,,ii #aagth ,,congress #b;d ,session ,s4 #ddaf ,,in ,,the ,,senate ,,of ,,the ,,united ,,states ,june #af1 #bjbb ,mr4 ,cassidy 7for himself1 ,mr4 ,scott of ,south ,carolina1 ,mr4 ,daines1 and ,mr4 ,young7 introduced the following bill2 which was read twice and referred to the ,committee on ,finance ,a ,,bill ,to amend the ,internal ,revenue ,code of #aihf to allow a credit against tax for charitable donations to nonprofit organizations providing education scholarships to qualified elementary and secondary students4 #a4 ,short title ,this ,act may be cited as the ,educational ,choice for ,children ,act4 #b4 ,tax credit for contributions to scholarship granting organizations 7a7 ,credit for individuals 7#a7 ,in general ,subpart ,a of part ,,iv of subchapter ,a of chapter #a of the ,internal ,revenue ,code of #aihf is amended by inserting after section #be;,d the following new section3 #be;,e4 ,qualified elementary and secondary education scholarships 7a7 ,allowance of credit ,in the case of an individual1 there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the amount of qualified contributions made by the taxpayer during the taxable year4 7b7 ,amount of credit ,the credit allowed under subsection 7a7 in any taxable year shall not exceed an amount equal to the greater of-- 7#a7 #aj percent of the adjusted gross income of the taxpayer for the taxable year1 or 7#b7 #b1jjj4 7c7 ,definitions ,for purposes of this section-- 7#a7 ,eligible student ,the term eligible student means an individual who-- 7,a7 is a member of a household with an income which is not greater than #cjj percent of the area median gross income 7as such term is used in section #db71 and 7,b7 is eligible to enroll in a public elementary or secondary school4 7#b7 ,qualified contribution ,the term qualified contribution means a charitable contribution 7as defined by section #agj7;c77 to a scholarship granting organization in the form of cash or marketable securities4 7#c7 ,qualified elementary or secondary education expense ,the term qualified elementary or secondary education expense has the same meaning given the term qualified higher education expenses under paragraph 7#c7 of section #ebi7;e71 except that such paragraph shall be applied-- 7,a7 by substituting elementary school or secondary school 7as such terms are defined in section #haja of the ,elementary and ,secondary ,education ,act of #aife 7#bj ,u4,s4,c4 #ghja77 for eligible educational institution each place it appears1 and 7,b7 in subparagraph 7,b7 thereof1 by substituting such school for such institution each place it appears4 7#d7 ,scholarship granting organization ,the term scholarship granting organization means any organization-- 7,a7 which-- 7i7 is described in section #eja7;c77#c7 and exempt from tax under section #eja7;a71 and 7ii7 is not a private foundation1 7,b7 whose exclusive purpose is to provide scholarships for qualified elementary or secondary education expenses of eligible students1 and 7,c7 7i7 which meets the requirements of subsection 7d71 or 7ii7 which1 pursuant to ,state law1 was able1 as of the date of the enactment of the ,educational ,choice for ,children ,act1 to receive contributions that are eligible for a ,state tax credit if such contributions are used by the organization to provide scholarships to individual elementary and secondary students1 including scholarships for attending private schools4 7d7 ,requirements for scholarship granting organizations 7#a7 ,in general ,an organization meets the requirements of this subsection if-- 7,a7 such organization provides scholarships to #b or more students1 provided that not all such students attend the same school1 7,b7 such organization does not provide scholarships for any expenses other than qualified elementary or secondary education expenses1 7,c7 such organization provides a scholarship to eligible students with a priority for-- 7i7 students awarded a scholarship the previous school year1 and 7ii7 after application of clause 7i71 any such students who have a sibling who was awarded a scholarship from such organization1 7,d7 such organization does not earmark or set aside contributions for scholarships on behalf of any particular student1 7,e7 such organization takes appropriate steps to verify the annual household income and family size of eligible students to whom it awards scholarships1 and limits them to a member of a household for which the income does not exceed the amount established under subsection 7c77#a77;,a71 7,f7 such organization-- 7i7 obtains from an independent certified public accountant annual financial and compliance audits1 and 7ii7 certifies to the ,secretary 7at such time1 and in such form and manner1 as the ,secretary may prescribe7 that the audit described in clause 7i7 has been completed1 and 7,g7 no officer or board member of such organization has been convicted of a felony4 7#b7 ,independent certified public accountant ,for purposes of paragraph 7#a77;,f71 the term independent certified public accountant means1 with respect to an organization1 a certified public accountant who is not a person described in section #dfe7;b77#c77;,a7 with respect to such organization or any employee of such organization4 7#c7 ,prohibition on self-dealing 7,a7 ,in general ,a scholarship granting organization may not award a scholarship to any disqualified person4 7,b7 ,disqualified person ,for purposes of this paragraph1 a disqualified person shall be determined pursuant to rules similar to the rules of section #didf4 7e7 ,denial of double benefit ,any qualified contribution for which a credit is allowed under this section shall not be taken into account as a charitable contribution for purposes of section #agj4 7f7 ,carryforward of unused credit 7#a7 ,in general ,if the credit allowable under subsection 7a7 for any taxable year exceeds the limitation imposed by section #bf7;a7 for such taxable year reduced by the sum of the credits allowable under this subpart 7other than this section1 section #bc1 and section #be;,d71 such excess shall be carried to the succeeding taxable year and added to the credit allowable under subsection 7a7 for such taxable year4 7#b7 ,limitation ,no credit may be carried forward under this subsection to any taxable year following the fifth taxable year after the taxable year in which the credit arose4 ,for purposes of the preceding sentence1 credits shall be treated as used on a first-in first-out basis4 7g7 ,application of volume cap ,a qualified contribution shall be taken into account under this section only if such contribution is not in excess of the volume cap established under section #c of the ,educational ,choice for ,children ,act4 4 7#b7 ,clerical amendment ,the table of sections for subpart ,a of part ,,iv of subchapter ,a of chapter #a of such ,code is amended by inserting after the item relating to section #be;,d the following new item3 ,sec4 #be;,e4 ,qualified elementary and secondary education scholarships4 4 7b7 ,credit for corporations 7#a7 ,in general ,subpart ,d of part ,,iv of subchapter ,a of chapter #a of such ,code is amended by adding after section #de,t the following3 #de,u4 ,contributions to scholarship granting organizations 7a7 ,general rule ,for purposes of section #ch1 in the case of a corporation1 the education scholarship credit determined under this section for the taxable year is the aggregate amount of qualified contributions for the taxable year4 7b7 ,amount of credit ,the credit allowed under subsection 7a7 for any taxable year shall not exceed #e percent of the taxable income 7as defined in section #agj7;b77#b77;,d77 of the corporation for such taxable year4 7c7 ,qualified contributions ,for purposes of this section1 the term qualified contribution has the meaning given such term under section #be;,e4 7d7 ,denial of double benefit ,no deduction shall be allowed under any provision of this chapter for any expense for which a credit is allowed under this section4 7e7 ,application of volume cap ,a qualified contribution shall be taken into account under this section only if such contribution is not in excess of the volume cap established under section #c of the ,educational ,choice for ,children ,act4 4 7#b7 ,conforming amendments ,section #ch7;b7 of such ,code is amended by striking plus at the end of paragraph 7#cb71 by striking the period and inserting 1 plus at the end of paragraph 7#cc71 and by adding at the end the following new paragraph3 7#cd7 the education scholarship credit determined under section #de,u7a74 4 7#c7 ,clerical amendment ,the table of sections for subpart ,d of part ,,iv of subchapter ,a of chapter #a of such ,code1 as amended by this ,act1 is amended by adding at the end the following new item3 ,sec4 #de,u4 ,contributions to scholarship granting organizations4 4 7c7 ,failure of scholarship granting organizations ,to make distributions 7#a7 ,in general ,chapter #db of such ,code is amended by adding at the end the following new subchapter3 ,i ,scholarship ,granting ,organizations ,sec4 #difi4 ,failure to distribute receipts4 #difi4 ,failure to distribute receipts 7a7 ,in general ,in the case of any scholarship granting organization 7as defined in section #be;,e7 which has been determined by the ,secretary to have failed to satisfy the requirement under subsection 7b7 for any taxable year1 any contribution made to such organization during the first taxable year beginning after the date of such determination shall not be treated as a qualified contribution 7as defined in section #be;,e7c77#b77 for purposes of sections #be;,e and #de,u4 7b7 ,requirement ,the requirement described in this subsection is that the amount of receipts of the scholarship granting organization for the taxable year which are distributed before the distribution deadline with respect to such receipts shall not be less than the required distribution amount with respect to such taxable year4 7c7 ,definitions ,for purposes of this section-- 7#a7 ,required distribution amount 7,a7 ,in general ,the required distribution amount with respect to a taxable year is the amount equal to #ajj percent of the total receipts of the scholarship granting organization for such taxable year-- 7i7 reduced by the sum of such receipts that are retained for reasonable administrative expenses for the taxable year or are carried to the succeeding taxable year under subparagraph 7,c71 and 7ii7 increased by the amount of the carryover under subparagraph 7,c7 from the preceding taxable year4 7,b7 ,safe harbor for reasonable administrative expenses ,for purposes of subparagraph 7,a77i71 if the percentage of total receipts of a scholarship granting organization for a taxable year which are used for administrative purposes is equal to or less than #aj percent1 such expenses shall be deemed to be reasonable for purposes of such subparagraph4 7,c7 ,carryover ,with respect to the amount of the total receipts of a scholarship granting organization with respect to any taxable year1 an amount not greater than #ae percent of such amount may1 at the election of such organization1 be carried to the succeeding taxable year4 7#b7 ,distributions ,the term distribution includes amounts which are formally committed but not distributed4 ,a formal commitment described in the preceding sentence may include contributions set aside for eligible students for more than one year4 7#c7 ,distribution deadline ,the distribution deadline with respect to receipts for a taxable year is the first day of the third taxable year following the taxable year in which such receipts are received by the scholarship granting organization4 4 7#b7 ,clerical amendment ,the table of subchapters for chapter #db of such ,code is amended by adding at the end the following new item3 ,subchapter ,i4 ,scholarship ,granting ,organizations 4 #c4 ,volume cap 7a7 ,allocation 7#a7 ,in general ,for purposes of sections #be;,e7g7 and #de,u7e7 of the ,internal ,revenue ,code of #aihf 7as added by this ,act71 the volume cap applicable with respect to both such sections shall be #aj1jjj1jjj1jjj for calendar year #bjbc and each subsequent year thereafter1 with such amount to be allocated as follows3 7,a7 #a1jjj1jjj1jjj shall be allocated to the ,states1 with such amount to be allocated in equal amounts to each ,state4 ,with respect to the amount which has been allocated to a ,state for any calendar year-- 7i7 #ej percent of such amount shall be made available for any individual residing in such ,state to claim the credit allowed under section #be;,e of the ,internal ,revenue ,code of #aihf with respect to any qualified contributions 7as defined in such section7 made by such individual during any taxable year beginning during such calendar year1 and 7ii7 #ej percent of such amount shall be made available for any corporation created or organized in such ,state to claim the credit determined under section #de,u of such ,code with respect to any qualified contributions made by such corporation during any taxable year beginning during such calendar year4 7,b7 ,with respect to the amount remaining after the allocation under subparagraph 7,a7-- 7i7 #ej percent of such amount shall be made available for any individual to claim the credit allowed under section #be;,e of the ,internal ,revenue ,code of #aihf with respect to any qualified contributions made by such individual during any taxable year beginning during such calendar year1 and 7ii7 #ej percent of such amount shall be made available for any corporation to claim the credit determined under section #de,u of such ,code with respect to any qualified contributions made by such corporation during any taxable year beginning during such calendar year4 7#b7 ,carryover ,the amount of any allotment to a ,state under paragraph 7#a77;,a7 for any calendar year which is not claimed by taxpayers described in such paragraph during such calendar year shall be added to the allotment provided to such ,state under such paragraph for the subsequent calendar year4 7b7 ,first-,come1 first-,serve ,for purposes of applying the volume cap under this section1 such volume cap shall be applied based on a first-come1 first-serve basis1 as determined based on the date on which the taxpayer made the qualified contribution4 7c7 ,real-,time information ,for purposes of this section1 the ,secretary of the ,treasury 7or the ,secretary's delegate7 shall develop a system to track the amount of qualified contributions made during the calendar year for which a credit may be claimed under section #be;,e or #de,u of the ,internal ,revenue ,code of #aihf1 with such information to be updated in real time4 #d4 ,exemption from gross income for scholarships for qualified elementary or secondary education expenses of eligible students 7a7 ,in general ,part ,,iii of subchapter ,b of chapter #a of the ,internal ,revenue ,code of #aihf is amended by inserting before section #adj the following new section3 #aci;,i4 ,scholarships for qualified elementary or secondary education expenses of eligible students 7a7 ,in general ,in the case of an individual1 gross income shall not include any amounts provided to any dependent of such individual pursuant to a scholarship for qualified elementary or secondary education expenses of an eligible student which is provided by a scholarship granting organization4 7b7 ,definitions ,in this section1 the terms qualified elementary or secondary education expense1 eligible student1 and scholarship granting organization have the same meaning given such terms under section #be;,e7c74 4 7b7 ,conforming amendment ,the table of sections for part ,,iii of subchapter ,b of chapter #a of the ,internal ,revenue ,code of #aihf is amended by inserting before the item relating to section #adj the following new item3 ,sec4 #aci;,i4 ,scholarships for qualified elementary or secondary education expenses of eligible students4 4 #e4 ,organizational and parental autonomy 7a7 ,prohibition of control over scholarship organizations 7#a7 ,in general 7,a7 ,treatment ,a scholarship granting organization shall not1 by virtue of participation under any provision of this ,act or any amendment made by this ,act1 be regarded as acting on behalf of any governmental entity4 7,b7 ,no governmental control ,nothing in this ,act1 or any amendment made by this ,act1 shall be construed to permit1 allow1 encourage1 or authorize any ,federal1 ,state1 or local government entity1 or officer or employee thereof1 to mandate1 direct1 or control any aspect of any scholarship granting organization4 7,c7 ,maximum freedom ,to the extent permissible by law1 this ,act1 and any amendment made by this ,act1 shall be construed to allow scholarship granting organizations maximum freedom to provide for the needs of the participants without governmental control4 7#b7 ,prohibition of control over non-public schools 7,a7 ,no governmental control ,nothing in this ,act1 or any amendment made by this ,act1 shall be construed to permit1 allow1 encourage1 or authorize any ,federal1 ,state1 or local government entity1 or officer or employee thereof1 to mandate1 direct1 or control any aspect of any private or religious elementary or secondary education institution4 7,b7 ,no exclusion of private or religious schools ,no ,federal1 ,state1 or local government entity1 or officer or employee thereof1 shall impose or permit the imposition of any conditions or requirements that would exclude or operate to exclude educational expenses at private or religious elementary and secondary education institutions from being considered qualified elementary or secondary education expenses4 7,c7 ,no exclusion of qualified expenses due to institution's religious character or affiliation ,no ,federal1 ,state1 or local government entity1 or officer or employee thereof1 shall exclude1 discriminate against1 or otherwise disadvantage any elementary or secondary education institution with respect to qualified elementary or secondary education expenses at that institution based in whole or in part on the institution's religious character or affiliation1 including religiously based or mission-based policies or practices4 7#c7 ,parental rights to use scholarships ,no ,federal1 ,state1 or local government entity1 or officer or employee thereof1 shall disfavor or discourage the use of scholarships granted by participating scholarship granting organizations for qualified elementary or secondary education expenses at private or nonprofit elementary and secondary education institutions1 including faith-based schools4 7#d7 ,parental right to intervene ,in any action filed in any ,state or ,federal court which challenges the constitutionality 7under the constitution of such ,state or the ,constitution of the ,united ,states7 of any provision of this ,act 7or any amendment made by this ,act71 any parent of an eligible student who has received a scholarship from a scholarship granting organization shall have the right to intervene in support of the constitutionality of such provision or amendment4 ,to avoid duplication of efforts and reduce the burdens placed on the parties to the action1 the court in any such action may require interveners taking similar positions to file joint papers or to be represented by a single attorney at oral argument1 provided that the court does not require such interveners to join any brief filed on behalf of any ,state which is a defendant in such action4 7b7 ,definitions ,for purposes of this section1 the terms eligible student1 scholarship granting organization1 and qualified elementary or secondary education expense shall have the same meanings given such terms under section #be;,e7c7 of the ,internal ,revenue ,code of #aihf 7as added by section #b7;a7 of this ,act74 #f4 ,effective date ,the amendments made by this ,act shall apply to taxable years beginning after ,december #ca1 #bjbb4