illinois income taxes in 2022 by taking advantage of the Illinois Tax Credit Scholarship program as follows:
• Make a contribution to a scholarship granting organization (SGO) like Big Shoulders Fund or Empower Illinois.
• Direct your contribution to Fenwick
• Get a 75% state income tax credit (not a deduction, a credit!) for the amount of your donationTake advantage of this program now for 2022! If you do not use all your tax credits in 2022, you can roll them forward for up to five years!
The stock market is still trading near all-time highs! Take advantage of double tax savings by contributing long-term appreciated stock to an SGO (thus avoiding capital gains tax), direct your gift to Fenwick, and receive a state income tax credit of 75% of the amount of your gift!
posted by Rich Miller
Wednesday, Jun 21, 23 @ 11:12 am
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A report from a progressive pro-taxation organization. They lose credibility when you use words like “Scheme” to describe a legal tax avoidance plan that benefits low-income kids that want a better education. Additionally, there are likely very few individuals who do this so-called Scheme…
• The average donation to Empower Illinois is $14,440, and the most common donation is $1,000.
https://tinyurl.com/393pyr9r
Comment by Donnie Elgin Wednesday, Jun 21, 23 @ 11:33 am
If legislators want to touch the whole gifting stock tax avoidance maneuver, I’m all for that, but ending the program will result fewer scholarships being given out to those who otherwise couldn’t afford to attend private schools (including the school that Pritker sent his kids to).
Comment by Chicagonk Wednesday, Jun 21, 23 @ 11:33 am
SECTION 3. PUBLIC FUNDS FOR SECTARIAN PURPOSES FORBIDDEN
Neither the General Assembly nor any county, city, town, township, school district, or other public corporation, shall ever make any appropriation or pay from any public fund whatever, anything in aid of any church or sectarian purpose,or to help support or sustain any school, academy, seminary, college, university, or other literary or scientific institution, controlled by any church or sectarian denomination whatever; nor shall any grant or donation of land, money, or other personal property ever be made by the State, or any such public corporation, to any church, or for any sectarian purpose.
Comment by Buford Wednesday, Jun 21, 23 @ 11:46 am
“who otherwise couldn’t afford to attend private schools”
Every single student at Joliet Catholic Academy is getting some form of an empower scholarship, ranging from 25%-90% of tuition paid.
They have a catchy video about it right on their home page, right now.
If you think for a second every single student at that school is coming from a family that ‘otherwise couldn’t afford it’ - you aren’t using actual data.
Maybe you think it’s a good scholarship program(I still don’t think it is personally), but the Catholic schools like Fenwick and JCA are abusing it to a clearly damaging degree.
Comment by TheInvisibleMan Wednesday, Jun 21, 23 @ 11:48 am
==The average donation to Empower Illinois is $14,440, and the most common donation is $1,000.==
I’m no mathematician, Donny, but if the most common gift is $1,000 and the average gift is 5-figures, that means some wealthy folks are donating quite a bit of stock to get to that average.
Comment by Travel Guy Wednesday, Jun 21, 23 @ 11:53 am
That’s easily fixable within the state statute if a grand bargain ever came together.
Comment by Halfback option Wednesday, Jun 21, 23 @ 11:57 am
=A report from a progressive pro-taxation organization=
Nopde, one of the schools put it out for everyone to see. Definitely a scheme.
Comment by JS Mill Wednesday, Jun 21, 23 @ 12:05 pm
Given they have scaled back deductions for average people so that their tax deductions no longer count, I would be against this scheme or any others like it. Make it so that if you donate stock you also have to donate any proceeds like tax credits also to the organization. Otherwise this is just another benefit to the 1%.
Comment by cermak_rd Wednesday, Jun 21, 23 @ 12:06 pm
=Every single student at Joliet Catholic Academy is getting some form of an empower scholarship, ranging from 25%-90% of tuition paid.=
Not true. Families may not pay the entire cost of educating a student, that is only because fundraising helps lower the cost schools can charge. Empower IL does NOT pay for every student to attend any school.
Comment by School Guy Wednesday, Jun 21, 23 @ 1:54 pm
My question - if wealthy people have money to donate for private school scholarships, and want to do that because they want low income kids to go to private schools, why do they need a tax break to donate. Just donate. If the response is, but they won’t, then the game is up - these individuals care more about their own tax break than poor kids.
Comment by Invest in Kids Wednesday, Jun 21, 23 @ 3:34 pm
Does it matter?
The kids whose parents donated will still pay for their kids to get the best education they can afford.
The kids who can’t afford it are out of luck.
How much tax revenue was diverted because of this program?
Was that diversion strictly taken from school funding? Or somewhere else in the $50 billion budget?
Comment by Frida's boss Wednesday, Jun 21, 23 @ 3:38 pm
===why do they need a tax break to donate===
They do. Every donor from every income bracket has finite resources. Most donors use this to multiply their giving x4.
Comment by Deep Dish Wednesday, Jun 21, 23 @ 4:39 pm
“Not true.”
The great thing about reality, is that there is a video on the home page of JCA explaining how they use ‘leveraged financial aid’ and the empower scholarships to do so. Where they go on to describe how that works, and go on further to describe ‘no child pays the full tuition rate’. Skip to the 1:56 mark in the video, and watch it for yourself. Or just skip to the 1:26 mark to hear “the cost of tuition has already been supplemented for EVERY Joliet Catholic student”.
But don’t try to pass off your weak attempt at obfuscation as if it is factual. I attended school at this diocese, I know all the ways they try to avoid reality.
Comment by TheInvisibleMan Thursday, Jun 22, 23 @ 8:33 am