Helping Kids Help Themselves


Reader Comment: You recently wrote an article about how to get a State of Alabama income tax credit by donating to charitable foundations that support a better education for low income children who are currently stuck in failing schools. This recommendation should come with one large caveat. I was one of the original people who signed a contract with the State for the PACT program. The original PACT program was in fact a contract, which I read through thoroughly and had my business lawyer also review. We discussed it and agreed that the only downside was a default by the State, which we further agreed, in the early nineties would never happen. Even though a default in a contract by any of the rest of us would have grave repercussions, as you know, this one did not. And I’m still paying more for my son’s college because of the State’s default and financial incompetence. So, when you tell us this is a good deal, remember the State can always change its mind and disallow the credit at some point if it feels like it. A.T.
Response: I understand your frustration with how the PACT program played out. When it was first introduced, we performed numerous calculations and determined, like you, that this was a great deal for the consumer, that the State had miscalculated the funding needed, and that the State would ‘make up’ the difference if we were correct about their miscalculations. Obviously we were wrong about the State’s willingness to live up to the full contract terms as well as the spirit of the original agreement.
I do believe the opportunity to receive a dollar-for-dollar State of Alabama income tax credit under the Alabama Accountability Act is a very different scenario:
·        The $25 million set aside for this program each year represents less than one-half of one percent of the annual budget the state allocates for the education fund. Strategically used it can have a big impact on the lives of children seeking a better education but it’s not a lot of money relative to total education spending in our state.
·        The tax credits are received on a calendar year basis whereas the PACT program was a ten to twenty year promise. I have personally reserved my tax credit for 2013 and I have no concern that I won’t get it.
Jenny McCain, President of Scholarships for Kids, Inc., (one of the organizations that provides scholarships under the Act), had this to say: "Fourteen states have tax credit laws like the Alabama Accountability Act and scholarship programs like ours have been around for twelve years. No state tax credit scholarship program has been repealed. In fact the majority of states have amended their laws to increase the amount of tax credits available and many have expanded the types of entities that can participate to include S-corporations and partnerships.”
I believe this is a great program and we as Alabamians should embrace the opportunity to redirect some of our income tax dollars to helping these kids who want a chance at a better education. Remember, it takes less than one-half hour of your time and won’t cost you a penny. To get started visit
Reader Question: We have been informed by our employer that our 401k plan will be transferred to a new provider. I assume this will be transparent, but I also expect some disparities from the change. Is there anything I need to be aware of, good or bad? And is there anything I should or can take advantage of? Is this switch common? R.A.
Answer: First of all it is not unusual for a company to change providers of employee benefits. In fact, companies would likely benefit from periodically having their benefit plans reviewed and re-quoted. Many times the existing provider will offer more competitive pricing on existing benefits. With a 401k plan, often the new provider will attempt to ‘map’ over investments from the old plan to ‘best fit’ similar investments under the new plan. For example, if under your old plan you are invested in a U.S. stock fund, the new provider will transfer those assets to a U.S. stock or stock index fund of the new plan. In other cases, they may transfer to a cash account and expect you to make new investment decisions. What’s important for you to do is to take the time to review your investment options under the new plan and then invest according to your investment objectives. While it forces you to spend some time you hadn’t expected, it should be well worth the effort. If you need assistance with these decisions, contact your Human Resources Department. The plan provider will likely have an investment expert who can assist you. Or contact your own investment advisor.