H.F. 2090 Section 1. Section 12D.3, subsection 1, paragraph a, Code 1 2014, is amended to read as follows: 2 a. Each participation agreement may require a participant 3 to agree to invest a specific amount of money in the trust 4 for a specific period of time for the benefit of a specific 5 beneficiary. A participant shall not be required to make an 6 annual contribution on behalf of a beneficiary. The maximum 7 contribution that may be deducted for Iowa income tax purposes 8 shall not exceed two thousand dollars per beneficiary per year 9 adjusted annually to reflect increases in the consumer price 10 index. Contributions to an account that are moneys from an 11 education savings grant under section 257.11B shall not be 12 considered a contribution that may be deducted for Iowa income 13 tax purposes. The treasurer of state shall set an account 14 balance limit to maintain compliance with section 529 of the 15 Internal Revenue Code. A contribution shall not be permitted 16 to the extent it causes the aggregate balance of all accounts 17 established for the same beneficiary to exceed the applicable 18 account balance limit. 19 Sec. 2. Section 256.7, Code 2014, is amended by adding the 20 following new subsection: 21 NEW SUBSECTION . 33. Adopt rules relating to applications 22 for an education savings grant pursuant to section 257.11B, 23 including application processing timelines and information 24 required to be submitted by a parent or guardian. 25 Sec. 3. NEW SECTION . 257.11B Education savings grant 26 program. 27 1. Pupils eligible to enroll in grades kindergarten through 28 twelve and attending a nonpublic school or receiving competent 29 private instruction under chapter 299A shall be eligible to 30 receive an education savings grant in the manner provided in 31 this section for school years beginning on or after July 1, 32 2015. Education savings grants shall be made available to 33 parents and guardians in the manner authorized under subsection 34 4, paragraph “c” , for the payment of qualified educational 35 -1- LSB 5396YH (4) 85 md/sc 1/ 9

H.F. 2090 expenses as provided in this section. 1 2. a. (1) By January 31 preceding the school year for 2 which the education savings grant is requested, the parent 3 or guardian of the pupil requesting to receive an education 4 savings grant shall submit an application to the department of 5 education, on application forms developed by the department, 6 indicating that the parent or guardian intends to enroll the 7 pupil in a nonpublic school or provide competent private 8 instruction for the pupil under chapter 299A. 9 (2) In addition to such information deemed appropriate by 10 the department of education, the application shall require 11 certification from the nonpublic school of the pupil’s 12 enrollment for the following school year or a statement 13 indicating the parent or guardian’s intent to provide or 14 arrange for competent private instruction for the pupil for the 15 following school year. 16 b. By March 1 preceding the school year for which the 17 education savings grant is requested, the department of 18 education shall notify the department of management of the 19 number of pupils in each school district designated for the 20 following school year to receive an education savings grant 21 and the amount of the education savings grant for each pupil. 22 The department of education shall also notify the parent 23 or guardian of such pupils who are approved to receive an 24 education savings grant. 25 c. Education savings grants shall only be approved for one 26 school year and applications must be submitted under paragraph 27 “a” for education savings grants in subsequent school years. 28 3. a. The department of management shall assign each pupil 29 an education savings grant in an amount equal to the statewide 30 average state foundation aid per pupil in the same school year. 31 b. The department of management shall on July 1 following 32 the determination of the amount of the education savings grant 33 for each approved pupil transfer such amounts to the pupil’s 34 account in the education savings grant fund established under 35 -2- LSB 5396YH (4) 85 md/sc 2/ 9

H.F. 2090 subsection 4. Such amount shall be available to the pupil’s 1 parent or guardian in the manner authorized under subsection 2 4, paragraph “c” , for the payment of qualified educational 3 expenses incurred by such persons for the pupil during that 4 school year. 5 4. An education savings grant fund is created in the state 6 treasury under the control of the department of management 7 consisting of moneys appropriated to the department for the 8 purpose of providing education savings grants under this 9 section. For the fiscal year commencing July 1, 2015, and 10 each succeeding fiscal year, there is appropriated from the 11 general fund of the state to the department of management to be 12 credited to the fund the amount necessary to pay all education 13 savings grants approved for that fiscal year. The director of 14 the department of management has all powers necessary to carry 15 out and effectuate the purposes, objectives, and provisions of 16 this section pertaining to the fund, including the power to do 17 all of the following: 18 a. Make and enter into contracts necessary for the 19 administration of the fund. 20 b. Procure insurance against any loss in connection with the 21 assets of the fund or require a surety bond. 22 c. Contract with a private financial management firm to 23 manage the fund, in collaboration with the treasurer of state, 24 including providing for the disbursement of education savings 25 grants in the form of an electronic debit card or checks that 26 are payable directly from the pupil’s account within the fund. 27 d. Conduct audits or other review necessary to properly 28 administer the program. 29 e. Adopt rules pursuant to chapter 17A for the 30 administration of the fund and accounts within the fund. 31 5. a. For each pupil approved for an education savings 32 grant, the department shall establish an account for that pupil 33 in the education savings grant fund. The amount of the pupil’s 34 education savings grant determined under subsection 3 shall be 35 -3- LSB 5396YH (4) 85 md/sc 3/ 9

H.F. 2090 deposited into the pupil’s account on July 1 and such amount 1 shall be immediately available for the payment of qualified 2 educational expenses incurred by the parent or guardian for 3 the pupil during that fiscal year using the payment method 4 authorized under subsection 4, paragraph “c” . 5 b. A nonpublic school or other entity that accepts payment 6 from a parent or guardian using funds from a pupil’s account in 7 the education savings grant fund shall not refund, rebate, or 8 share any portion of such payment with the parent, guardian, or 9 pupil. 10 c. Moneys remaining in a pupil’s account upon conclusion 11 of the fiscal year shall remain in the pupil’s account within 12 the education savings grant fund for the payment of qualified 13 educational expenses in future fiscal years or for the payment 14 of higher education costs under subsection 8. 15 6. For purposes of this section, “qualified educational 16 expenses” includes tuition and fees at a nonpublic school, 17 textbooks, fees or payments for educational therapies including 18 tutoring or cognitive skills training, curriculum fees and 19 materials for a course of study for a specific subject matter 20 or grade level, tuition or fees for nonpublic online education 21 programs, education materials and services for pupils with 22 disabilities including the cost of paraprofessionals and 23 assistants who are trained in accordance with state law, 24 standardized test fees, fees required by the department 25 not to exceed for each grant recipient five percent of the 26 total grant amount in any fiscal year, contributions to an 27 Iowa education savings plan trust account under chapter 12D, 28 contributions to a Coverdell education savings account under 26 29 U.S.C. §530, higher education expenses, as defined in section 30 12D.1, excluding room and board expenses, and other expenses 31 incurred by the parent or guardian that are directly related 32 to the education of the pupil at a nonpublic school, including 33 a nonpublic school accredited by an independent accrediting 34 agency approved by the department of education, or directly 35 -4- LSB 5396YH (4) 85 md/sc 4/ 9

H.F. 2090 related to providing competent private instruction for the 1 pupil under chapter 299A. The cost of one computer or other 2 portable computing device shall be allowed as a qualified 3 educational expense for a pupil if such a purchase has not been 4 made using funds from that pupil’s account in either of the 5 two immediately preceding fiscal years. “Qualified educational 6 expenses” do not include transportation costs for the pupil, the 7 cost of food or refreshments consumed by the pupil, the cost of 8 clothing for the pupil, or the cost of disposable materials, 9 including but not limited to paper, notebooks, pencils, pens, 10 and art supplies. 11 7. A person who makes a false claim for the purpose of 12 obtaining an education savings grant provided for in this 13 section or who knowingly receives the grant or makes a payment 14 from an account within the education savings grant fund 15 without being legally entitled to it is guilty of a fraudulent 16 practice. The false claim for an education savings grant or a 17 payment from an account shall be disallowed and if amounts from 18 the grant have been disbursed from the applicable account in 19 the education savings grant fund, the department of management 20 shall initiate legal proceedings to recover such amounts. A 21 parent or guardian, or a pupil for purposes of subsection 8, 22 who violates this subsection is prohibited from participating 23 in the education savings grant program in the future. 24 8. For each pupil with a positive balance in the pupil’s 25 account in the education savings grant fund upon graduation 26 from high school or completion of an equivalent level of 27 competent private instruction under chapter 299A, the 28 department of management shall maintain the account in the 29 fund until the pupil is twenty-five years of age. Following 30 graduation from high school until the pupil is twenty-five 31 years of age, moneys in the pupil’s account may be used for 32 higher education costs, as defined in section 12D.1, subsection 33 2, incurred by the pupil while attending an institution of 34 higher education under the control of the state board of 35 -5- LSB 5396YH (4) 85 md/sc 5/ 9

H.F. 2090 regents, a community college located in this state, or a 1 private college or university located in this state. Payments 2 from a pupil’s account for higher education costs shall be 3 made in the same manner as payments for qualified educational 4 expenses under subsection 5. Moneys in a pupil’s account when 5 the pupil turns twenty-five years of age shall be transferred 6 by the department for deposit in the general fund of the state. 7 9. This section shall not be construed to authorize the 8 state or any political subdivision of the state to exercise 9 authority over any nonpublic school or pupil receiving 10 competent private instruction under chapter 299A or construed 11 to require a nonpublic school to modify its admissions or 12 educational program in order to receive payment from a parent 13 or guardian using funds from a pupil’s account in the education 14 savings grant fund. A nonpublic school or entity providing 15 competent private instruction under chapter 299A, that accepts 16 payment from a parent or guardian using funds from a pupil’s 17 account in the education savings grant fund is not an agent of 18 this state or other political subdivision of this state. Rules 19 adopted by the department to implement this section that impose 20 an undue burden on a nonpublic school or entity providing 21 competent private instruction under chapter 299A are invalid. 22 Sec. 4. Section 422.7, Code 2014, is amended by adding the 23 following new subsection: 24 NEW SUBSECTION . 51. Subtract, to the extent included, the 25 amount of any education savings grant under section 257.11B 26 received during the tax year by pupils for whom the taxpayer is 27 the parent or guardian authorized to spend such grant amounts 28 for qualified educational expenses. 29 Sec. 5. APPLICABILITY. This Act applies to school budget 30 years and fiscal years beginning on or after July 1, 2015. 31 Sec. 6. APPLICABILITY. The following provisions of this Act 32 apply to tax years beginning on or after January 1, 2015: 33 1. The section of this Act amending section 12D.3. 34 2. The section of this Act amending section 422.7. 35 -6- LSB 5396YH (4) 85 md/sc 6/ 9

H.F. 2090 EXPLANATION 1 The inclusion of this explanation does not constitute agreement with 2 the explanation’s substance by the members of the general assembly. 3 This bill provides education savings grants for pupils 4 attending a nonpublic school or receiving competent private 5 instruction and establishes an education savings grant fund. 6 Under the bill, pupils eligible to enroll in grades 7 kindergarten through 12 and attending a nonpublic school or 8 receiving competent private instruction under Code chapter 9 299A are eligible to receive an education savings grant for 10 school years beginning on or after July 1, 2015. By January 31 11 preceding the school year for which the education savings grant 12 is requested, the parent or guardian of the pupil requesting to 13 receive an education savings grant must submit an application 14 to the department of education indicating that the parent or 15 guardian intends to enroll the pupil in a nonpublic school or 16 provide competent private instruction for the pupil. 17 The bill requires that by March 1 preceding the school 18 year for which the education savings grant is requested, 19 the department of education must notify the department of 20 management of the number of pupils in each school district 21 designated for the following school year to receive an 22 education savings grant and the amount of the education savings 23 grant for each pupil. Education savings grants may only be 24 approved for one school year and applications must be submitted 25 for education savings grants in subsequent school years. 26 The amount of each education savings grant is equal to the 27 statewide average state foundation aid per pupil in the same 28 school year. 29 The bill creates an education savings grant fund in the state 30 treasury under the control of the department of management 31 consisting of moneys appropriated to the department for the 32 purpose of providing education savings grants. For the fiscal 33 year commencing July 1, 2015, and each succeeding fiscal year, 34 there is appropriated from the general fund of the state to the 35 -7- LSB 5396YH (4) 85 md/sc 7/ 9

H.F. 2090 department of management for deposit in the fund the amount 1 necessary to pay all education savings grants approved for 2 that fiscal year. For each pupil approved for an education 3 savings grant, the department of management must establish an 4 account for that pupil in the education savings grant fund. 5 The amount of the pupil’s education savings grant is deposited 6 into the pupil’s account on July 1 and such amount is available 7 for use by parents and guardians for the payment of qualified 8 educational expenses, as defined in the bill, incurred by the 9 parent or guardian for the pupil during that fiscal year. 10 The bill authorizes the department of education to 11 contract with a private financial management firm to manage 12 the education savings grant fund, in collaboration with the 13 treasurer of state, including providing for the disbursement 14 of education savings grants in the form of an electronic debit 15 card or checks that are payable directly from the pupil’s 16 account within the fund. 17 The bill provides that moneys remaining in a pupil’s account 18 upon the conclusion of the fiscal year shall remain in the 19 pupil’s account within the education savings grant fund for 20 the payment of qualified educational expenses in future fiscal 21 years or for higher education costs as authorized in the bill. 22 Under the bill, for each pupil with a positive balance in 23 the pupil’s account in the education savings grant fund upon 24 graduation from high school or completion of an equivalent 25 level of competent private instruction under Code chapter 26 299A, the department of management is required to maintain the 27 account in the fund until the pupil is 25 years old. Until 28 the pupil is 25 years old, moneys in the pupil’s account may 29 be used by the pupil for higher education costs, as defined 30 in Code section 12D.1. Moneys in a pupil’s account when the 31 pupil turns 25 years old are transferred by the department of 32 management for deposit in the general fund of the state. 33 The bill provides that a person who makes a false claim for 34 the purpose of obtaining an education savings grant or who 35 -8- LSB 5396YH (4) 85 md/sc 8/ 9

H.F. 2090 knowingly receives the grant or makes a payment from an account 1 within the education savings grant fund without being legally 2 entitled to it is guilty of a fraudulent practice and is 3 subject to a criminal penalty. The bill allows the department 4 of management to initiate legal proceedings to recover grants 5 and amounts improperly awarded or paid from accounts under the 6 bill. 7 The bill provides that moneys from an education savings 8 grant under the bill are not taxable income under Code chapter 9 422. In addition, the bill provides that contributions to an 10 Iowa education savings plan trust account under Code chapter 11 12D that are moneys from an education savings grant under the 12 bill are not considered a contribution that may be deducted for 13 Iowa income tax purposes. 14 The bill applies to school budget years and fiscal years 15 beginning on or after July 1, 2015. 16 The provisions of the bill amending Code sections 12D.3 and 17 422.7 apply to tax years beginning on or after January 1, 2015. 18 -9- LSB 5396YH (4) 85 md/sc 9/ 9