H.R. 121 — Introduced in House

I 114th CONGRESS 1st Session H. R. 121 IN THE HOUSE OF REPRESENTATIVES January 6, 2015 Mr. Garrett introduced the following bill; which was referred to the Committee on Ways and Means, and in addition to the Committee on Education and the Workforce, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned A BILL To allow a State to opt out of K–12 education grant programs and the requirements of those programs, to amend the Internal Revenue Code of 1986 to provide a credit to taxpayers in such a State, and for other purposes. 1. Short title; table of contents (a) Short title This Act may be cited as the Local Education Authority Returns Now Act. (b) Table of contents The table of contents for this Act is as follows: Sec. 1. Short title; table of contents. Title I—Ability of States to opt out of K–12 education grant programs Sec. 101. Determinations by Secretary of the Treasury as to which States are opt-out States. Sec. 102. Amounts creditable to States. Sec. 103. Opt-out States not eligible to receive grants under K–12 education grant programs. Sec. 104. Requirements of K–12 education grant programs do not apply to opt-out States. Sec. 105. Definitions. Title II—Credit to taxpayers in opt-out State Sec. 201. Refundable opt-out State education credit. I Ability of States to opt out of K–12 education grant programs 101. Determinations by Secretary of the Treasury as to which States are opt-out States (a) Deadline Not later than February 1 of each calendar year (hereinafter in this title referred to as the determination year), the Secretary of the Treasury shall determine which States, if any, are opt-out States for the calendar year (hereinafter in this title referred to as the opt-out year) that follows the determination year. (b) Determination The Secretary of the Treasury shall determine that a State is an opt-out State for an opt-out year under subsection (a) if, and only if, there is transmitted to the Secretary a copy of a law, in effect as of January 1 of the determination year, that can fairly be read to mean that the policy of the State is to not accept grant funds under the K–12 education grant programs, and thereby to not be bound by the requirements of those programs, for that opt-out year. (c) Notification Upon making a determination under subsection (a), the Secretary of the Treasury shall transmit that determination to the Secretary of Education and to Congress. 102. Amounts creditable to States (a) In general For purposes of determinations relating to the refundable opt-out State education credit under section 36D of the Internal Revenue Code of 1986, as early as practicable for a calendar year, the Secretary of Education shall, for each State, determine the amount creditable to that State for that calendar year and make available that determination. (b) Amount creditable The Secretary shall determine the amount creditable to a State for a calendar year as follows: (1) If the State was not an opt-out State for the preceding calendar year, the amount creditable for the calendar year shall be equal to the aggregate K–12 funding (as determined under subsection (d)) for that State for that preceding calendar year. (2) If the State was an opt-out State for the preceding calendar year, the amount creditable for the calendar year shall be equal to— (A) the extrapolated amount (as determined under subsection (c)) for that preceding calendar year, plus (B) the amount that results when the amount creditable for that preceding calendar year is subtracted from the extrapolated amount (as determined under subsection (c)) for that preceding calendar year. (c) Extrapolated amount (1) In general The Secretary of Education shall determine the extrapolated amount for a State for a calendar year. The determination shall be based on— (A) the amount of grant funds that would have been received other than on a competitive basis, as direct grants, subgrants, or otherwise, under the K–12 education grant programs, by the State or any public educational entity in the State for that calendar year, had it elected not to be an opt-out State for that calendar year; plus (B) the average annual amount of all grant funds that would have been received on a competitive basis, as direct grants, subgrants, or otherwise, under the K–12 education grant programs, by the State or any public educational entity in the State for that calendar year and the four preceding calendar years, had it elected not to be an opt-out State for those calendar years. (2) Regulations The Secretary shall prescribe regulations for making determinations required by this subsection. The initial regulations shall be prescribed not later than 6 months after the date of the enactment of this Act. (d) Aggregate K–12 funding The aggregate K–12 funding for a State for a calendar year shall be equal to— (1) the amount of all grant funds received other than on a competitive basis, as direct grants, subgrants, or otherwise, under the K–12 education grant programs, by the State or any public educational entity in the State for that calendar year; plus (2) the average annual amount of all grant funds received on a competitive basis, as direct grants, subgrants, or otherwise, under the K–12 education grant programs, by the State or any public educational entity in the State for that calendar year and the four preceding calendar years. 103. Opt-out States not eligible to receive grants under K–12 education grant programs (a) In general When a State is an opt-out State for a calendar year, neither the State nor any public educational entity in the State is eligible to receive, as direct grants, subgrants, or otherwise, any funds under any of the K–12 education grant programs for that calendar year. (b) Reallocation Any funds under a K–12 education grant program that are not allocated to a State or public educational entity in the State by reason of subsection (a) shall be returned to the Treasury. 104. Requirements of K–12 education grant programs do not apply to opt-out States When a State is an opt-out State for a calendar year, neither the State nor any public educational entity in the State is subject to any statutory or regulatory requirement of a K–12 education grant program for that calendar year. 105. Definitions In this title: (1) The term K–12 education grant program means any grant program carried out under any title of the Elementary and Secondary Education Act of 1965, except for the following: (A) Indian, Native Hawaiian, and Alaska Native Education Title VII (20 U.S.C. 7401 et seq.). (B) Impact Aid Title VIII (20 U.S.C. 7701 et seq.). (2) The term public educational entity means, with respect to a State, the State educational agency, any local educational agency in the State, or any public elementary or secondary school in the State. II Credit to taxpayers in opt-out State 201. Refundable opt-out State education credit (a) In general Subpart C of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to refundable credits) is amended by inserting after section 36B the following new section: 36C. Opt-out State education credit (a) General rule In the case of an eligible individual, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year the opt-out State education amount. (b) Opt-Out State education amount For purposes of this section— (1) In general The term opt-out State education amount means, with respect to a taxpayer for a taxable year beginning in an opt-out year, the amount equal to— (A) the amount creditable under section 102 of the Local Education Authority Returns Now Act to an opt-out State (determined under section 101 of such Act), multiplied by— (B) a fraction— (i) the numerator of which is the taxpayer’s household tax burden from such State for the opt-out year, and (ii) the denominator of which is the total tax revenue of such State for the opt-out year. (2) Household tax burden The household tax burden from a State for an opt-out year is the sum of— (A) the State real property taxes, (B) the State personal property taxes, (C) the State income, war profits, and excess profits taxes, plus (D) the State general sales taxes, for the calendar year in which the second preceding taxable year ends and within which paid or accrued by the taxpayer. For purposes of this section, terms used in the preceding sentence which are also used in section 164 shall have the respective meanings given such terms by section 164. (3) Total tax revenue The total tax revenue of a State for an opt-out year is the amount determined by the Secretary to be the aggregate tax revenue of such State for the calendar year in which the second preceding taxable year ends. (c) Eligible individual For purposes of this section— (1) In general The term eligible individual means an individual whose principal place of abode (within the meaning of section 121) was in the opt-out State for the entire taxable year. (2) Dependents The term eligible individual does not include any individual if a deduction under section 151 with respect to such individual is allowed to another taxpayer for a taxable year beginning in the calendar year in which such individual’s taxable year begins. (d) Opt-Out year The term opt-out year means a calendar year for which the Secretary determines a State to be an opt-out State under section 101 of the Local Education Authority Returns Now Act. (e) Amount of credit shall be determined under tables (1) In general The credit under subsection (a) shall be determined under tables prescribed by the Secretary. (2) Requirements for tables The tables prescribed under paragraph (1) shall— (A) reflect the provisions of this section, and (B) take into account filing status, State of residence, and adjusted gross income. . (b) Conforming amendments (1) Paragraph (2) of section 1324(b) of title 31, United States Code, is amended by inserting 36C, after 36B,. (2) The table of sections for subpart C of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting after the item relating to section 36B the following new item: Sec. 36C. Opt-out State education credit. . (c) Effective date The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.