AZ SB1318

Increases the minimum percentage of annual revenues that school tuition organizations must allocate for educational scholarships or tuition grants from 90% to 95%.

Requires school tuition organizations to allocate at least 90% of contributions for scholarships to students whose family income does not exceed 185% of the economic eligibility threshold for free or reduced-price lunches under the national school lunch and child nutrition acts.

Changes the language prohibiting tax credits when donors "designate" contributions to instead prohibit credits when donors "request or recommend" contributions for the benefit of specific students, and removes the prohibition on reciprocal designation agreements between taxpayers.

Modifies audit requirements so that only school tuition organizations receiving $1 million or more in donations must conduct full financial audits; those receiving less than $1 million must conduct financial reviews instead.

Clarifies that school tuition organizations cannot award scholarships solely based on donor recommendations but may consider recommendations among other factors, and must include notice language about these restrictions in solicitation materials and applications.