RI Tax Credit Program

The Grace School at Meeting Street is a proud partner of STEPS (Scholarships to Economically Poor Students), a scholarship granting organization (SGO) comprised of area independent schools that provide robust financial aid to students from low-income households. STEPS is exclusively supported by the Rhode Island Scholarship Tax Credit Program, which allows corporations to receive valuable RI tax credit for contributing scholarship dollars.

C-Corps, S-Corps, LLPs, and LLCs of all sizes can qualify for a state tax credit of up-to 90% of their total donation to STEPS. The application process is simple and tax credits can be as large as $100,000. Learn more about STEPS Program Information (.pdf), or to download the application (.pdf), visit the RI Division of Taxation website.

Many of Rhode Island’s best known companies are participating, so why aren’t you? For more information, please contact Lori Sousa at 401.533.9223.

Frequently Asked Questions (FAQs)

WHAT IS STEPS?

STEPS - (Scholarships to Economically Poor Students) - is a certified SGO comprised of The Grace School, Community Preparatory School, San Miguel School and Sophia Academy.

WHAT CHILDREN ARE ELIGIBLE?

Children enrolled in grades K-12 at one of the five STEPS schools, including The Grace School, whose family’s annual household income does not exceed more than 250% of the federal poverty threshold.

HOW DOES THE TAX CREDIT WORK?

Businesses can choose to make a 1-year or 2-year commitment. A 1-year commitment results in a 75% credit while a 2-year commitment results in a 90% credit with a maximum credit of $100,000. Therefore, a business can contribute up to $111,111 per year. Donors can also claim the contribution as an itemized deduction on federal returns, although the state deduction will be reduced, since the donor is paying less tax.

WHICH BUSINESSES CAN PARTICIPATE?

C-Corporations, S-Corporations, Limited Liability Partnerships and Limited Liability Corporations may receive up to a $100,000 tax credit annually for a donation to STEPS. Companies are selected for participation in the program through a state lottery. The lottery is capped at $1,500,000 in credits annual.

HOW DOES MY BUSINESS APPLY FOR AN RI CORPORATE SCHOLARSHIP TAX CREDIT?

Qualified businesses can apply for the tax credit by filling out and submitting an application available from an SGO or on-line. The program is limited to $1.5 million in approved tax credits annually. Once the annual cap is reached no more tax credits will be approved until the following year. Applications must be submitted to the RI Division of Taxation on July 1.

WHEN ARE CONTRIBUTIONS DUE?

Within 30 days of submittal, businesses receive an approval or denial from the Division of Taxation. Approved businesses have 120 days to make the contribution to the SGO. Businesses whose tax credit application is not approved are under no obligation to make a donation to STEPS.

ARE PASS-THROUGH ENTITIES ELIGIBLE?

The credit passes through to the shareholder/member/partner pro-rata based on ownership percentages. The credit can be claimed on RI-1040 against ALL of the taxpayer's RI tax, not only against the income from the pass-through entity, including spouse's income, W-2 income, investment income, etc. The pass-through entity does not have to have income to qualify for the credit. A taxpayer can use an entity that has no business income and pass the credit through. For example, if an RI taxpayer were an S-corporation that also has a nonresident shareholder, that corporation would not want to contribute. But if that RI taxpayer also owns an LLC that has an unrelated source of revenue, i.e., rental property in the LLC, the LLC qualifies to make the contribution.

HOW DOES A CONTRIBUTION BECOME A SCHOLARSHIP?

Scholarship tax credit contributions are distributed to certified SGOs, one of which STEPS. SGOs are charitable organizations-representing two or more private schools-that administer tuition assistance grants to eligible students, allowing them to attend any qualified participating school of their parents' choice. A corporation may allocate its contribution to one or more SGOs.

CAN NON-RESIDENTS APPLY?

The credit does not help a nonresident since it would be negated by a reduction of the credit for tax paid to other states on their home state returns.

WHOM CAN I CONTACT FOR MORE INFORMATION?

Lori Sousa, Grants and Corporate Relations Officer at Meeting Street, 401.533.9223 More information and applications are available at: www.tax.ri.gov/Credits/index.php

SHARE THIS PAGE