S.F. 128 Section 1. Section 8.6, Code 2021, is amended by adding the 1 following new subsection: 2 NEW SUBSECTION . 17. Education savings grants. To adopt 3 rules relating to the administration of and applications 4 for the education savings grant program pursuant to section 5 257.11B, including but not limited to application processing 6 timelines, information required to be submitted by a parent or 7 guardian, and payment and recovery of grant amounts. 8 Sec. 2. NEW SECTION . 257.11B Education savings grant 9 program. 10 1. a. For the school budget year beginning July 1, 2022, 11 and each succeeding school budget year, the following resident 12 pupils who are attending a nonpublic school, as defined 13 in section 285.16, located in this state and who maintain 14 enrollment for the entirety of the required attendance period 15 of the school year shall be eligible to apply for an education 16 savings grant in the manner provided in this section: 17 (1) A pupil eligible to enroll in kindergarten and who is 18 not otherwise ineligible under this section. 19 (2) A pupil eligible to enroll in grade one through 20 grade twelve if the pupil has attended a public school for 21 the equivalent of the two semesters immediately preceding 22 the school budget year for which the education savings grant 23 is requested and who is not otherwise ineligible under this 24 section. 25 (3) A pupil who received an education savings grant for 26 the immediately preceding school budget year, who is eligible 27 to enroll in grade one through grade twelve, and who is not 28 otherwise ineligible under this section. 29 b. Education savings grants shall be made available to 30 parents and guardians in the manner authorized under subsection 31 4, paragraph “c” , for the payment of qualified grant expenses as 32 provided in this section. 33 c. For purposes of this subsection, “resident” means the 34 same as defined in section 282.1, subsection 2. 35 -1- LSB 2005XS (3) 89 md/jh 1/ 10

S.F. 128 2. a. (1) By January 31 preceding the school year for 1 which the education savings grant is requested, the parent 2 or guardian of the pupil shall submit an application to the 3 department of management, on application forms developed by 4 the department of management, indicating that the parent or 5 guardian intends to enroll the pupil in a nonpublic school for 6 the entirety of the school year. 7 (2) In addition to such information deemed appropriate by 8 the department of management, the application shall require 9 certification from the nonpublic school of the pupil’s 10 enrollment for the following school year. 11 b. By March 1 preceding the school year for which the 12 education savings grant is requested, the department of 13 management shall notify the parent or guardian of each pupil 14 approved for the following school year to receive an education 15 savings grant and the amount of the education savings grant for 16 the pupil. 17 c. Education savings grants shall only be approved for one 18 school year and applications must be submitted annually for 19 education savings grants in subsequent school years. 20 3. The department of management shall assign each pupil an 21 education savings grant in an amount equal to fifty percent of 22 the regular program state cost per pupil for the same school 23 budget year. 24 4. An education savings grant fund is created in the state 25 treasury under the control of the department of management 26 consisting of moneys appropriated to the department of 27 management for the purpose of providing education savings 28 grants under this section. For the fiscal year commencing July 29 1, 2022, and each succeeding fiscal year, there is appropriated 30 from the general fund of the state to the department of 31 management to be credited to the fund the amount necessary 32 to pay all education savings grants approved for that fiscal 33 year. The director of the department of management has all 34 powers necessary to carry out and effectuate the purposes, 35 -2- LSB 2005XS (3) 89 md/jh 2/ 10

S.F. 128 objectives, and provisions of this section pertaining to the 1 fund, including the power to do all of the following: 2 a. Make and enter into contracts necessary for the 3 administration of the fund. 4 b. Procure insurance against any loss in connection with the 5 assets of the fund or require a surety bond. 6 c. Contract with a private financial management firm to 7 manage the fund, in collaboration with the treasurer of state, 8 including providing for the disbursement of education savings 9 grants in the form of an electronic debit card or checks that 10 are payable directly from the pupil’s account within the fund. 11 d. Conduct audits or other review necessary to properly 12 administer the program. 13 e. Adopt rules for the administration of the fund and 14 accounts within the fund. 15 5. a. For each pupil approved for an education savings 16 grant, the department of management shall establish an account 17 for that pupil in the education savings grant fund. The amount 18 of the pupil’s education savings grant shall be deposited 19 into the pupil’s account on July 1, and such amount shall 20 be immediately available for the payment of qualified grant 21 expenses incurred by the parent or guardian for the pupil 22 during that fiscal year using the payment method authorized 23 under subsection 4, paragraph “c” . 24 b. A nonpublic school that accepts payment from a parent or 25 guardian using funds from a pupil’s account in the education 26 savings grant fund shall not refund, rebate, or share any 27 portion of such payment with the parent, guardian, or pupil. 28 c. Moneys remaining in an eligible pupil’s account upon 29 conclusion of the fiscal year shall remain in the eligible 30 pupil’s account in the education savings grant fund for the 31 payment of qualified grant expenses in future fiscal years 32 during which the pupil participates in the program or for the 33 payment of higher education costs that are qualified education 34 expenses as provided under subsection 8. 35 -3- LSB 2005XS (3) 89 md/jh 3/ 10

S.F. 128 6. a. For purposes of this section, “qualified grant 1 expenses” includes tuition and fees at a nonpublic school, 2 textbooks, fees or payments for educational therapies, 3 including tutoring or cognitive skills training, curriculum 4 fees and materials for a course of study for a specific subject 5 matter or grade level, tuition or fees for nonpublic online 6 education programs, education materials and services for pupils 7 with disabilities, including the cost of paraprofessionals 8 and assistants who are trained in accordance with state law, 9 standardized test fees, qualified education expenses, as 10 defined in section 12D.1, excluding room and board expenses, 11 and other expenses incurred by the parent or guardian that 12 are directly related to the education of the pupil at a 13 nonpublic school, including a nonpublic school accredited by 14 an independent accrediting agency approved by the department 15 of education. 16 b. “Qualified grant expenses” does not include 17 transportation costs for the pupil, the cost of food or 18 refreshments consumed by the pupil, the cost of clothing for 19 the pupil, or the cost of disposable materials, including 20 but not limited to paper, notebooks, pencils, pens, and art 21 supplies. 22 7. a. A person who makes a false claim for the purpose 23 of obtaining an education savings grant provided for in this 24 section or who knowingly receives the grant or makes a payment 25 from an account within the education savings grant fund without 26 being legally entitled to do so is guilty of a fraudulent 27 practice under chapter 714. The false claim for an education 28 savings grant or a payment from an account shall be disallowed. 29 The department of management shall also close the pupil’s 30 account in the education savings grant fund and transfer any 31 remaining moneys in the account for deposit in the general 32 fund of the state. If the improperly obtained amounts from 33 the grant have been disbursed from the applicable account in 34 the education savings grant fund, the department of management 35 -4- LSB 2005XS (3) 89 md/jh 4/ 10

S.F. 128 shall recover such amounts from the parent or guardian, or from 1 the pupil for purposes of subsection 8, including by initiating 2 legal proceedings to recover such amounts, if necessary. A 3 parent or guardian, or a pupil for purposes of subsection 4 8, who commits a fraudulent practice under this section is 5 prohibited from participating in the education savings grant 6 program in the future. 7 b. If, prior to the end of the required attendance period 8 of the school year, a pupil who receives an education savings 9 grant withdraws from enrollment in the nonpublic school or is 10 expelled, the nonpublic school shall notify the department of 11 management in writing of the pupil’s withdrawal or expulsion, 12 and the pupil’s parent or guardian shall notify the department 13 of management of the pupil’s withdrawal or expulsion from the 14 nonpublic school. A pupil’s expulsion from the nonpublic 15 school prior to the end of the required attendance period for 16 the school year shall invalidate the pupil’s eligibility for 17 the education savings grant for the school budget year. A 18 pupil’s withdrawal from a nonpublic school prior to the end 19 of the required attendance period of the school year shall 20 invalidate the pupil’s eligibility for the education savings 21 grant for the school budget year unless the withdrawal is 22 the result of a change in residence of the pupil and the 23 pupil, following written notice by the parent or guardian and 24 certification by the new nonpublic school to the department of 25 management, enrolls in a different nonpublic school in this 26 state for the remainder of the school year. 27 c. (1) Upon receipt of a notice of expulsion under 28 paragraph “b” , the department of management shall close 29 the pupil’s account in the education savings grant fund and 30 transfer any remaining moneys in the account for deposit in 31 the general fund of the state. In addition, if amounts from 32 the grant for the school budget year during which the pupil 33 is expelled have been disbursed from the expelled pupil’s 34 account in the education savings grant fund, the department 35 -5- LSB 2005XS (3) 89 md/jh 5/ 10

S.F. 128 of management shall recover such amounts from the parent or 1 guardian, including by initiating legal proceedings to recover 2 such amounts, if necessary. 3 (2) Upon receipt of a notice of withdrawal under paragraph 4 “b” and a determination that the pupil’s withdrawal was not the 5 result of a change in residence, the department of management 6 shall cease disbursements of remaining moneys in the pupil’s 7 account in the education savings grant fund and maintain the 8 pupil’s account if and until such time that the pupil uses the 9 funds for qualified education expenses under subsection 8. 10 In addition, if amounts from the grant for the school budget 11 year during which the withdrawal occurs have been disbursed 12 from the pupil’s account in the education savings grant fund, 13 the department of management shall recover such amounts from 14 the parent or guardian to the extent the amount disbursed 15 exceeds the amount of the grant proportionate to the remaining 16 portion of the school year following the withdrawal, including 17 by initiating legal proceedings to recover such amounts, if 18 necessary. 19 (3) Upon receipt of a notice of withdrawal under paragraph 20 “b” and a determination that the withdrawal was the result of 21 a change in residence but that the pupil did not enroll in 22 a different nonpublic school in this state for the remainder 23 of the school year, the department of management shall cease 24 disbursements of remaining moneys in the pupil’s account in 25 the education savings grant fund and maintain the pupil’s 26 account if and until such time that the pupil uses the funds 27 for qualified education expenses under subsection 8. 28 (4) If a pupil’s eligibility is invalidated under the 29 provisions of paragraph “b” , the pupil shall be ineligible for 30 an education savings grant for the following school budget year 31 under subsection 1, paragraph “a” , subparagraph (2). 32 8. For each pupil with a positive balance in the pupil’s 33 account in the education savings grant fund upon graduation 34 from high school, the department of management shall maintain 35 -6- LSB 2005XS (3) 89 md/jh 6/ 10

S.F. 128 the account in the fund until the pupil is twenty-five years of 1 age. Following graduation from high school until the pupil is 2 twenty-five years of age, moneys in the pupil’s account may be 3 used for qualified education expenses, as defined in section 4 12D.1, incurred by the pupil while attending an institution 5 of higher education under the control of the state board of 6 regents, a community college located in this state, or a 7 private college or university located in this state. Payments 8 from a pupil’s account for qualified education expenses shall 9 be made in the same manner as payments for qualified grant 10 expenses under subsection 5. Moneys in a pupil’s account when 11 the pupil turns twenty-five years of age shall be transferred 12 by the department of management for deposit in the general fund 13 of the state. 14 9. This section shall not be construed to authorize the 15 state or any political subdivision of the state to exercise 16 authority over any nonpublic school or construed to require a 17 nonpublic school to modify its academic standards for admission 18 or educational program in order to receive payment from a 19 parent or guardian using funds from a pupil’s account in the 20 education savings grant fund. A nonpublic school that accepts 21 payment from a parent or guardian using funds from a pupil’s 22 account in the education savings grant fund is not an agent 23 of this state or of a political subdivision of this state. 24 Rules adopted by the department of management to implement this 25 section that impose an undue burden on a nonpublic school are 26 invalid. 27 Sec. 3. Section 422.7, Code 2021, is amended by adding the 28 following new subsection: 29 NEW SUBSECTION . 48. Subtract, to the extent included, the 30 amount of an education savings grant under section 257.11B 31 received by the taxpayer for payment of qualified grant 32 expenses. 33 Sec. 4. APPLICABILITY. The following applies to school 34 budget years and fiscal years beginning on or after July 1, 35 -7- LSB 2005XS (3) 89 md/jh 7/ 10

S.F. 128 2022: 1 The section of this Act enacting section 257.11B. 2 Sec. 5. APPLICABILITY. The following applies to tax years 3 beginning on or after January 1, 2022: 4 The section of this Act enacting section 422.7, subsection 5 48. 6 EXPLANATION 7 The inclusion of this explanation does not constitute agreement with 8 the explanation’s substance by the members of the general assembly. 9 This bill establishes an education savings grant program for 10 certain pupils attending a nonpublic school. 11 The following pupils who attend a nonpublic school in this 12 state and who maintain enrollment for the entirety of the 13 required attendance period of the school year are eligible to 14 apply for an education savings grant: (1) a pupil eligible to 15 enroll in kindergarten; (2) a pupil eligible to enroll in grade 16 1 through grade 12 if the pupil has attended a public school 17 for the equivalent of the two immediately preceding semesters; 18 or (3) a pupil who received an education savings grant for the 19 immediately preceding school budget year and who is eligible 20 to enroll in grade 1 through grade 12. By January 31 preceding 21 the school year for which the education savings grant is 22 requested, the parent or guardian of the pupil requesting to 23 receive an education savings grant must submit an application 24 to the department of management indicating that the parent or 25 guardian intends to enroll the pupil in a nonpublic school for 26 the entirety of the school year. 27 The bill requires that by March 1 preceding the school 28 year for which the education savings grant is requested, the 29 department of management must notify the parent or guardian of 30 each pupil approved for the following school year to receive 31 an education savings grant and the amount of the education 32 savings grant for the pupil. The education savings grant is 33 equal to 50 percent of the regular program state cost per pupil 34 for the same school budget year. Education savings grants 35 -8- LSB 2005XS (3) 89 md/jh 8/ 10

S.F. 128 must be approved for each school year and applications must be 1 submitted each year. 2 The bill creates an education savings grant fund in 3 the state treasury under the control of the department of 4 management consisting of moneys appropriated to the department 5 of management for the purpose of providing education savings 6 grants. For the fiscal year commencing July 1, 2022, and each 7 succeeding fiscal year, there is appropriated from the general 8 fund of the state to the department of management for deposit 9 in the fund the amount necessary to pay all education savings 10 grants approved for that fiscal year. For each pupil approved 11 for an education savings grant, the department of management 12 must establish an account for that pupil in the education 13 savings grant fund. The amount of the pupil’s education 14 savings grant is deposited into the pupil’s account on July 1 15 and such amount is available for use by parents and guardians 16 for the payment of qualified grant expenses, as defined in the 17 bill, incurred by the parent or guardian for the pupil during 18 that fiscal year. 19 The bill authorizes the department of management to 20 contract with a private financial management firm to manage 21 the education savings grant fund, in collaboration with the 22 treasurer of state, including providing for the disbursement 23 of education savings grants in the form of an electronic debit 24 card or checks that are payable directly from the pupil’s 25 account within the fund. 26 The bill provides that moneys remaining in an eligible 27 pupil’s account upon the conclusion of the fiscal year shall 28 remain in the eligible pupil’s account in the education savings 29 grant fund for the payment of qualified grant expenses in 30 future fiscal years during which the pupil participates in 31 the program or for higher education costs that are qualified 32 education expenses as authorized in the bill. 33 Under the bill, for each pupil with a positive balance in 34 the pupil’s account in the education savings grant fund upon 35 -9- LSB 2005XS (3) 89 md/jh 9/ 10

S.F. 128 graduation from high school, the department of management is 1 required to maintain the account in the fund until the pupil 2 reaches an age specified in the bill. Until the pupil reaches 3 the age limitation, moneys in the pupil’s account may be used 4 by the pupil for qualified education expenses, as defined in 5 Code section 12D.1. Moneys in a pupil’s account when the pupil 6 reaches the age limitation are transferred by the department of 7 management for deposit in the general fund of the state. 8 The bill provides that a person who makes a false claim for 9 the purpose of obtaining an education savings grant or who 10 knowingly receives the grant or makes a payment from an account 11 in the education savings grant fund without being legally 12 entitled to do so is guilty of a fraudulent practice and is 13 subject to a criminal penalty. The bill directs the department 14 of management to recover grants and amounts improperly awarded 15 or paid and requires the closure of the pupil’s account and 16 transfer of all remaining moneys to the general fund of the 17 state. The bill also establishes requirements and procedures 18 for parents or guardians and for the department of management 19 when a pupil receiving an education savings grant withdraws 20 or is expelled from the nonpublic school prior to the end of 21 the required attendance period of the school year, including 22 requirements for disposition of the pupil’s account within the 23 education savings grant fund and recovery of grant funds. 24 The bill provides that an education savings grant received 25 by a taxpayer is not taxable income for purposes of state 26 individual income taxation. This provision of the bill applies 27 to tax years beginning on or after January 1, 2022. 28 The section of the bill enacting the education savings 29 grant program applies to school budget years and fiscal years 30 beginning on or after July 1, 2022. 31 -10- LSB 2005XS (3) 89 md/jh 10/ 10