House File 853 - Introduced
HOUSE FILE
BY COMMITTEE ON WAYS AND MEANS
(SUCCESSOR TO HF 320)
Passed House, Date Passed Senate, Date
Vote: Ayes Nays Vote: Ayes Nays
Approved
A BILL FOR
1 An Act providing that contributions made to certain school
2 tuition organizations may be treated as credits under the
3 individual income tax and including an applicability date
4 provision.
5 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
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PAG LIN
1 1 Section 1. NEW SECTION. 422.11K SCHOOL TUITION
1 2 ORGANIZATION TAX CREDIT.
1 3 1. The taxes imposed under this division less the credits
1 4 allowed under sections 422.12 and 422.12B shall be reduced by
1 5 a school tuition organization tax credit equal to sixty=five
1 6 percent of the amount of the voluntary cash contributions made
1 7 by the taxpayer during the fiscal year ending in the tax year.
1 8 2. To be eligible for this credit, all of the following
1 9 shall apply:
1 10 a. A deduction pursuant to section 170 of the Internal
1 11 Revenue Code for any amount of the contribution is not taken
1 12 for state tax purposes.
1 13 b. The contribution does not designate that any part of
1 14 the contribution be used for the direct benefit of any
1 15 dependent of the taxpayer or for any other student designated
1 16 by the taxpayer.
1 17 c. Each school tuition organization shall apply for tax
1 18 credits on behalf of the taxpayers making contributions to the
1 19 organization. The application shall be filed with the
1 20 department by August 15 following the end of the fiscal year
1 21 and shall contain a listing of each taxpayer, the taxpayer's
1 22 contribution, and the ratio that the contributions that are
1 23 used for educational scholarships and tuition grants for
1 24 public and private nonprofit preschools are to the total
1 25 contributions used for educational scholarships and tuition
1 26 grants. The department shall compute the amount of credits
1 27 attributable to contributions benefiting preschools and those
1 28 benefiting elementary and secondary schools. The total amount
1 29 of credits that may be approved for any fiscal year for
1 30 contributions benefiting preschools is three million dollars
1 31 and for contributions benefiting elementary and secondary
1 32 schools is seven million dollars. If tax credits exceed the
1 33 limit, the amount available to each taxpayer shall be
1 34 prorated. If all the tax credits available for one type of
1 35 contribution are not used, the excess may be used to increase
2 1 the limit for the other type of contribution.
2 2 Notwithstanding any other provision, the maximum tax credit
2 3 a taxpayer may receive shall not exceed an amount equal to
2 4 fifty thousandths of one percent of the combined available
2 5 credits for both types for married taxpayers filing jointly or
2 6 equal to twenty=five thousandths of one percent of the
2 7 combined available credits for both types for all other
2 8 taxpayers.
2 9 The department shall notify the school tuition organization
2 10 of the amount of each taxpayer's tax credit by November 1 of
2 11 the tax year. The school tuition organization shall notify
2 12 the taxpayers of their amount of tax credit by December 1 of
2 13 the tax year.
2 14 3. Any credit in excess of the tax liability is not
2 15 refundable but the excess for the tax year may be credited to
2 16 the tax liability for the following five tax years or until
2 17 depleted, whichever is the earlier.
2 18 4. Married taxpayers who file separate returns or file
2 19 separately on a combined return form must determine the tax
2 20 credit based upon their combined net income and allocate the
2 21 total credit amount to each spouse in the proportion that each
2 22 spouse's respective net income bears to the total combined net
2 23 income. Nonresidents or part=year residents of Iowa must
2 24 determine their tax credit in the ratio of their Iowa source
2 25 net income to their all source net income. Nonresidents or
2 26 part=year residents who are married and elect to file separate
2 27 returns or to file separately on a combined return form must
2 28 allocate the tax credit between the spouses in the ratio of
2 29 each spouse's Iowa source net income to the combined Iowa
2 30 source net income of the taxpayers.
2 31 5. For purposes of this section:
2 32 a. "Qualified school" means a public or private nonprofit
2 33 preschool, as defined in section 237A.1, in this state or a
2 34 nonpublic elementary or secondary school in this state which
2 35 is accredited under section 256.11 and adheres to the
3 1 provisions of the federal Civil Rights Act of 1964 and chapter
3 2 216.
3 3 b. (1) "School tuition organization" means a charitable
3 4 organization in this state that is exempt from federal income
3 5 taxation under section 501(c)(3) of the Internal Revenue Code
3 6 and that allocates at least ninety percent of its annual
3 7 revenue for educational scholarships or tuition grants to
3 8 children to allow them to attend any qualified school of their
3 9 parents' choice.
3 10 (2) A school tuition organization shall only award
3 11 educational scholarships and tuition grants to children who
3 12 reside in Iowa. In addition, to qualify as a school tuition
3 13 organization, the charitable organization shall provide
3 14 educational scholarships or tuition grants to students without
3 15 limiting availability to only students of one school and shall
3 16 prioritize the provision of such scholarships and grants to
3 17 students from families whose incomes are less than two hundred
3 18 percent of the federal poverty level, as defined by the most
3 19 recently revised income guidelines published by the United
3 20 States department of health and human services.
3 21 6. A school tuition organization that receives a voluntary
3 22 cash contribution pursuant to this section shall report to the
3 23 department, in a form prescribed by the department, by August
3 24 15 of each fiscal year all of the following information:
3 25 a. The name, address, and contact name of the school
3 26 tuition organization.
3 27 b. The total number of contributions received during the
3 28 previous fiscal year.
3 29 c. The total dollar amount of contributions received
3 30 during the previous fiscal year.
3 31 d. The total number of children awarded educational
3 32 scholarships or tuition grants during the previous fiscal
3 33 year.
3 34 e. The total dollar amount of educational scholarships and
3 35 tuition grants awarded during the previous fiscal year.
4 1 f. For each school to which educational scholarships or
4 2 tuition grants were awarded all of the following shall be
4 3 provided:
4 4 (1) The name and address of the school.
4 5 (2) The number of educational scholarships and tuition
4 6 grants awarded during the previous fiscal year.
4 7 (3) The total dollar amount of educational scholarships
4 8 and tuition grants awarded during the previous fiscal year.
4 9 Sec. 2. APPLICABILITY DATE. This Act applies to tax years
4 10 beginning on or after January 1, 2006.
4 11 EXPLANATION
4 12 This bill provides for an individual income tax credit
4 13 equal to 65 percent of the voluntary contributions made to a
4 14 school tuition organization that is exempt from federal income
4 15 tax. The tax credit is limited to .025 percent of the tax
4 16 credits available in the case of a single filer and .05
4 17 percent of the tax credits available in the case of joint
4 18 filers. If married individuals file separately, the credit is
4 19 divided between them based upon each individual's net income.
4 20 At least 90 percent of total contributions must be used by the
4 21 school tuition organization to provide educational
4 22 scholarships or tuition grants to children attending public or
4 23 private nonprofit preschools or nonpublic elementary or
4 24 secondary schools that are accredited under state law and
4 25 adhere to the federal Civil Rights Act of 1964 and the state
4 26 civil rights law. The contribution may not be deducted as a
4 27 charitable deduction for state tax purposes or be designated
4 28 for the direct benefit of the taxpayer's dependents or another
4 29 student designated by the taxpayer. The prioritization of the
4 30 scholarships and grants shall be to families with incomes of
4 31 less than 200 percent of the federal poverty level. All
4 32 assistance must go to students residing in Iowa and must be
4 33 available to students in more than one school.
4 34 The school tuition organization must report annually to the
4 35 department of revenue information related to the amount of
5 1 contributions made to the organization, and the number,
5 2 school, and amount of scholarships and grants awarded.
5 3 To receive the credits the organization shall apply on
5 4 behalf of each contributor to the department of revenue.
5 5 The total amount of credits that may be granted by the
5 6 department of revenue is $10 million per fiscal year with $3
5 7 million for contributions used for preschools and $7 million
5 8 used for elementary and secondary schools. If the amount of
5 9 tax credits exceeds the appropriate limit, the department is
5 10 to prorate the credits.
5 11 The bill applies to tax years beginning on or after January
5 12 1, 2006.
5 13 LSB 2637HV 81
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