Scholarship Foundation Qualifications & Reporting Requirements
What are the qualifications for becoming an approved scholarship foundation?
- A scholarship foundation must be a nonstock, nonprofit corporation that is exempt from taxation under IRC § 501(c)(3). As part of the application, VDOE requires a copy of the organization’s IRS ruling letter that states the entity is exempt from taxation under IRC § 501(c)(3).
- A scholarship foundation must be established to provide financial aid for the education of students residing in the Commonwealth of Virginia. An organization that was established for a charitable purpose other than providing financial aid for education may still qualify for the tax credit program if its articles of incorporation or equivalent documents, or its governing rules, such as its bylaws, have been legally and validly amended to also specifically state that it will provide financial aid for the education of students residing in the Commonwealth. As part of the application, a scholarship foundation is required to submit a copy of the articles of incorporation or equivalent documents, or the governing rules, such as the bylaws.
- A scholarship foundation must be registered with the Virginia Department of Agriculture and Consumer Services (VDACS) to solicit donations in Virginia. As part of the application, VDOE requires documentation that the applicant complies with Section 57-48, et seq., of the Code of Virginia, including a copy of the VDACS website that shows the organization is registered or exempt, a current registration letter, or a copy of the current renewal application.
- A scholarship foundation, in awarding scholarships from tax credit-derived funds, must provide VDOE assurance to DOE that it will:
- provide scholarships for qualified educational expenses only to students whose family's annual household income is not in excess of 300 percent of the current poverty guidelines or to eligible students with a disability;
- not limit scholarships to students of one school; and
- comply with Title VI of the Civil Rights Act of 1964, as amended.
As part of the application, the scholarship foundation is required to include a statement assuring that it will adhere to the above requirements.
What are the reporting requirements for scholarship foundations?
- A scholarship foundation must have an audit or review, or a compilation if the applicant’s total revenues (including the value of all donations) were $100,000 or less for the most recent year ended, performed by an independent certified public accountant. The scholarship foundation is required to provide a copy of the audit, review or compilation within nine months after the end of the fiscal year. As part of the application, the applicant is required to submit a copy of the most recent audit, review or compilation. In the event that an applicant has not been in existence for two years or more, and a compilation, audit or review has not been conducted, the applicant must provide a written statement to the Department that explains why such compilation, audit or review is not available, and when the applicant expects to have a compilation, audit or review conducted.
- By September 30 of each year, on a reporting template provided by VDOE, all scholarship foundations must provide the following information to VDOE and certify its completeness and accuracy:
- the total number and value of contributions received by the foundation during the12-month period ending on June 30 of the prior calendar year for which tax credits were issued;
- the dates when such contributions were received; and
- the total number and dollar amount of qualified educational expenses scholarships awarded from tax-credit-derived donations and disbursed by the scholarship foundation during the 24-month period ending on June 30 of the current calendar year.
In July, VDOE will provide a report template, with instructions on how the report is to be completed, to all participating scholarship foundations. The Guidelines for the Education Improvement Scholarships Tax Credits Program provides further guidance about this reporting requirement.
**Please note that under the law, any scholarship foundation that fails to provide this certified report to VDOE by September 30 each year will be subject to the following penalties:
- First offense – a $1,000 civil penalty. The civil penalty must be remitted to the Department by November 1 of the same year.
- Second offense within a five-year period – the scholarship foundation will be removed the list of approved scholarship foundations and will not be permitted to request preauthorization for additional tax credits, nor will it be permitted to receive and administer additional tax credit-derived funds. After two years, the scholarship foundation may reapply to the Department to become an approved scholarship foundation and receive and administer tax credit-derived funds. If a scholarship foundation is authorized by the Department to be added to the list of approved scholarship foundations, the applicant scholarship foundation will not be considered to have any previous offenses.