- The Legislature passes a law that authorizes the State to grant a certain dollar amount of tax credits. Those appear as expenditures in the State’s budget alongside all other state expenditures. The Legislature appropriated $8.5 million dollars for the first two years of the program.
- A businesses applies to the New Hampshire Department of Revenue Administration for the tax credits.
- NHDRA approves, allocating a certain amount to the business on a first come first served basis.
- Within 60 days, the business must donate the money to a scholarship organization or lose the allocation of tax credits. For a $10,000 donation, for instance, the business will pay about $429 out of pocket. The rest is money it would have paid in taxes. So it’s just as if the business had written a check on the State’s bank account.
- The scholarship organization provides a donation receipt to the NHDRA.
- The scholarship organization can take up to 10% of that as a fee. (One scholarship organization, NEO, offered to kick back part of this the religious schools that helped get business donations.)
- The scholarship organization gives the rest of the donation out as tuition subsidy, directly to schools, for specific children.
- The scholarship organization then gives the business a second receipt saying that the money has gone to a school.
- The business provides that receipt to NHDRA in lieu of taxes it would have owed.
- If the student came from a public school that receives state adequacy aid, the State reduces the school’s adequacy aid by the amount that would have gone to the school for that student.
- The school either reduces it’s budget or increases local property taxes to make up for the loss.