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Charter advocacy group fears House tax plan will harm charter schools

Tax changes could limit access to debt vehicles, but JLF expert says charters face bigger obstacles

The National Alliance for Public Charter Schools says the House of Representatives’ tax reform plan threatens the ability of charter schools to fund building projects through lower-cost lending programs.

H.R. 1 removes public charter schools from qualifying for three programs: New Market Tax Credits, Private Activity Bonds, and Qualified Zone Academy Bonds.

“This is devastating to charter schools, which often struggle to find space and lack the amenities of district schools,” said Nina Rees, National Alliance for Public Charter Schools president and CEO. “In some states, charter schools receive zero facilities dollars, and in all states, charter schools are dependent on finding alternative and cost-effective means of accessing capital for their buildings.”

NMTCs allows individual or corporate investors to receive a tax credit against their federal income tax in exchange for investing in Community Development Entities. PABs are tax-exempt bonds issued by local or state governments to provide special financing benefits for certain projects. QZABs give financial institutions holding bonds a tax credit instead of charging interest to school districts receiving the loan.

“Without financial instruments like NMTCs, PABs, and QZABs, charter schools would have to divert resources away from high-quality classroom instruction and into facilities,” Rees said.

Terry Stoops, vice president of research and director of education studies at the John Locke Foundation, isn’t concerned about charter schools losing access to these tax-credit programs.

“As far as charter schools go, the fact that the state doesn’t provide capital funding not only allows the state to realize savings and how much it spends on public education, it also encourages charter schools to be creative in how they provide a facility for their students,” Stoops said.

Some charter schools retrofit existing buildings, lease district school space, or bring in private developers to build a school, he said.

“There are plenty of private developers and even nonprofit lenders that provide funding for charter schools,” Stoops said. “If the tax bill passes, I don’t think charter schools are going to be harmed. I don’t think most charter schools are going to even notice.”

The Senate version of the tax bill doesn’t prevent charter schools from accessing the tax credit programs, so it earned the National Alliance for Public Charter Schools’ support.

Stoops argues the Alliance and other charter advocacy groups should be more concerned with other more pressing issues.

“There are states that are ramping up their regulatory burden on charter schools. We have funding inequities between districts and charter schools,” Stoops said. “Those are the issues that groups like the Alliance need to highlight.”