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House File 2425 - IntroducedA Bill ForAn Act 1creating a private instruction organization tax credit
2available against the individual and corporate income taxes,
3and including effective date and retroactive applicability
4provisions.
5BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1 Section 1. NEW SECTION. 422.11X Private instruction
2organization tax credit.
31. The taxes imposed under this subchapter, less the credits
4allowed under section 422.12, shall be reduced by a private
5instruction tax credit equal to sixty-five percent of the
6amount of the voluntary cash or noncash contributions made
7by the taxpayer during the tax year to a private instruction
8organization, subject to the maximum total value of tax credits
9allowed in subsection 8. The tax credit shall be claimed by
10use of a tax credit certificate as provided in subsection 7.
112. To be eligible for this credit, all of the following
12shall apply:
13a. A deduction pursuant to section 170 of the Internal
14Revenue Code for any amount of the contribution is not taken
15for state tax purposes.
16b. The contribution does not designate that any part of the
17contribution be used for the direct benefit of any dependent of
18the taxpayer or any other student designated by the taxpayer.
19c. The value of a noncash contribution shall be appraised
20pursuant to rules of the director.
213. Any credit in excess of the tax liability is not
22refundable but the excess for the tax year may be credited to
23the tax liability for the following five tax years or until
24depleted, whichever is the earlier.
254. Married taxpayers who file separate returns or file
26separately on a combined return form must determine the tax
27credit under subsection 1 based upon their combined net income
28and allocate the total credit amount to each spouse in the
29proportion that each spouse’s respective net income bears to
30the total combined net income. Nonresidents or part-year
31residents of Iowa must determine their tax credit in the ratio
32of their Iowa source net income to their all source net income.
33Nonresidents or part-year residents who are married and elect
34to file separate returns or to file separately on a combined
35return form must allocate the tax credit between the spouses
-1-1in the ratio of each spouse’s Iowa source net income to the
2combined Iowa source net income of the taxpayers.
35. An individual may claim the tax credit allowed a
4partnership, limited liability company, S corporation, estate,
5or trust electing to have the income taxed directly to the
6individual. The amount claimed by the individual shall be
7based upon the pro rata share of the individual’s earnings of
8the partnership, limited liability company, S corporation,
9estate, or trust.
106. For purposes of this section:
11a. “Eligible student” means a student who is a member of
12a household whose total annual income during the calendar
13year before the student receives a grant for purposes of this
14section does not exceed an amount equal to four times the most
15recently published federal poverty guidelines in the federal
16register by the United States department of health and human
17services.
18b. “Grant” means grants to students to cover all or part of
19qualified private instruction.
20c. “Private instruction organization” means a charitable
21organization in this state that is exempt from federal taxation
22under section 501(c)(3) of the Internal Revenue Code and that
23does all of the following:
24(1) Allocates at least ninety percent of its annual revenue
25in grants for eligible students to allow them to receive
26qualified private instructions of their parents’ choice.
27(2) Only awards grants to eligible students who reside in
28Iowa.
29(3) Provides grants to eligible students without limiting
30availability to a type of qualified private instruction.
31(4) Only provides grants to eligible students in a certain
32geographic area within the state.
33(5) Prepares an annual reviewed financial statement
34certified by a public accounting firm.
35d. “Qualified private instruction” means independent private
-2-1instruction or competent private instruction under chapter
2299A.
37. a. In order for the taxpayer to claim the private
4instruction organization tax credit under subsection 1, a
5tax credit certificate issued by the private instruction
6organization to which the contribution was made shall be
7included with the person’s tax return. The tax credit
8certificate shall contain the taxpayer’s name, address, tax
9identification number, the amount of the contribution, the
10amount of the credit, and other information required by the
11department.
12b. (1) The department shall authorize a private instruction
13organization to issue tax credit certificates for contributions
14made to the private instruction organization, limited by the
15maximum total dollar value of the tax credits available for the
16calendar year in subsection 8. The aggregate amount of tax
17credit certificates that the department shall authorize for a
18private instruction organization for a calendar year shall be
19determined for that organization by the department equal to the
20product of the following:
21(a) The maximum total dollar value of the tax credits
22available for the calendar year.
23(b) The ratio of the number of households submitting a
24participation form to the department for a particular private
25instruction organization to the total participation forms
26submitted.
27(2) However, a private instruction organization shall not
28be authorized to issue tax credit certificates unless the
29organization is controlled by a board of directors consisting
30of at least seven members. The names and addresses of the
31members shall be provided to the department and shall be made
32available by the department to the public, notwithstanding any
33state confidentiality restrictions.
34c. Pursuant to rules of the department, a private
35instruction organization shall initially register with the
-3-1department. The organization’s registration shall include
2proof of Internal Revenue Code section 501(c)(3) status
3and provide the geographic area the private instruction
4organization serves. Once the private instruction organization
5has registered, it is not required to subsequently register
6unless the geographic area it serves changes.
7d. Each household that receives funds from a private
8instruction organization shall submit a participation form
9annually to the department by November 1. For the 2022
10calendar year only, each household served by a private
11instruction organization shall submit a participation form to
12the department by August 1, 2022.
138. The maximum total dollar value of the tax credits for the
142022 calendar year shall not exceed ten million dollars for the
152022 calendar year. For calendar years beginning on or after
16January 1, 2023, the maximum total value of tax credits shall
17not exceed twenty million dollars.
189. Each year by December 1, the department shall authorize
19private instruction organizations to issue tax credit
20certificates for the following calendar year. However, for the
212022 calendar year only, the department, by September 1, 2022,
22shall authorize private instruction organizations to issue tax
23credit certificates for the 2022 calendar year.
2410. A private instruction organization that receives a
25voluntary cash or noncash contribution pursuant to this section
26shall report to the department, on a form prescribed by the
27department, by January 12 of each calendar year all of the
28following information:
29a. The name and address of the members and the chairperson
30of the governing board of the private instruction organization.
31b. The total number and dollar value of contributions
32received and the total number and dollar value of the tax
33credits approved during the previous calendar year.
34c. A list of the individual donors for the previous calendar
35year that includes the dollar value of each donation and the
-4-1dollar value of each approved tax credit.
2d. The total number of eligible students utilizing grants
3for the school year in progress and the total dollar value of
4the grants.
5e. The name and address of each household at which grants
6are currently being utilized.
7f. The name of the person providing private instruction and
8the number of eligible students receiving private instruction
9by the person.
10 Sec. 2. Section 422.33, Code 2022, is amended by adding the
11following new subsection:
12 NEW SUBSECTION. 32. The taxes imposed under this subchapter
13shall be reduced by a private instruction organization tax
14credit as provided pursuant to section 422.11X.
15 Sec. 3. EFFECTIVE DATE. This Act, being deemed of immediate
16importance, takes effect upon enactment.
17 Sec. 4. RETROACTIVE APPLICABILITY. This Act applies
18retroactively to January 1, 2022, for tax years beginning on
19or after that date.
20EXPLANATION
21The inclusion of this explanation does not constitute agreement with
22the explanation’s substance by the members of the general assembly.
23This bill provides an individual and corporate income
24tax credit equal to a maximum 65 percent of the voluntary
25contributions made to a private instruction organization that
26is exempt from federal income tax. At least 90 percent of
27total contributions must be used by the private instruction
28organization to provide grants to students who are members
29of households that have total annual income that does not
30exceed four times the most recently published federal poverty
31guidelines. The contribution may not be deducted as a
32charitable deduction for state tax purposes or be designated
33for the direct benefit of a dependent or any other student
34designated by the taxpayer.
35The private instruction organization must limit the grants
-5-1to students who reside in Iowa, must provide grants without
2limiting the type of private instruction received, and only
3provide grants to students in a certain geographic area.
4The tax credit is claimed by attaching a tax credit
5certificate to the taxpayer’s tax return. A private
6instruction organization is authorized to issue a tax credit
7certificate in an amount determined by the department. The
8amount available for each private instruction organization
9is determined by multiplying the maximum total value of tax
10credits available for the calendar year with the ratio of the
11number of households submitting a participation form to the
12department of revenue for a particular private instruction
13organization to the total participation forms submitted. Each
14household that receives funds from a private instruction
15organization must submit a participation form to the department
16of revenue. For calendar year 2022 the maximum total value
17of tax credits available shall not exceed $10 million and for
18calendar years beginning on or after January 1, 2023, the
19maximum total value of credits shall not exceed $20 million.
20The private instruction organization must report to the
21department of revenue by January 12 of each calendar year
22the members of the governing board, the total dollar value
23of contributions received and the total dollar value of
24tax credits approved, a list of donors, the total number of
25students receiving grants for the school year, the name and
26address of each household utilizing the grants, and the name
27of the person providing private instruction and the number of
28eligible students receiving private instruction by the person.
29The bill takes effect upon enactment and applies
30retroactively to tax years beginning on or after January 1,
312022.
-6-jm/jh
2available against the individual and corporate income taxes,
3and including effective date and retroactive applicability
4provisions.
5BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1 Section 1. NEW SECTION. 422.11X Private instruction
2organization tax credit.
31. The taxes imposed under this subchapter, less the credits
4allowed under section 422.12, shall be reduced by a private
5instruction tax credit equal to sixty-five percent of the
6amount of the voluntary cash or noncash contributions made
7by the taxpayer during the tax year to a private instruction
8organization, subject to the maximum total value of tax credits
9allowed in subsection 8. The tax credit shall be claimed by
10use of a tax credit certificate as provided in subsection 7.
112. To be eligible for this credit, all of the following
12shall apply:
13a. A deduction pursuant to section 170 of the Internal
14Revenue Code for any amount of the contribution is not taken
15for state tax purposes.
16b. The contribution does not designate that any part of the
17contribution be used for the direct benefit of any dependent of
18the taxpayer or any other student designated by the taxpayer.
19c. The value of a noncash contribution shall be appraised
20pursuant to rules of the director.
213. Any credit in excess of the tax liability is not
22refundable but the excess for the tax year may be credited to
23the tax liability for the following five tax years or until
24depleted, whichever is the earlier.
254. Married taxpayers who file separate returns or file
26separately on a combined return form must determine the tax
27credit under subsection 1 based upon their combined net income
28and allocate the total credit amount to each spouse in the
29proportion that each spouse’s respective net income bears to
30the total combined net income. Nonresidents or part-year
31residents of Iowa must determine their tax credit in the ratio
32of their Iowa source net income to their all source net income.
33Nonresidents or part-year residents who are married and elect
34to file separate returns or to file separately on a combined
35return form must allocate the tax credit between the spouses
-1-1in the ratio of each spouse’s Iowa source net income to the
2combined Iowa source net income of the taxpayers.
35. An individual may claim the tax credit allowed a
4partnership, limited liability company, S corporation, estate,
5or trust electing to have the income taxed directly to the
6individual. The amount claimed by the individual shall be
7based upon the pro rata share of the individual’s earnings of
8the partnership, limited liability company, S corporation,
9estate, or trust.
106. For purposes of this section:
11a. “Eligible student” means a student who is a member of
12a household whose total annual income during the calendar
13year before the student receives a grant for purposes of this
14section does not exceed an amount equal to four times the most
15recently published federal poverty guidelines in the federal
16register by the United States department of health and human
17services.
18b. “Grant” means grants to students to cover all or part of
19qualified private instruction.
20c. “Private instruction organization” means a charitable
21organization in this state that is exempt from federal taxation
22under section 501(c)(3) of the Internal Revenue Code and that
23does all of the following:
24(1) Allocates at least ninety percent of its annual revenue
25in grants for eligible students to allow them to receive
26qualified private instructions of their parents’ choice.
27(2) Only awards grants to eligible students who reside in
28Iowa.
29(3) Provides grants to eligible students without limiting
30availability to a type of qualified private instruction.
31(4) Only provides grants to eligible students in a certain
32geographic area within the state.
33(5) Prepares an annual reviewed financial statement
34certified by a public accounting firm.
35d. “Qualified private instruction” means independent private
-2-1instruction or competent private instruction under chapter
2299A.
37. a. In order for the taxpayer to claim the private
4instruction organization tax credit under subsection 1, a
5tax credit certificate issued by the private instruction
6organization to which the contribution was made shall be
7included with the person’s tax return. The tax credit
8certificate shall contain the taxpayer’s name, address, tax
9identification number, the amount of the contribution, the
10amount of the credit, and other information required by the
11department.
12b. (1) The department shall authorize a private instruction
13organization to issue tax credit certificates for contributions
14made to the private instruction organization, limited by the
15maximum total dollar value of the tax credits available for the
16calendar year in subsection 8. The aggregate amount of tax
17credit certificates that the department shall authorize for a
18private instruction organization for a calendar year shall be
19determined for that organization by the department equal to the
20product of the following:
21(a) The maximum total dollar value of the tax credits
22available for the calendar year.
23(b) The ratio of the number of households submitting a
24participation form to the department for a particular private
25instruction organization to the total participation forms
26submitted.
27(2) However, a private instruction organization shall not
28be authorized to issue tax credit certificates unless the
29organization is controlled by a board of directors consisting
30of at least seven members. The names and addresses of the
31members shall be provided to the department and shall be made
32available by the department to the public, notwithstanding any
33state confidentiality restrictions.
34c. Pursuant to rules of the department, a private
35instruction organization shall initially register with the
-3-1department. The organization’s registration shall include
2proof of Internal Revenue Code section 501(c)(3) status
3and provide the geographic area the private instruction
4organization serves. Once the private instruction organization
5has registered, it is not required to subsequently register
6unless the geographic area it serves changes.
7d. Each household that receives funds from a private
8instruction organization shall submit a participation form
9annually to the department by November 1. For the 2022
10calendar year only, each household served by a private
11instruction organization shall submit a participation form to
12the department by August 1, 2022.
138. The maximum total dollar value of the tax credits for the
142022 calendar year shall not exceed ten million dollars for the
152022 calendar year. For calendar years beginning on or after
16January 1, 2023, the maximum total value of tax credits shall
17not exceed twenty million dollars.
189. Each year by December 1, the department shall authorize
19private instruction organizations to issue tax credit
20certificates for the following calendar year. However, for the
212022 calendar year only, the department, by September 1, 2022,
22shall authorize private instruction organizations to issue tax
23credit certificates for the 2022 calendar year.
2410. A private instruction organization that receives a
25voluntary cash or noncash contribution pursuant to this section
26shall report to the department, on a form prescribed by the
27department, by January 12 of each calendar year all of the
28following information:
29a. The name and address of the members and the chairperson
30of the governing board of the private instruction organization.
31b. The total number and dollar value of contributions
32received and the total number and dollar value of the tax
33credits approved during the previous calendar year.
34c. A list of the individual donors for the previous calendar
35year that includes the dollar value of each donation and the
-4-1dollar value of each approved tax credit.
2d. The total number of eligible students utilizing grants
3for the school year in progress and the total dollar value of
4the grants.
5e. The name and address of each household at which grants
6are currently being utilized.
7f. The name of the person providing private instruction and
8the number of eligible students receiving private instruction
9by the person.
10 Sec. 2. Section 422.33, Code 2022, is amended by adding the
11following new subsection:
12 NEW SUBSECTION. 32. The taxes imposed under this subchapter
13shall be reduced by a private instruction organization tax
14credit as provided pursuant to section 422.11X.
15 Sec. 3. EFFECTIVE DATE. This Act, being deemed of immediate
16importance, takes effect upon enactment.
17 Sec. 4. RETROACTIVE APPLICABILITY. This Act applies
18retroactively to January 1, 2022, for tax years beginning on
19or after that date.
20EXPLANATION
21The inclusion of this explanation does not constitute agreement with
22the explanation’s substance by the members of the general assembly.
23This bill provides an individual and corporate income
24tax credit equal to a maximum 65 percent of the voluntary
25contributions made to a private instruction organization that
26is exempt from federal income tax. At least 90 percent of
27total contributions must be used by the private instruction
28organization to provide grants to students who are members
29of households that have total annual income that does not
30exceed four times the most recently published federal poverty
31guidelines. The contribution may not be deducted as a
32charitable deduction for state tax purposes or be designated
33for the direct benefit of a dependent or any other student
34designated by the taxpayer.
35The private instruction organization must limit the grants
-5-1to students who reside in Iowa, must provide grants without
2limiting the type of private instruction received, and only
3provide grants to students in a certain geographic area.
4The tax credit is claimed by attaching a tax credit
5certificate to the taxpayer’s tax return. A private
6instruction organization is authorized to issue a tax credit
7certificate in an amount determined by the department. The
8amount available for each private instruction organization
9is determined by multiplying the maximum total value of tax
10credits available for the calendar year with the ratio of the
11number of households submitting a participation form to the
12department of revenue for a particular private instruction
13organization to the total participation forms submitted. Each
14household that receives funds from a private instruction
15organization must submit a participation form to the department
16of revenue. For calendar year 2022 the maximum total value
17of tax credits available shall not exceed $10 million and for
18calendar years beginning on or after January 1, 2023, the
19maximum total value of credits shall not exceed $20 million.
20The private instruction organization must report to the
21department of revenue by January 12 of each calendar year
22the members of the governing board, the total dollar value
23of contributions received and the total dollar value of
24tax credits approved, a list of donors, the total number of
25students receiving grants for the school year, the name and
26address of each household utilizing the grants, and the name
27of the person providing private instruction and the number of
28eligible students receiving private instruction by the person.
29The bill takes effect upon enactment and applies
30retroactively to tax years beginning on or after January 1,
312022.
-6-jm/jh