,,ii #aaith ,,congress #ast ,session ,s4 #ahaj ,,in ,,the ,,senate ,,of ,,the ,,united ,,states ,may #bj1 #bjbe,mr4 ,cruz 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 ,universal ,school ,choice ,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;,e the following new section3 #be;,f4 ,qualified elementary and secondary education scholarships 7a7 ,allowance of credit ,in the case of an individual who is a citizen or resident of the ,united ,states 7as defined in section #ggja7;a77#i771 there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the aggregate amount of qualified contributions made by the taxpayer during the taxable year4 7b7 ,limitations 7#a7 ,in general ,the credit allowed under subsection 7a7 to any taxpayer for 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 #e1jjj4 7#b7 ,application of volume cap ,no credit shall be allowed under subsection 7a7 to the taxpayer with respect to the amount of any qualified contribution made during a taxable year which would result in the aggregate amount of credits claimed under this section for such taxable year exceeding-- 7,a7 with respect to qualified contributions for which the taxpayer is required to designate a distribution ,state pursuant to paragraph 7#d7 of section #c7;a7 of the ,universal ,school ,choice ,act1 the volume cap allocated to such ,state pursuant to paragraph 7#b7 of such section1 or 7,b7 with respect to qualified contributions which are not described in subparagraph 7,a71 the volume cap made available to taxpayers pursuant to paragraph 7#c77;,b7 of such section4 7#c7 ,reduction based on ,state credit ,the amount allowed as a credit under subsection 7a7 for a taxable year shall be reduced by the amount allowed as a credit on any ,state tax return of the taxpayer for qualified contributions made by the taxpayer during the taxable year4 7c7 ,definitions ,for purposes of this section-- 7#a7 ,eligible student ,the term eligible student means an individual who 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 7,a7 ,in general ,the term qualified elementary or secondary education expense means the following expenses in connection with enrollment or attendance at1 or for students enrolled at or attending1 a public or private elementary or secondary school 7including a religious elementary or secondary school73 7i7 ,tuition and required fees4 7ii7 ,curricula and curricular materials4 7iii7 ,books or other instructional materials4 7iv7 ,online educational materials1 as well as software1 courses1 and computer hardware or other technological devices required to access such materials and which is primarily used for educational purposes4 7v7 ,tuition for tutoring or educational classes outside of the home or online1 including at a tutoring facility1 but only if the tutor or instructor is not related to the student and-- 7,i7 is licensed as a teacher in any ,state1 7,,ii7 has taught at-- 7aa7 a public or private elementary or secondary school1 or 7bb7 an institution of higher education 7as defined in section #aja7;a7 of the ,higher ,education ,act of #aife 7#bj ,u4,s4,c4 #ajja7;a7771 or 7,,iii7 is a subject matter expert in the relevant subject4 7vi7 ,fees for a nationally standardized norm-referenced achievement test1 an advanced placement examination1 or any examinations related to admission to an institution of higher education4 7vii7 ,fees for dual enrollment in an institution of higher education4 7viii7 ,educational therapies for students with disabilities provided by a licensed or accredited practitioner or provider1 including occupational1 behavioral1 physical1 and speech-language therapies4 7ix7 ,transportation costs incurred for students to participate in any activity for which expenses are authorized under this paragraph4 7,b7 ,home schooling ,the term qualified elementary or secondary education expense shall include expenses for the purposes described in clauses 7i7 through 7ix7 of subparagraph 7,a7 in connection with a home school 7whether treated as a home school or a private school for purposes of applicable ,state law74 7,c7 ,prohibition on payments to family members ,the term qualified elementary or secondary education expense shall not include any expenses related to services provided to the student which are provided by an individual who bears a relationship to the student described in section #aeb7;d77#b74 7#d7 ,scholarship granting organization 7,a7 ,in general ,the term scholarship granting organization means any organization-- 7i7 which-- 7,i7 is described in section #eja7;c77#c7 and exempt from tax under section #eja7;a71 and 7,,ii7 is not a private foundation1 7ii7 substantially all of the activities of which are providing scholarships for qualified elementary or secondary education expenses of eligible students1 7iii7 which prevents the co-mingling of qualified contributions with other amounts by maintaining #a or more separate accounts exclusively for qualified contributions1 and 7iv7 which meets the requirements of subsection 7d74 7,b7 ,scholarships for non-eligible students ,for purposes of determining whether an organization satisfies the requirement described in subparagraph 7,a77ii71 such organization may include activities of which are providing scholarships for education expenses of children who are not described in paragraph 7#a74 7#e7 ,state ,the term ,state means each of the #ej ,states1 the ,district of ,columbia1 the ,commonwealth of ,puerto ,rico1 ,american ,samoa1 ,guam1 the ,commonwealth of the ,northern ,mariana ,islands1 the ,united ,states ,virgin ,islands1 and the ,department of the ,interior 7acting through the ,bureau of ,indian ,education74 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 with respect to any amount contributed to such organization for which a credit is allowed under this section1 such organization does not provide scholarships for any expenses other than qualified elementary or secondary education expenses1 7,c7 with respect to any amount contributed to such organization for which a credit is allowed under this section1 such organization provides a scholarship to eligible students with a priority for-- 7i7 students awarded a scholarship the previous school year1 7ii7 after application of clause 7i71 any such students who have a sibling who was awarded a scholarship from such organization1 and 7iii7 after application of clauses 7i7 and 7ii71 any such students from households with annual incomes below #ejj percent of the poverty line in the ,state1 7,d7 such organization does not earmark or set aside contributions for scholarships on behalf of any particular student at the direction of any individual or corporation that has made a qualified contribution to such organization1 7,e7 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,f7 no officer or board member of such organization has been convicted of a felony4 7#b7 ,income verification 7,a7 ,in general ,for purposes of paragraph 7#a77;,c77iii71 in the case where providing such priority may be applicable with respect to a student1 the organization shall take appropriate steps to verify the annual household income to the student4 7,b7 ,safe harbor ,for purposes of subparagraph 7,a71 review of all of the following 7as applicable7 shall be treated as satisfying the requirement to take appropriate steps to verify annual household income3 7i7 ,federal and ,state income tax returns or tax return transcripts with applicable schedules for the taxable year prior to application4 7ii7 ,income reporting statements for tax purposes or wage and income transcripts from the ,internal ,revenue ,service4 7iii7 ,notarized income verification letter from employers4 7iv7 ,unemployment or workers compensation statements4 7v7 ,budget letters regarding public assistance payments and ,supplemental ,nutrition ,assistance ,program 7,,snap7 payments including a list of household members4 7#c7 ,independent certified public accountant ,for purposes of paragraph 7#a77;,e71 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#d7 ,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 ,alternative minimum tax ,for purposes of calculating the alternative minimum tax under section #ee1 a taxpayer may use any credit received for a qualified contribution under this section4 4 7#b7 ,conforming amendments 7,a7 ,section #be7;e77#a77;,c7 of such ,code is amended by striking and #be;,d and inserting #be;,d1 and #be;,f4 7,b7 ,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;,e the following new item3 ,sec4 #be;,f4 ,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 the ,internal ,revenue ,code of #aihf is amended by adding after section #de;,,aa the following3 #de;,,bb4 ,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;,f4 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 ,universal ,school ,choice ,act4 4 7#b7 ,conforming amendments ,section #ch7;b7 of such ,code is amended by striking plus at the end of paragraph 7#dj71 by striking the period and inserting 1 plus at the end of paragraph 7#da71 and by adding at the end the following new paragraph3 7#db7 the education scholarship credit determined under section #de;,,bb7a74 4 7#c7 ,clerical amendment ,the table of sections for subpart ,d of part ,,iv of subchapter ,a of chapter #a of such ,code is amended by adding at the end the following new item3 ,sec4 #de;,,bb4 ,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;,f7 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;,f7c77#b77 for purposes of sections #be;,f and #de;,,bb4 7b7 ,requirement 7#a7 ,in general ,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 7#b7 ,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 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 year1 as reduced by the sum of such receipts that are retained for reasonable administrative expenses for the taxable year4 7,b7 ,safe harbor for reasonable administrative expenses ,for purposes of subparagraph 7,a71 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#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 #a year4 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 7d7 ,effective date ,the amendments made by this section shall apply to taxable years ending after ,december #ca1 #bjbe4 #c4 ,volume cap 7a7 ,in general 7#a7 ,national ,cap ,for purposes of sections #be;,f7b77#b7 and #de;,,bb7e7 of the ,internal ,revenue ,code of #aihf 7as added by this ,act71 the volume cap applicable under this section shall be #aj1jjj1jjj1jjj for calendar year #bjbf and each subsequent year thereafter4 7#b7 ,allocation of cap 7,a7 ,in general ,for each calendar year1 the ,secretary shall1 from the amount allotted under paragraph 7#a7-- 7i7 subject to subparagraph 7,c71 first reserve1 for each ,state1 an amount equal to the sum of the qualifying contributions designated under paragraph 7#d7 with respect to such ,state in the preceding year2 and 7ii7 next1 allocate the remaining amount among the ,states by allocating to each ,state the sum of-- 7,i7 an amount that bears the same relationship to #bj percent of such remaining amount as the number of individuals aged #e through #ag in the ,state1 as determined by the ,secretary 7in coordination with the ,secretary of ,education7 on the basis of the most recent satisfactory data1 bears to the number of those individuals in all such ,states1 as so determined2 and 7,,ii7 an amount that bears the same relationship to #hj percent of such remaining amount as the number of individuals aged #e through #ag from families with incomes below the poverty line in the ,state1 as determined by the ,secretary 7in coordination with the ,secretary of ,education71 on the basis of the most recent satisfactory data1 bears to the number of those individuals in all such ,states1 as so determined4 7,b7 ,minimum allocation ,notwithstanding subparagraph 7,a71 no ,state receiving an allotment under this section may receive less than one-half of one percent of the amount allotted for a calendar year4 7,c7 ,initial year ,for purposes of the first calendar year with respect to which this section applies1 the amount allocated to each ,state under this paragraph shall be determined without respect to subparagraph 7,a77i74 7#c7 ,allocation and adjustments 7,a7 ,initial allocation to ,states ,no later than ,november #a of the year preceding a year for which there is a volume cap on credits under paragraph 7#a7 7hereafter in this section1 the applicable year71 or as early as practicable with respect to the first year1 the ,secretary shall announce the ,state allocations under paragraph 7#b7 for the applicable year4 7,b7 ,reallocation of unclaimed credits ,on or after ,july #ca of any applicable year1 the ,secretary shall-- 7i7 make available any amounts of the volume cap which were allocated to ,states under paragraph 7#b7 and which have not been claimed2 and 7ii7 allocate such amounts on a first-come1 first-serve basis1 as determined based on the time 7during such calendar year7 at which the taxpayer made the qualified contribution with respect to which the allocation is made4 7#d7 ,designation by taxpayer 7,a7 ,in general ,for purposes of determining the amount of the volume cap allocated to a ,state under paragraph 7#b7 for any calendar year which has been claimed by taxpayers1 the ,secretary shall-- 7i7 as part of the system described in subsection 7c71 require each taxpayer making a qualified contribution to designate the distribution ,state with respect to such contribution2 and 7ii7 for each ,state which an allocation has been made under paragraph 7#b71 ensure that the total amount of qualified contributions designated with respect to such ,state pursuant to clause 7i7 during such calendar year does not exceed the amount of the volume cap allocated to a ,state for such calendar year4 7,b7 ,binding on scholarship granting organization ,the designation by the taxpayer of the distribution ,state pursuant to subparagraph 7,a77i7 shall be binding on the scholarship granting organization for purposes of any distribution of the qualified contribution made by such taxpayer4 7,c7 ,distribution ,state ,for purposes of this section1 the term distribution ,state means the ,state for which the scholarship granting organization shall1 pursuant to the requirements under section #difi of the ,internal ,revenue ,code of #aihf1 be required to make distributions with respect to eligible students residing in such ,state4 7,d7 ,exception for administrative expenses ,the requirements applicable to a scholarship granting organization under subparagraphs 7,b7 and 7,c7 shall not apply to such portion of the qualified contributions received by such organization that are used for administrative purposes 7as described in section #difi7;c77#a77;,b7 of the ,internal ,revenue ,code of #aihf74 7b7 ,annual increases 7#a7 ,in general ,in the case of the calendar year after a high use calendar year1 the dollar amount otherwise in effect under subsection 7a7 for such calendar year shall be equal to #aje percent of the dollar amount in effect for such high use calendar year4 7#b7 ,high use calendar year ,for purposes of this subsection1 the term high use calendar year means any calendar year for which #ij percent or more of the volume cap in effect for such calendar year under subsection 7a7 is allocated to taxpayers4 7#c7 ,prevention of decreases in annual volume cap ,the volume cap in effect under subsection 7a7 for any calendar year shall not be less than the volume cap in effect under such subsection for the preceding calendar year4 7#d7 ,publication of annual volume cap ,the ,secretary shall make publicly available the dollar amount of the volume cap in effect under subsection 7a7 for each calendar year4 7c7 ,real-,time information ,for purposes of this section1 the ,secretary 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;,f or #de;,,bb of the ,internal ,revenue ,code of #aihf1 with such information to be updated in real time4 7d7 ,definition ,for purposes of this section1 the term ,secretary means the ,secretary of the ,treasury 7or the ,secretary's delegate7 #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;,j4 ,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;,f7c74 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;,j4 ,scholarships for qualified elementary or secondary education expenses of eligible students4 4 7c7 ,effective date ,the amendments made by this section shall apply to amounts received after ,december #ca1 #bjbe1 in taxable years ending after such date4 #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;,f7c7 of the ,internal ,revenue ,code of #aihf 7as added by section #b7;a7 of this ,act74