Federal

Educational Opportunities Act of 2023

Source: Congress.gov · 3,135 words in original text

What This Bill Does

This bill creates tax credits for people and corporations who donate money to scholarship granting organizations (nonprofit groups that give scholarships). These scholarships help pay for tuition at private elementary and secondary schools for students from lower-income families. The bill also requires these organizations to distribute most of their money as scholarships or face a tax penalty.

Who It Affects

Individual taxpayers who make charitable donations to scholarship organizations, corporations that make charitable donations to scholarship organizations, scholarship granting organizations, private schools that charge tuition, families with children eligible for scholarships, the Institute of Education Sciences (which will evaluate the program).

Key Provisions

- Individual taxpayers can claim a tax credit up to $4,500 per year (or $2,250 for married people filing separately) for donations to scholarship granting organizations (Sec. 2(a)) - Corporations can claim a tax credit up to $100,000 per year for donations to scholarship granting organizations (Sec. 2(b)) - Scholarship granting organizations must distribute at least 90 percent of the money they receive as scholarships by a deadline, or pay a 15 percent tax on the undistributed amount (Sec. 2(c)) - Eligible students must come from households earning no more than 250 percent of the federal poverty guidelines, and scholarship organizations cannot earmark donations for specific students or schools (Sec. 2(a)) - Schools receiving scholarship students must provide annual test score reports to scholarship organizations and parents, broken down by race, ethnicity and grade level (Sec. 2(a))

What Changes

If this bill becomes law, people and corporations can reduce their federal income taxes by donating to scholarship organizations instead of getting a deduction (a smaller tax benefit). Scholarship organizations would face a 15 percent tax penalty if they do not distribute at least 90 percent of donations within specific timeframes. Schools accepting scholarship students would need to report standardized test results to scholarship organizations and parents. The Institute of Education Sciences would conduct annual evaluations measuring whether these scholarships help students succeed academically and whether they expand school choice options for families.

Important Definitions

Qualified contribution: A charitable donation to a scholarship granting organization (Sec. 2(a)) Scholarship granting organization: A tax-exempt nonprofit organization whose only purpose is providing scholarships for school tuition to eligible students, that gives scholarships to multiple students at multiple schools, and that does not earmark donations for specific students (Sec. 2(a)) Eligible student: A student enrolled in a qualifying school whose household income does not exceed 250 percent of the federal poverty guidelines (Sec. 2(a)) Qualified elementary and secondary education expenses: School tuition and related expenses at schools that charge tuition, comply with state laws including nondiscrimination and safety laws, and provide annual test score reports (Sec. 2(a)) Distribution: Amounts formally committed but not yet actually distributed as scholarships (Sec. 2(c))

Effective Date

The tax credits apply to taxable years beginning after December 31, 2022 (Sec. 2(e))

II 118TH CONGRESS 1ST SESSION S. 301 To amend the Internal Revenue Code of 1986 to allow a credit against tax for qualified elementary and secondary education tuition. IN THE SENATE OF THE UNITED STATES FEBRUARY 7, 2023 Mr. RUBIO introduced the following bill; which was read twice and referred to the Committee on Finance A BILL To amend the Internal Revenue Code of 1986 to allow a credit against tax for qualified elementary and secondary education tuition. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Educational Opportu- 4 nities Act of 2023’’. 5 SEC. 2. TAX CREDIT FOR CONTRIBUTIONS TO SCHOLAR- 6 SHIP GRANTING ORGANIZATIONS. 7 (a) CREDIT FOR INDIVIDUALS.— 8 (1) IN GENERAL.—Subpart A of part IV of sub- 9 chapter A of chapter 1 of the Internal Revenue Code 10 VerDate Sep 11 2014 03:30 Feb 17, 2023 Jkt 047007 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S301.IS S301 pbinns on DSKBC47HB2PROD with BILLS 2 •S 301 IS of 1986 is amended by inserting after section 25E 1 the following new section: 2 ‘‘SEC. 25F. CONTRIBUTIONS FOR QUALIFIED ELEMENTARY 3 AND SECONDARY EDUCATION TUITION. 4 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in- 5 dividual, there shall be allowed as a credit against the tax 6 imposed by this chapter for the taxable year an amount 7 equal to the amount of qualified contributions made by 8 the taxpayer during the taxable year. 9 ‘‘(b) DOLLAR LIMITATION.—The amount allowed as 10 a credit under subsection (a) with respect to any taxpayer 11 shall not exceed— 12 ‘‘(1) $2,250, in the case of a married individual 13 filing a separate return, and 14 ‘‘(2) $4,500, in any other case. 15 ‘‘(c) QUALIFIED CONTRIBUTIONS; OTHER DEFINI- 16 TIONS.—For purposes of this section— 17 ‘‘(1) QUALIFIED CONTRIBUTION.—The term 18 ‘qualified contribution’ means a charitable contribu- 19 tion (as defined by section 170(c)) to a scholarship 20 granting organization. 21 ‘‘(2) SCHOLARSHIP GRANTING ORGANIZA- 22 TION.—The term ‘scholarship granting organization’ 23 means any organization— 24 VerDate Sep 11 2014 03:30 Feb 17, 2023 Jkt 047007 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S301.IS S301 pbinns on DSKBC47HB2PROD with BILLS 3 •S 301 IS ‘‘(A) which is described in section 1 501(c)(3) and exempt from tax under section 2 501(a), 3 ‘‘(B) whose exclusive purpose is to provide 4 scholarships for the qualified elementary and 5 secondary education expenses of eligible stu- 6 dents, and 7 ‘‘(C) which meets the requirements of sub- 8 section (d). 9 ‘‘(3) ELIGIBLE STUDENT.—The term ‘eligible 10 student’ means an individual— 11 ‘‘(A) who is enrolled in a school (within the 12 meaning of section 530(b)(3)(B), after the ap- 13 plication of paragraph (4)(B)), and 14 ‘‘(B) who is a member of a household with 15 a total annual household income which does not 16 exceed 250 percent of the Federal poverty 17 guidelines (as determined by the Secretary of 18 Health and Human Services). 19 ‘‘(4) QUALIFIED ELEMENTARY AND SECONDARY 20 EDUCATION EXPENSES.—The term ‘qualified ele- 21 mentary and secondary education expenses’ has the 22 meaning given such term by section 530(b)(3), ex- 23 cept that— 24 VerDate Sep 11 2014 03:30 Feb 17, 2023 Jkt 047007 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S301.IS S301 pbinns on DSKBC47HB2PROD with BILLS 4 •S 301 IS ‘‘(A) ‘child’ shall be substituted for ‘bene- 1 ficiary’ and ‘a child’ shall be substituted for 2 ‘the designated beneficiary of the trust’ in 3 clauses (i) and (iii) of subparagraph (A) there- 4 of, and 5 ‘‘(B) in applying such paragraph, the term 6 ‘school’ shall only include schools which— 7 ‘‘(i) charge tuition for attendance, 8 ‘‘(ii) comply with all applicable State 9 laws, including laws relating to unlawful 10 discrimination, health and safety require- 11 ments, and criminal background checks of 12 employees, and 13 ‘‘(iii) agree to provide annual reports 14 as described in subsection (e) to the schol- 15 arship granting organization and to the 16 parents or guardians of eligible students 17 receiving a scholarship from the scholar- 18 ship granting organization. 19 ‘‘(5) SCHOLARSHIP.—The term ‘scholarship’ 20 does not include any payment to fulfill or fund any 21 obligation or project of any school or school system 22 to provide a free, appropriate public education. 23 VerDate Sep 11 2014 03:30 Feb 17, 2023 Jkt 047007 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S301.IS S301 pbinns on DSKBC47HB2PROD with BILLS 5 •S 301 IS ‘‘(d) REQUIREMENTS FOR SCHOLARSHIP GRANTING 1 ORGANIZATIONS.—An organization meets the require- 2 ments of this section if— 3 ‘‘(1) such organization does not provide grants 4 to eligible students for any expenses other than 5 qualified elementary and secondary education ex- 6 penses, 7 ‘‘(2) such organization provides grants to— 8 ‘‘(A) more than 1 student, and 9 ‘‘(B) students attending more than 1 10 school, 11 ‘‘(3) such organization does not earmark or set 12 aside contributions for scholarships on behalf of any 13 particular student or to any specific school or group 14 of schools, 15 ‘‘(4) such organization takes appropriate steps 16 to verify the annual household income and family 17 size of eligible students to which it provides grants, 18 ‘‘(5) such organization obtains annual audits 19 from an independent certified public accountant and 20 submits such audits to the Secretary, 21 ‘‘(6) no employee of such organization has vio- 22 lated any law relating to the audit described in para- 23 graph (4), and 24 ‘‘(7) such organization— 25 VerDate Sep 11 2014 03:30 Feb 17, 2023 Jkt 047007 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S301.IS S301 pbinns on DSKBC47HB2PROD with BILLS 6 •S 301 IS ‘‘(A) requires any eligible student who re- 1 ceives a scholarship— 2 ‘‘(i) to participate in the evaluation 3 conducted by the Institute of Education 4 Science under section 2(d) of the Edu- 5 cational Opportunities Act of 2023, and 6 ‘‘(ii) to permit such organization to 7 share assessment information and other 8 data regarding the student with the Insti- 9 tute in accordance with subparagraph (B), 10 and 11 ‘‘(B) provides the reports described in sub- 12 section (e)(1)(C) and such other information as 13 necessary to the Director of the Institute of 14 Education Science for the purposes of identi- 15 fying eligible students receiving a scholarship 16 from such organization and conducting the eval- 17 uations and reports required under section 2(d) 18 of the Educational Opportunities Act of 2023. 19 For purposes of paragraph (5), the term ‘inde- 20 pendent certified public accountant’ means, with re- 21 spect to an organization, a certified public account- 22 ant which is not a related person (within the mean- 23 ing of section 465(b)(3)(C)) with respect to such or- 24 ganization or any employee of such organization. 25 VerDate Sep 11 2014 03:30 Feb 17, 2023 Jkt 047007 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S301.IS S301 pbinns on DSKBC47HB2PROD with BILLS 7 •S 301 IS ‘‘(e) ELIGIBLE SCHOOL REPORTING REQUIRE- 1 MENT.— 2 ‘‘(1) IN GENERAL.—The reports described in 3 this subsection include— 4 ‘‘(A) a report to the parents on the stu- 5 dent’s academic achievement, including a com- 6 parison with the aggregate academic achieve- 7 ment of other students in the same grade or 8 level at the school who receive a scholarship 9 from a scholarship granting organization, if 10 available, and 11 ‘‘(B) a report to each scholarship granting 12 organization that provides scholarships to stu- 13 dents at the school, including— 14 ‘‘(i) the test results, in the aggregate 15 and disaggregated by race or ethnicity and 16 grade level, of the students receiving such 17 scholarships who are in grades 3 through 18 12 on a grade-appropriate nationally norm- 19 referenced standardized test, or a grade- 20 appropriate State-recognized assessment, 21 and 22 ‘‘(ii) any additional data requested by 23 the Director of the Institute of Education 24 Sciences in accordance with section 25 VerDate Sep 11 2014 03:30 Feb 17, 2023 Jkt 047007 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S301.IS S301 pbinns on DSKBC47HB2PROD with BILLS 8 •S 301 IS 2(d)(B) of the Educational Opportunities 1 Act of 2023. 2 ‘‘(2) NO PERSONALLY IDENTIFIABLE INFORMA- 3 TION.—In preparing and submitting the report de- 4 scribed in paragraph (1)(B), a school shall not in- 5 clude any personally identifiable information regard- 6 ing a student. 7 ‘‘(f) DENIAL OF DOUBLE BENEFIT.—No deduction 8 shall be allowed under any provision of this chapter for 9 any expense for which a credit is allowed under this sec- 10 tion. 11 ‘‘(g) ELECTION.—This section shall apply to a tax- 12 payer for a taxable year only if such taxpayer elects to 13 have this section apply for such taxable year.’’. 14 (2) CLERICAL AMENDMENT.—The table of sec- 15 tions for subpart A of part IV of subchapter A of 16 chapter 1 of such Code is amended by inserting 17 after the item relating to section 25E the following 18 new item: 19 ‘‘Sec. 25F. Contributions for qualified elementary and secondary education tui- tion.’’. (b) CREDIT FOR CORPORATIONS.— 20 (1) IN GENERAL.—Subpart D of part IV of 21 subchapter A of chapter 1 of the Internal Revenue 22 Code of 1986 is amended by adding at the end the 23 following new section: 24 VerDate Sep 11 2014 03:30 Feb 17, 2023 Jkt 047007 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S301.IS S301 pbinns on DSKBC47HB2PROD with BILLS 9 •S 301 IS ‘‘SEC. 45AA. CONTRIBUTIONS TO SCHOLARSHIP GRANTING 1 ORGANIZATIONS. 2 ‘‘(a) GENERAL RULE.—For purposes of section 38, 3 in the case of a corporation, the education scholarship 4 credit determined under this section for the taxable year 5 is the aggregate amount of qualified contributions for the 6 taxable year. 7 ‘‘(b) LIMITATION.—The amount of the credit deter- 8 mined under this section for any taxable year shall not 9 exceed $100,000. 10 ‘‘(c) QUALIFIED CONTRIBUTIONS.—For purposes of 11 this section, the term ‘qualified contribution’ has the 12 meaning given such term under section 25F. 13 ‘‘(d) DENIAL OF DOUBLE BENEFIT.—No deduction 14 shall be allowed under any provision of this chapter for 15 any expense for which a credit is allowed under this sec- 16 tion. 17 ‘‘(e) ELECTION.—This section shall apply to a tax- 18 payer for a taxable year only if such taxpayer elects to 19 have this section apply for such taxable year.’’. 20 (2) CONFORMING AMENDMENTS.— 21 (A) Section 38(b) of such Code is amended 22 by striking ‘‘plus’’ at the end of paragraph 23 (39), by striking the period at the end of para- 24 graph (40) and inserting ‘‘, plus’’, and by add- 25 ing at the end the following new paragraph: 26 VerDate Sep 11 2014 03:30 Feb 17, 2023 Jkt 047007 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S301.IS S301 pbinns on DSKBC47HB2PROD with BILLS 10 •S 301 IS ‘‘(41) the education scholarship credit deter- 1 mined under section 45AA(a).’’. 2 (B) The table of sections for subpart D of 3 part IV of subchapter A of chapter 1 of such 4 Code is amended by adding at the end the fol- 5 lowing new item: 6 ‘‘Sec. 45AA. Contributions to scholarship granting organizations.’’. (c) EXCISE TAX ON FAILURE OF SCHOLARSHIP 7 GRANTING ORGANIZATIONS TO MAKE DISTRIBUTIONS.— 8 (1) IN GENERAL.—Chapter 42 of the Internal 9 Revenue Code of 1986 is amended by adding at the 10 end the following new subchapter: 11 ‘‘Subchapter I—Scholarship Granting 12 Organizations 13 ‘‘Sec. 4969. Tax on failure to distribute receipts. ‘‘SEC. 4969. TAX ON FAILURE TO DISTRIBUTE RECEIPTS. 14 ‘‘(a) TAX IMPOSED.—There is hereby imposed a tax 15 on the failure of an scholarship granting organization (as 16 defined in section 25F(c)(2)) to make distributions in any 17 taxable year in an amount equal to or in excess of the 18 required distribution amount before the distribution dead- 19 line. 20 ‘‘(b) AMOUNT OF TAX.—The tax imposed by sub- 21 section (a) shall be equal to 15 percent of the excess (if 22 any) of— 23 VerDate Sep 11 2014 03:30 Feb 17, 2023 Jkt 047007 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S301.IS S301 pbinns on DSKBC47HB2PROD with BILLS 11 •S 301 IS ‘‘(1) the required distribution amount with re- 1 spect to the taxable year, over 2 ‘‘(2) the amount of receipts of the scholarship 3 granting organization for such taxable year which 4 are distributed before the distribution deadline with 5 respect to such receipts. 6 ‘‘(c) DEFINITIONS.—For purposes of this section— 7 ‘‘(1) REQUIRED DISTRIBUTION AMOUNT.—The 8 required distribution amount with respect to a tax- 9 able year is an amount equal to 90 percent of the 10 total receipts of the scholarship granting organiza- 11 tion for such taxable year. 12 ‘‘(2) DISTRIBUTIONS.—The term ‘distribution’ 13 includes amounts which are formally committed but 14 not distributed. 15 ‘‘(3) DISTRIBUTION DEADLINE.—The distribu- 16 tion deadline with respect to receipts for a taxable 17 year is the first day of the second taxable year fol- 18 lowing the taxable year in which such receipts are 19 received by the scholarship granting organization. 20 ‘‘(d) REASONABLE CAUSE EXCEPTION.—The tax im- 21 posed by subsection (a) shall not apply with respect to any 22 failure to make required distributions before the distribu- 23 tion deadline which is not willful and is due to reasonable 24 cause.’’. 25 VerDate Sep 11 2014 03:30 Feb 17, 2023 Jkt 047007 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S301.IS S301 pbinns on DSKBC47HB2PROD with BILLS 12 •S 301 IS (2) ABATEMENT OF TAX.— 1 (A) GENERAL RULE.—Subsection (b) of 2 section 4962 of such Code is amended by strik- 3 ing ‘‘or G’’ and inserting ‘‘G, or I’’. 4 (B) FIRST TIER TAX.—Subsection (a) of 5 section 4963 of such Code is amended by in- 6 serting ‘‘4969,’’ after ‘‘4967,’’. 7 (C) TAXABLE EVENT.—Subsection (c) of 8 section 4963 of such Code is amended by in- 9 serting ‘‘4969,’’ after ‘‘4967,’’. 10 (3) CORRECTION PERIOD.—Subparagraph (A) 11 of section 4963(e)(2) of such Code is amended by in- 12 serting ‘‘or 4969’’ after ‘‘4942’’. 13 (4) CONFORMING AMENDMENT.—The table of 14 subchapters for chapter 42 of such Code is amended 15 by adding at the end the following new item: 16 ‘‘SUBCHAPTER I—SCHOLARSHIP GRANTING ORGANIZATIONS’’. (d) EVALUATIONS.— 17 (1) DEFINITIONS.—In this section— 18 (A) the terms ‘‘eligible student’’, ‘‘qualified 19 elementary and secondary education expenses’’, 20 and ‘‘scholarship granting organization’’ have 21 the meanings given such terms in section 22 25F(c) of the Internal Revenue Code of 1986, 23 as added by this Act; 24 VerDate Sep 11 2014 03:30 Feb 17, 2023 Jkt 047007 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\S301.IS S301 pbinns o [Text truncated for display. Full text available on Congress.gov.]

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