Administrators welcome IRS ruling ahead of eStem's opening set for July 21
by Cynthia Howell
Arkansas Democrat-Gazette
Tuesday, July 8, 2008
Three downtown Little Rock charter schools and their management organization received tax-exempt status Tuesday from the Internal Revenue Service, enabling the new schools to proceed with plans to open to 856 students on July 21.
“It’s a relief,” Roy Brooks, chief executive officer of the eStem Public Charter Schools Inc. management organization, said about the IRS designation required by the state. “There have been a lot of people, a lot of parents, concerned about it.”
The 501(c)(3) designation from the IRS also clears the way for the eStem elementary, middle and high charter schools to qualify for meal reimbursements from the federally funded school breakfast and lunch program, and to receive almost $5 million in state operating aid this year — including $319,153 scheduled to be distributed by the end of this month.
Joe Mittiga, chief operations officer for eStem Public Charter Schools Inc., said written notice of the tax exempt status was faxed by IRS representatives to Jess Askew III, chairman of the board of trustees for the management organization and an attorney who assisted school leaders in meeting the IRS requirements.
“We are very pleased,” Mittiga said. “We knew it was going to happen, we just weren’t sure exactly when. It clears the path for the doors to be open on the 21st.”
Section 501(c)(3) is a provision of U.S. tax law that gives a federal income-tax exemption to qualified nonprofits such as religious, charitable, scientific, public safety, amateur sports and education organizations. Tuesday’s IRS notification specifically categorizes the three charter schools and its management organization as public charities rather than private foundations.
As a result of an organization holding tax-exempt status, donors can qualify for tax deductions based on their contributions or gifts to the organization.
The tax-exempt status awarded by the IRS serves as a check or a validation of an organization’s claims to be a nonprofit operation.
Arkansas’ charter school rules, based on Arkansas Code Annotated 6-23-303 and adopted by the state Board of Education, say any entity that applies to the state to establish a charter school must also apply for tax-exempt status.
“The eligible entity must have status as a tax-exempt organization under Section 501(c)(3) of the Internal Revenue Code of 1986 prior to the first day of its operation with students,” the state Board of Education rules also state.
The three eStem schools, which constitute the largest charter school operation in the state, are scheduled to open earlier than other new charter schools this year.
In addition to serving 856 students in grades kindergarten through nine, the schools are employing 53 full-time faculty and four part-time teachers. Students and faculty will be housed in the renovated Arkansas Gazette building at Third and Louisiana streets in Little Rock.
The eStem name is an acronym for economics of science, technology, engineering and mathematics.
The schools are open-enrollment charter schools, which are taxpayer-funded public schools run by organizations other than traditional public school systems. The charter schools operate according to the terms of a contract or charter with the state.
The schools are exempted from some of the state laws and rules that apply to traditional public schools. In return for those waivers, the charter schools are held to stricter standards for student achievement.
