Senate File 386 - Introduced SENATE FILE BY BRUNKHORST Passed Senate, Date Passed House, Date Vote: Ayes Nays Vote: Ayes Nays Approved A BILL FOR 1 An Act allowing individual income tax credits for contributions 2 made to certain school tuition organizations and including an 3 applicability date provision. 4 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 5 TLSB 2181SS 81 6 mg/pj/5 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 seventy=five 1 6 percent of the amount of the voluntary cash contributions made 1 7 by the taxpayer during the tax year to a school tuition 1 8 organization, not to exceed either of the following: 1 9 a. Seven hundred dollars for a single individual. 1 10 b. Eight hundred dollars for a married couple. 1 11 2. To be eligible for this credit, all of the following 1 12 shall apply: 1 13 a. A deduction pursuant to section 170 of the Internal 1 14 Revenue Code for any amount of the contribution is not taken 1 15 for state tax purposes. 1 16 b. The contribution does not designate that any part of 1 17 the contribution be used for the direct benefit of any 1 18 dependent of the taxpayer or any other student designated by 1 19 the taxpayer. 1 20 3. Any credit in excess of the tax liability is not 1 21 refundable but the excess for the tax year may be credited to 1 22 the tax liability for the following five tax years or until 1 23 depleted, whichever is the earlier. 1 24 4. Married taxpayers who file separate returns or file 1 25 separately on a combined return form must determine the tax 1 26 credit under subsection 1, paragraph "b", based upon their 1 27 combined net income and allocate the total credit amount to 1 28 each spouse in the proportion that each spouse's respective 1 29 net income bears to the total combined net income. 1 30 Nonresidents or part=year residents of Iowa must determine 1 31 their tax credit in the ratio of their Iowa source net income 1 32 to their all source net income. Nonresidents or part=year 1 33 residents who are married and elect to file separate returns 1 34 or to file separately on a combined return form must allocate 1 35 the tax credit between the spouses in the ratio of each 2 1 spouse's Iowa source net income to the combined Iowa source 2 2 net income of the taxpayers. 2 3 5. For purposes of this section: 2 4 a. "Disabled student" means a child requiring special 2 5 education, as defined in section 256B.2, subsection 1. 2 6 b. "New student" means a child who did not attend an 2 7 accredited nonpublic school in Iowa during the previous school 2 8 year. 2 9 c. "Qualified school" means a preschool for disabled 2 10 students in this state or a nonpublic elementary or secondary 2 11 school in this state which is accredited under section 256.11 2 12 and adheres to the provisions of the federal Civil Rights Act 2 13 of 1964 and chapter 216. 2 14 d. "School tuition organization" means a charitable 2 15 organization in this state that is exempt from federal 2 16 taxation under all of section 501(c)(3) of the Internal 2 17 Revenue Code and that does all of the following: 2 18 (1) Allocates at least ninety percent of its annual 2 19 revenue for educational scholarships or tuition grants to 2 20 children to allow them to attend any qualified school of their 2 21 parents' choice of which one=third of the children who receive 2 22 scholarships or grants are new students. Once a child has 2 23 been deemed a new student, that child shall continue to be 2 24 counted as a new student for each school year the child 2 25 receives a scholarship or grant from the organization to 2 26 attend a qualified school. 2 27 (2) Only awards educational scholarships and tuition 2 28 grants to children who reside in Iowa. 2 29 (3) Provides educational scholarships or tuition grants to 2 30 students without limiting availability to only students of one 2 31 school. 2 32 (4) Prioritizes the providing of such scholarships and 2 33 grants to students from families whose incomes are less than 2 34 two hundred percent of the federal poverty level, as defined 2 35 by the most recently revised income guidelines published by 3 1 the United States department of health and human services. 3 2 6. A school tuition organization that receives a voluntary 3 3 cash contribution pursuant to this subsection shall report to 3 4 the department, on a form prescribed by the department, by 3 5 February 28 of each year all of the following information: 3 6 a. The name, address, and contact name of the school 3 7 tuition organization. 3 8 b. The total number of contributions received during the 3 9 previous calendar year. 3 10 c. The total dollar amount of contributions received 3 11 during the previous calendar year. 3 12 d. The total number of children awarded educational 3 13 scholarships or tuition grants during the previous calendar 3 14 year and the number of these children who are new students, 3 15 who reside in the state, and who are from families with 3 16 incomes of less than two hundred percent of the federal 3 17 poverty level. 3 18 e. The total dollar amount of educational scholarships and 3 19 tuition grants awarded during the previous calendar year. 3 20 f. For each school to which educational scholarships or 3 21 tuition grants were awarded all of the following shall be 3 22 provided: 3 23 (1) The name and address of the school. 3 24 (2) The number of educational scholarships and tuition 3 25 grants awarded during the previous calendar year. 3 26 (3) The total dollar amount of educational scholarships 3 27 and tuition grants awarded during the previous calendar year. 3 28 7. The department shall annually file a report with the 3 29 chairpersons and ranking members of the senate and house 3 30 committees on ways and means detailing a compilation of the 3 31 information received from the reports of all school tuition 3 32 organizations filed pursuant to the requirements of subsection 3 33 6. 3 34 8. This section is repealed January 1, 2014. 3 35 Sec. 2. APPLICABILITY DATE. This Act applies to tax years 4 1 beginning on or after January 1, 2006, but before January 1, 4 2 2014. 4 3 EXPLANATION 4 4 This bill provides for an individual income tax credit 4 5 equal to 75 percent of the voluntary contributions made to a 4 6 school tuition organization that is exempt from federal income 4 7 tax. The tax credit is limited to $700 for single individuals 4 8 and $800 for married persons filing jointly. If married 4 9 individuals file separately, the $800 is divided between them 4 10 based upon each individual's net income. At least 90 percent 4 11 of total contributions must be used by the school tuition 4 12 organization to provide educational scholarships or tuition 4 13 grants to children attending nonpublic schools or preschools 4 14 for disabled students that are accredited under state law and 4 15 adhere to the federal Civil Rights Act of 1964 and the state 4 16 civil rights law. In addition, one=third of the scholarships 4 17 or grants must be provided to students who did not attend a 4 18 nonpublic school in the previous year. The contribution may 4 19 not be deducted as a charitable deduction for state tax 4 20 purposes or be designated for the direct benefit of the 4 21 taxpayer's dependents or any other student designated by the 4 22 taxpayer. 4 23 The school tuition organization must limit scholarships and 4 24 grants to children that reside in Iowa, must provide 4 25 scholarships and grants to students at more than one school, 4 26 and must prioritize the awarding of scholarships and grants to 4 27 students of low=income families. 4 28 The school tuition organization must report to the 4 29 department of revenue information related to the amount of 4 30 contributions made to the organization, and the number, 4 31 school, and amount of scholarships and grants awarded. 4 32 The bill applies to tax years beginning on or after January 4 33 1, 2006, but before January 1, 2014. 4 34 LSB 2181SS 81 4 35 mg:rj/pj/5