HF 464 (LSB 2182YH (3) 85)

HOUSE FILE 464

BY  KOESTER

A BILL FOR

An Act providing for an individual and corporate income tax credit for contributions made to certain home school grant organizations and including effective date and applicability provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  NEW SECTION.  422.11R  Home school grant organization tax credit.
   1.  For purposes of this section:
   a.  “Certified enrollment” means the number of eligible children that are currently receiving competent private instruction from the qualified instructor submitting a participation form pursuant to subsection 6, paragraph “d”.
   b.  “Competent private instruction” means the same as provided in section 299A.1.
   c.  “Eligible child” means a child of compulsory attendance age who is under competent private instruction and who is a member of a household whose total annual income during the calendar year before the child receives a home school grant for purposes of this section does not exceed an amount equal to three times the most recently published federal poverty guidelines in the federal register by the United States department of health and human services.
   d.  “Home school grant” means a grant to an eligible child to cover the qualified educational expenses of the eligible child.
   e.  “Home school grant organization” means a charitable organization in this state qualifying under section 501(c)(3) of the Internal Revenue Code as an organization that is exempt from federal taxation under section 501(a) of the Internal Revenue Code and that does all of the following:
   (1)  Allocates at least ninety percent of its annual revenue in home school grants for eligible children to allow them to receive competent private instruction of their parents’ choice.
   (2)  Awards home school grants only to eligible children who reside in Iowa.
   (3)  Provides home school grants to eligible children without limiting availability to only children of one home.
   (4)  Prepares an annual financial statement certified by a public accounting firm.
   f.  “Qualified educational expenses” means expenses incurred by a parent or guardian that are directly related to providing competent private instruction for the eligible child under chapter 299A. “Qualified educational expenses” includes but is not limited to textbooks, payment to a licensed or accredited tutor or practitioner, curriculum materials, tuition or fees for live or online education programs, education materials and services for an eligible child with disabilities, standardized test fees, transportation expenses, and computer and internet access fees.
   g.  “Qualified instructor” means a person who is providing competent private instruction, as defined in section 299A.1, in this state.
   h.  “Total approved tax credits” means for tax years beginning on or after January 1, 2014, eight million seven hundred fifty thousand dollars.
   2.  The taxes imposed under this division, less the credits allowed under section 422.12, shall be reduced by a home school grant organization tax credit equal to sixty-five percent of the amount of the voluntary cash or noncash contributions made by the taxpayer during the tax year to a home school grant organization, subject to the total dollar value of the organization’s tax credit certificates as computed in subsection 7. The tax credit shall be claimed by use of a tax credit certificate as provided in subsection 6.
   3.  To be eligible for the credit, all of the following shall apply:
   a.  A deduction pursuant to section 170 of the Internal Revenue Code for any amount of the contribution is not taken for state tax purposes.
   b.  The contribution does not designate that any part of the contribution be used for the direct benefit of any dependent of the taxpayer or any other eligible child designated by the taxpayer.
   c.  The value of a noncash contribution shall be appraised pursuant to rules of the director.
   4.  Any credit in excess of the tax liability is not refundable but the excess for the tax year may be credited to the tax liability for the following five tax years or until depleted, whichever is the earlier.
   5.  Married taxpayers who file separate returns or file separately on a combined return form must determine the tax credit under subsection 2 based upon their combined net income and allocate the total credit amount to each spouse in the proportion that each spouse’s respective net income bears to the total combined net income. Nonresidents or part-year residents of Iowa must determine their tax credit in the ratio of their Iowa source net income to their all source net income. Nonresidents or part-year residents who are married and elect to file separate returns or to file separately on a combined return form must allocate the tax credit between the spouses in the ratio of each spouse’s Iowa source net income to the combined Iowa source net income of the taxpayers.
   6.
  a.  In order for the taxpayer to claim the home school grant organization tax credit, a tax credit certificate issued by the home school grant organization to which the contribution was made shall be attached to the person’s tax return. The tax credit certificate shall contain the taxpayer’s name, address, tax identification number, the amount of the contribution, the amount of the credit, and other information required by the department.
   b.  The department shall authorize a home school grant organization to issue tax credit certificates for contributions made to the home school grant organization. The aggregate amount of tax credit certificates that the department shall authorize for a home school grant organization for a tax year shall be determined for that organization pursuant to subsection 7. However, a home school grant organization shall not be authorized to issue tax credit certificates unless the organization is controlled by a board of directors consisting of at least seven members. The names and addresses of the members shall be provided to the department and shall be made available by the department to the public, notwithstanding any state confidentiality restrictions.
   c.  Pursuant to rules of the department, a home school grant organization shall initially register with the department. The organization’s registration shall include proof of section 501(c)(3) status and provide a detailed description of the geographic area the home school grant organization serves. Once the home school grant organization has registered, it is not required to subsequently register unless the geographic area it serves changes.
   d.  Each qualified instructor that desires to be served by a home school grant organization shall submit a participation form annually to the department by November 1 providing the following information:
   (1)  Certified enrollment as of October 1, or the first Monday in October if October 1 falls on a Saturday or Sunday.
   (2)  The home school grant organization that represents the qualified instructor. A qualified instructor shall only be represented by one home school grant organization.
   7.
  a.  Each year by December 1, the department shall authorize home school grant organizations to issue tax credit certificates for the following tax year. Tax credit certificates available for issue by each home school grant organization shall be determined in the following manner:
   (1)  Total the certified enrollment of each participating qualified instructor to arrive at the total participating certified enrollment.
   (2)  Determine the per eligible child tax credit available by dividing the total approved tax credits by the total participating certified enrollment.
   (3)  Multiply the per eligible child tax credit by the total participating certified enrollment of each home school assistance organization.
   b.  For purposes of calculating certified enrollment in this subsection, an eligible child receiving competent private instruction from more than one qualified instructor shall only be counted once. In the event an eligible child is included in the certified enrollment of multiple qualified instructors being represented by different home school grant organizations, that eligible child shall be counted in the certified enrollment of the qualified instructor providing the greatest percentage of competent private instruction to the eligible child.
   8.  A home school grant organization that receives a voluntary cash or noncash contribution pursuant to this section shall report to the department, on a form prescribed by the department, by January 12 of each tax year, all of the following information:
   a.  The name and address of the members and the chairperson of the governing board of the home school grant organization.
   b.  The total number and dollar value of contributions received and the total number and dollar value of the tax credits approved during the previous tax year.
   c.  A list of the individual donors for the previous tax year that includes the dollar value of each donation and the dollar value of each approved tax credit.
   d.  The total number of eligible children utilizing home school grants for the school year in progress and the total dollar value of the grants.
   e.  The name and address of each qualified instructor for which home school grants are currently being utilized, detailing the number of eligible students and the total dollar value of grants being utilized for each qualified instructor served by a home school grant organization.
    Sec. 2.  Section 422.33, Code 2013, is amended by adding the following new subsection:
   NEW SUBSECTION.  30.  The taxes imposed under this division shall be reduced by a home school grant organization tax credit allowed under section 422.11R. The maximum amount of tax credits that may be approved under this subsection for a tax year equals twenty-five percent of the home school grant organization’s tax credits that are authorized pursuant to section 422.11R, subsection 7, for a tax year.
    Sec. 3.  EFFECTIVE UPON ENACTMENT.  This Act, being deemed of immediate importance, takes effect upon enactment.
    Sec. 4.  APPLICABILITY.  This Act applies to tax years beginning on or after January 1, 2014.
EXPLANATION
   This bill creates a nonrefundable individual and corporate income tax credit equal to 65 percent of the voluntary contributions made to a home school grant organization. “Home school grant organization” is defined in the bill as a 501(c)(3) tax-exempt charitable organization in Iowa that allocates at least 90 percent of its annual revenue to providing home school grants to Iowa children of compulsory attendance age who are under competent private instruction and who are members of households that have total annual incomes of less than three times the federal poverty level. Additionally, a home school grant organization must not limit availability of grants to only children of one home, and must prepare an annual financial statement certified by a public accounting firm. “Home school grants” are grants to eligible children, as defined in the bill, to cover expenses, including those specified in the bill, incurred by a parent or guardian that are directly related to providing competent private instruction under Code chapter 299A.
   Contributions may not be deducted as a charitable deduction for state tax purposes or be designated for the direct benefit of the taxpayer’s dependents or any other eligible child designated by the taxpayer.
   A home school grant organization is required to register with the department of revenue and shall be authorized to issue tax credit certificates in amounts equal to the total certified enrollment of the qualified instructors served by the organization multiplied by a per eligible student tax credit amount. The amount is determined by dividing the total approved tax credits ($8.75 million per year) by the total certified enrollment of all qualified instructors served by home school grant organizations. For purposes of calculating the credit amount per home school grant organization, an eligible child may only be counted once. If the eligible child is included in the certified enrollment of multiple qualified instructors being represented by different home school grant organizations, the eligible child shall be counted in the certified enrollment of the qualified instructor providing the greatest percentage of competent private instruction to the eligible child. “Certified enrollment” and “qualified instructor” are both defined in the bill.
   The tax credit is claimed by attaching the tax credit to the taxpayer’s income tax return. Any credit in excess of the taxpayer’s tax liability may be carried forward for a period of five years.
   The total home school grant organization tax credits that may be approved in a tax year for the corporate income tax cannot exceed 25 percent of the total credits authorized for all home school grant organizations for a tax year.
   Home school grant organizations are required to report to the department of revenue information related to the organization’s governing board, the amount of contributions received and the names of donors, the name and address of each qualified instructor, the number of eligible children utilizing grants, and the total amount of the grants.
   The bill takes effect upon enactment and applies to tax years beginning on or after January 1, 2014.