SF 572 (LSB 2542SV (2) 90)

SENATE FILE 572

BY  COMMITTEE ON WAYS AND MEANS

(SUCCESSOR TO SSB 1208)

A BILL FOR

An Act relating to certain education programs and tax credits and including effective date, applicability, and retroactive applicability provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

DIVISION I
TUITION AND TEXTBOOK TAX CREDIT

    Section 1.  Section 422.12, subsection 2, paragraph b, Code 2023, is amended to read as follows:
   b.  A tuition credit equal to twenty-five percent of the first two thousand dollars which the taxpayer has paid to others for each dependent in grades kindergarten through twelve, for tuition and textbooks of each dependent who is receiving private instruction or who is attending an elementary or secondary school situated in Iowa, which school is accredited or approved under section 256.11, which is not operated for profit, and which adheres to the provisions of the federal Civil Rights Act of 1964 and chapter 216.  Amounts paid from an account in the education savings account fund under section 257.11B, as enacted by 2023 Iowa Acts, House File 68, section 7, shall not be eligible for the credit under this paragraph. Notwithstanding any other provision, all other credits allowed under this subsection shall be deducted before the tuition credit under this paragraph. The department, when conducting an audit of a taxpayer’s return, shall also audit the tuition tax credit portion of the tax return.
    Sec. 2.  EFFECTIVE DATE.  This division of this Act, being deemed of immediate importance, takes effect upon enactment.
    Sec. 3.  RETROACTIVE APPLICABILITY.  This division of this Act applies retroactively to tax years beginning on or after January 1, 2023.
DIVISION II
SCHOOL TUITION ORGANIZATION GRANTS

    Sec. 4.  Section 422.11S, subsection 6, paragraph c, subparagraph (1), Code 2023, is amended to read as follows:
   (1)  Allocates at least ninety percent of its annual revenue within three calendar years from January 1 of the calendar year during which the revenues were received in tuition grants for children to allow them to attend a qualified school of their parents’ choice.
    Sec. 5.  Section 422.11S, subsection 6, paragraph c, Code 2023, is amended by adding the following new subparagraph:
   NEW SUBPARAGRAPH.  (05)  For eligible students participating in the education savings account program under section 257.11B, as enacted by 2023 Iowa Acts, House File 68, section 7, only provides tuition grants in amounts not to exceed the tuition amount for which the parent or guardian is responsible for payment following application of amounts paid using moneys from the student’s account in the education savings account fund.
    Sec. 6.  Section 422.11S, subsection 8, paragraph a, subparagraph (2), Code 2023, is amended to read as follows:
   (2)  “Total approved tax credits” means for the 2006 calendar year, two million five hundred thousand dollars, for the 2007 calendar year, five million dollars, for calendar years beginning on or after January 1, 2008, but before January 1, 2012, seven million five hundred thousand dollars, for calendar years beginning on or after January 1, 2012, but before January 1, 2014, eight million seven hundred fifty thousand dollars, for calendar years beginning on or after January 1, 2014, but before January 1, 2019, twelve million dollars, for calendar years beginning on or after January 1, 2019, but before January 1, 2020, thirteen million dollars, for calendar years beginning on or after January 1, 2020, but before January 1, 2022, fifteen million dollars, and for calendar years beginning on or after January 1, 2022, but before January 1, 2024, twenty million dollars, for the calendar year beginning January 1, 2024, seventeen million dollars, and for calendar years beginning on or after January 1, 2025, fourteen million dollars.
    Sec. 7.  RETROACTIVE APPLICABILITY.  The section of this division of this Act amending section 422.11S, subsection 6, paragraph “c”, subparagraph (1), applies retroactively to contributions to a school tuition organization made on or after January 1, 2022.
    Sec. 8.  APPLICABILITY.  The section of this division of this Act enacting section 422.11S, subsection 6, paragraph “c”, subparagraph (05), applies to tuition grants made for school years beginning on or after July 1, 2023.
DIVISION III
EDUCATION SAVINGS ACCOUNTS —— ADMINISTRATION OF FUNDS

    Sec. 9.  Section 257.11B, subsection 6, paragraph c, as enacted by 2023 Iowa Acts, House File 68, section 7, is amended to read as follows:
   c.  Moneys remaining in a pupil’s individual account upon conclusion of the fiscal year shall remain in the pupil’s individual account for the payment of qualified educational expenses in future consecutive fiscal years during which the pupil participates in the program until the pupil becomes ineligible under the program or until the remaining amounts are transferred to the state general fund under subsection 8.  If moneys remain in a pupil’s individual account upon conclusion of the fiscal year and the pupil does not participate in the program during the immediately succeeding fiscal year, the department of education or third-party entity shall close the pupil’s account in the fund, and transfer any remaining moneys in the account for deposit in the general fund of the state.
    Sec. 10.  Section 257.11B, subsection 7, as enacted by 2023 Iowa Acts, House File 68, section 7, is amended to read as follows:
   7.  a.  A person who makes a false claim for the purpose of obtaining an education savings account payment or who knowingly receives the payment or makes a payment from an individual account within the fund without being legally entitled to do so is guilty of a fraudulent practice under chapter 714. The false claim for an education savings account or a payment from an individual account shall be disallowed. The department of education or third-party entity shall also close the pupil’s individual account in the fund and transfer any remaining moneys in the account for deposit in the general fund of the state. If the improperly obtained amounts have been disbursed from the applicable individual account, the department of education or third-party entity shall recover such amounts from the parent or guardian, including by initiating legal proceedings to recover such amounts, if necessary. A parent or guardian who commits a fraudulent practice under this section is prohibited from participating in the education savings account program in the future.
   b.  (1)  If, prior to the end of the required attendance period of the school year, a pupil who receives an education savings account payment withdraws from enrollment in the nonpublic school or is expelled, the nonpublic school shall notify the department of education or third-party entity in writing of the pupil’s withdrawal or expulsion.
   (2)  Upon receipt of a notice of expulsion, the department of education or third-party entity shall cease disbursements of remaining moneys in the pupil’s account, close the pupil’s account in the fund, and transfer any remaining moneys in the account for deposit in the general fund of the state.
   (3)  Upon receipt of a notice of withdrawal and a determination that the pupil did not enroll in a different nonpublic school in this state for the remainder of the school year, the department of education or third-party entity shall cease disbursements of remaining moneys in the pupil’s account in the fund, close the pupil’s account, and transfer any moneys remaining in the pupil’s account for deposit in the general fund of the state.
    Sec. 11.  EFFECTIVE DATE.  This division of this Act, being deemed of immediate importance, takes effect upon enactment.
    Sec. 12.  RETROACTIVE APPLICABILITY.  This division of this Act applies retroactively to January 24, 2023.
DIVISION IV
NONPUBLIC SCHOOL PUPIL TEXTBOOK SERVICES

    Sec. 13.  Section 301.1, subsections 2 and 3, Code 2023, are amended by striking the subsections.
    Sec. 14.  EFFECTIVE DATE.  This division of this Act takes effect July 1, 2025.
DIVISION V
EDUCATION SAVINGS ACCOUNTS —— CORRECTIONS

    Sec. 15.  Section 257.11B, subsection 2, paragraph a, subparagraph (1), subparagraph division (c), as enacted by 2023 Iowa Acts, House File 68, section 7, is amended to read as follows:
   (c)  A resident pupil who is eligible to enroll in grades one through twelve and was enrolled in a nonpublic school for the school year immediately preceding the school year for which the education savings account payment is requested if the pupil’s household has an annual income less than or equal to three hundred percent of the most recently revised poverty income guidelines published by the United States department of health and human services.
    Sec. 16.  Section 257.46, subsection 3, Code 2023, as amended by 2023 Iowa Acts, House File 68, section 16, is amended to read as follows:
   3.  If any portion of the gifted and talented program budget remains unexpended at the end of the budget year, the remainder shall be carried over to the subsequent budget year and added to the gifted and talented program budget for that year. At the end of a fiscal year beginning on or after July 1, 2022, the school district may use all or a portion of funds for the purposes authorized under section 257.10, subsection 9, paragraph “d”.
    Sec. 17.  EFFECTIVE DATE.  This division of this Act, being deemed of immediate importance, takes effect upon enactment.
    Sec. 18.  RETROACTIVE APPLICABILITY.  This division of this Act applies retroactively to January 24, 2023.
EXPLANATION
The inclusion of this explanation does not constitute agreement with
the explanation’s substance by the members of the general assembly.
   This bill relates to certain education programs and tax credits.
   DIVISION I —— TUITION AND TEXTBOOK TAX CREDIT. Code section 422.12(2)(b) provides an income tax tuition credit equal to 25 percent of the first $2,000 which the taxpayer has paid to others for each dependent in grades kindergarten through 12, for tuition and textbooks of each dependent who is receiving private instruction or who is attending an elementary or secondary school situated in Iowa meeting certain criteria. The bill specifies that amounts paid from an account in the education savings account fund under Code section 257.11B, as enacted by 2023 Iowa Acts, House File 68, shall not be eligible for the credit.
   Division I takes effect upon enactment and applies retroactively to tax years beginning on or after January 1, 2023.
   DIVISION II —— SCHOOL TUITION ORGANIZATION GRANTS.  Code sections 422.11S and 422.33 provide a school tuition organization tax credit against the individual income tax and corporate income tax, respectively, for contributions made by the taxpayer during the tax year to a school tuition organization. The bill adds a requirement to the criteria for a school tuition organization by specifying that for eligible students participating in the education savings account program under Code section 257.11B, the organization only provides tuition grants in amounts not to exceed the tuition amount for which the parent or guardian is responsible for payment following application of amounts paid using moneys from the student’s account in the education savings account fund. This provision applies to tuition grants made for school years beginning on or after July 1, 2023.
   The bill requires school tuition organizations to allocate 90 percent of annual revenues as tuition grants within three years from January 1 of the calendar year during which the revenues were received. This provision applies retroactively to contributions to a school tuition organization made on or after January 1, 2022.
   The bill also reduces the total annual amount of available school tuition organization tax credits for the calendar year beginning January 1, 2024, from $20 million to $17 million, and to $14 million for calendar years beginning on or after January 1, 2025.
   DIVISION III —— EDUCATION SAVINGS ACCOUNTS —— ADMINISTRATION OF FUNDS. Code section 257.11B, as enacted by 2023 Iowa Acts, House File 68, section 7, specifies that moneys remaining in a pupil’s individual account upon conclusion of the fiscal year shall remain in the pupil’s individual account for the payment of qualified educational expenses in future fiscal years during which the pupil participates in the program until the pupil becomes ineligible under the program or until the remaining amounts are transferred to the state general fund as required in that Code section. The bill provides that such remaining moneys are available for future consecutive fiscal years during which the pupil participates in the program. The bill further provides that if moneys remain in a pupil’s individual account upon conclusion of the fiscal year and the pupil does not participate in the program during the immediately succeeding fiscal year, the department of education or third-party entity shall close the pupil’s account in the fund, and transfer any remaining moneys in the account for deposit in the general fund of the state.
   The bill also amends the education savings account program under Code section 257.11B by providing that if, prior to the end of the required attendance period of the school year, a pupil who receives an education savings account payment withdraws from enrollment in the nonpublic school or is expelled, the nonpublic school shall notify the department of education or third-party entity in writing of the pupil’s withdrawal or expulsion. Under the bill, upon receipt of a notice of expulsion, the department of education or third-party entity shall cease disbursements of remaining moneys in the pupil’s account, close the pupil’s account in the fund, and transfer any remaining moneys in the account for deposit in the general fund of the state. Additionally, upon receipt of a notice of withdrawal and a determination that the pupil did not enroll in a different nonpublic school in this state for the remainder of the school year, the department of education or third-party entity shall cease disbursements of remaining moneys in the pupil’s account in the fund, close the pupil’s account, and transfer any moneys remaining in the pupil’s account for deposit in the general fund of the state.
   Division III takes effect upon enactment and applies retroactively to January 24, 2023.
   DIVISION IV —— NONPUBLIC SCHOOL PUPIL TEXTBOOK SERVICES.  Code section 301.1 authorizes each school board to adopt textbooks for the district, and to contract for and buy such books and any and all other necessary school supplies at contract prices, and to sell them to the pupils of their respective districts at cost, loan such textbooks to such pupils free, or rent them to pupils. In addition, Code section 301.1, subsections 2 and 3, provides that textbooks adopted and purchased by a school district shall, to the extent funds are appropriated by the general assembly, be made available to pupils attending accredited nonpublic schools upon request of the pupil or the pupil’s parent under comparable terms as made available to pupils attending public schools. The bill strikes those subsections of Code section 301.1 relating to a school district making such textbooks available to pupils attending nonpublic schools.
   Division IV takes effect July 1, 2025.
   DIVISION V —— EDUCATION SAVINGS ACCOUNTS —— CORRECTIONS.  Division V corrects errors and omissions in Code section 257.11B, as enacted by 2023 Iowa Acts, House File 68, section 7.
   Division V takes effect upon enactment and applies retroactively to January 24, 2023.