Credits Where Credits are Due.

On Monday, the Editorial Board of the Arizona Republic continued its Jihad against school tax credits and--unable to make its case through mere persuasion--resorted to a  classic Mainstream Media tactic.

The premise of the editorial is that the practice of “recommending” which students benefit from scholarships is illegal, and that Arizona lawmakers are gambling that the IRS won’t notice.
 
In order to convince the reader that the practice of “recommending” is indeed illegal, the editorial writers refer to an article written by two Republic reporters.

Unethical is one thing. Illegal is another, far more serious matter.

Reporters Pat Kossan and Ronald J. Hansen have found no shortage of tax experts who believe the practice of "recommending" specific students transgresses federal tax law.

But that’s not what the article says.   In fact, the experts quoted in the Kossan/Hansen article say that while outright  swapping of charitable contributions is illegal, Arizona’s policy of allowing “recommendations” is in a gray area.
 
The absolutes begin to get gray over the practice of "recommending" that a donation go to a specific child, perhaps a grandchild or an employer's son.
 
Kossan and Hansen then go on to quote three tax preparers as well as a tax professor and the Director of a School Tuition Organization.  The professionals sound a common theme.  Openly earmarking a contribution to a specific child is illegal and earmarking a contribution to a specific child and disguising it as a recommendation is also illegal but making a legitimate recommendation is legal.
 
The entire point of the Editorial is that the practice of recommending is illegal and that the legislature is taking a huge risk by gambling that the IRS is too busy to investigate.   The editorial writer uses a Republic article as a source and resorts to  mischaracterizing the article in order justify the editorial.  Naturally, this approach only works if no one remembers the original article…or if no one is there to blog about it.

Journalists are shocked when they learn that the public distrusts the media, but shenanigans like Monday's editorial go a long way toward eroding public trust.  And readers who don't trust a source eventually stop reading the source.

That my friends is one reason why the newspapers are fading away. 

Comments

[Winnie]

Completely aside from the "steering donations" issue, an individual is not eligible for a federal tax deduction on a donation he also gets a state tax credit for.

[Blackbird03]

Nice of them to hit the tuition organizations during their major fund-raising efforts. I bet this costs these schools big $ (maybe 20% or more) by creating uncertainty and casting aspersions about the program. It costs the state big time too as every kid that goes to a private school saves the state big $. How about sending them a bill for damages.

Just when private schools need the most help to support their students, the lib media launches this fusillade of crap. This is so outrageous because there is no one to call the Republic on their blatant effort to act as a proxy for the teachers unions. The Republic's efforts were thoroughly rebuffed at the Legislature and now its time to put them out of business for good! How about an investigation into their sources for a start. Thanks for pursuing this Greg.

[Arizona is getting stupid.]

Ye gawds, sometimes you are a total fool.

All it takes is the IRS to decide that the entire program is illegal and send a mass mailing of pay or die to all of the contributors with a prove that it didn't benefit your child.

Greggie boy, that is the IRS, you are guilty and will pay unless you can prove to their satisfaction you are innocent. As a CPA, you should well understand this one. The fact that the whole program has degenerated into a swap-a-thon to cut tuition costs, and benefit certain critters at the lobbyslature further adds to my disgust, and a wish to see the IRS just send those letters begins to rise in my hopes.

As a person who sends his kid to private school, and continuously gets the thinly veiled advertisements for the scam, I decided on my reading of the tax code not to participate, because of the IRS's ability to look back 7 fricking years and send a giant bill. I further decided on that course after talking with some very nice folks I know who work at Revenue and showed them some of the literature I received. Their off the record comment was most likely it is illegal, but politically we don't dare say a word. They are also the ones who pointed out to me the biggest danger wouldn't be from DOR because of the political interference, but from the FEDS!

Think about it.

The Repulsive is the least of anybody's worries. If I had to choose between worrying about the media, or worrying about the folks who can take a chunk of my wealth without much due process- that is a no brainer.

[ron]

What is really unnerving for the rich people who have been participating in this 'legal' ponzi scheme is that the IRS might really come knocking on their door and do an audit all of their taxes for years they have participated. It is further unnerving because nice people who responded to their friends appeal to 'Please write a check for John to _________ (name of school here) with John's name in the Memo line so it will be credited to him.' So as a 'nice friend' they did so 'in all innocence' and now open themselves to a visit from the IRS.

Of course, the friends whose child benefitted from the generosity will not be around to pay the legal bills incurred.

[Winnie]

If I donate to the organization and don't take the deduction on my federal taxes, why would the IRS care?

[nick]

The rats at the landfill shreik when they
know a load of the Rag will be dumped.

[Ken]

Some of us donate to tuition organizations with no recommendation whatsoever. Also, we do not have any children in private school so we cannot directly benefit either (in fact we homeschool). I wonder how many others are in the same situation.

Coincidentally, the only time we have donated to a school with a recommendation was a donation to a public school. Somehow the Republic does not see a problem with that. Interesting.

[Tom in Kingman]

The entire tax credit program for private schools is based on bogus premises. All you had to do is look at a buffoon like Trent Franks, the father of this mess for proof. It is pure ideology, to put public money into private shcool, and the idea that it "saves" money for the public schools is nonsense.

[Phillip D]

The author here is making an extremely tangential point, and that specific tangential point is unimportant when compared to the well-known and now oft-reported abuse of Arizona's Tuition Tax Scheme.

Even the Libertarian leaning East Valley Tribune calls it "A Rigged Privledge," a system "supposed to revolutionize school choice for disadvantaged children. Instead it fostered a rigged system that keeps private education a privilege for the already privileged." (http://www.eastvalleytribune.com/page/taxcredits)

Reporters and commentators alike, all over the state, in all sorts of publications and blogs, are writing about how everybody knows how to "play the game" and get donations directed to their kid.

It's patently illegal, unethical, and undermines our republic's cherished system of public education. It needs to be stopped!

[Falcon9]

Silly goose, the tax credit program strengthens our public education system. In fact, it is a key part of our three part public education system. 1) District schools, 2) Charter Public Schools and 3) Tuition tax credits.

This three part system is how we educate the public.

The district system in Arizona only recently became part of the public system with open enrollment. Before that, it was a system of private schools paid for by the public.

The district system is still dysfunctional. Almost unbelievably, there is absolutely no correlation between spending and results. Go figure - the only part of our economy where that is true.

[Tom in Kingman]

The Arizona legislature is a much better example of there being no correlation between spending and results. Public school boards are incredibly accountable.