Education Freedom Scholarships and Opportunity Act

I 117TH CONGRESS 1ST SESSION H. R. 889 To amend the Internal Revenue Code of 1986 to establish tax credits to encourage individual and corporate taxpayers to contribute to scholar- ships for elementary and secondary students through eligible scholarship- granting organizations, and for other purposes. IN THE HOUSE OF REPRESENTATIVES FEBRUARY 5, 2021 Mr. OWENS (for himself, Mr. ALLEN, Mr. ADERHOLT, Mrs. LESKO, Mr. LAMALFA, Mr. LAMBORN, Mr. GAETZ, Mr. POSEY, Mr. WEBSTER of Florida, Mr. HICE of Georgia, Mr. BAIRD, Mr. GUTHRIE, Mr. MOOLENAAR, Mr. GUEST, Ms. FOXX, Mr. BISHOP of North Carolina, Mr. BUDD, Mr. CHABOT, Mr. JORDAN, Mr. LATTA, Mr. STIVERS, Mr. PERRY, Mr. KELLER, Mr. JOYCE of Pennsylvania, Mr. WILSON of South Caro- lina, Mr. NORMAN, Mr. RICE of South Carolina, Mr. DESJARLAIS, Mr. JACKSON, Mr. WEBER of Texas, Mr. CLINE, and Mr. GALLAGHER) intro- duced the following bill; which was referred to the Committee on Ways and Means, and in addition to the Committee on Education and Labor, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned A BILL To amend the Internal Revenue Code of 1986 to establish tax credits to encourage individual and corporate tax- payers to contribute to scholarships for elementary and secondary students through eligible scholarship-granting organizations, and for other purposes. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 VerDate Sep 11 2014 23:49 Feb 25, 2021 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H889.IH H889 pamtmann on DSKBC07HB2PROD with BILLS 2 •HR 889 IH SECTION 1. SHORT TITLE. 1 This Act may be cited as the ‘‘Education Freedom 2 Scholarships and Opportunity Act’’. 3 SEC. 2. PURPOSE. 4 The purpose of this Act is to encourage individual 5 and corporate taxpayers to contribute to scholarships for 6 individual elementary and secondary students through eli- 7 gible scholarship-granting organizations, as identified by 8 States. 9 TITLE I—AMENDMENTS TO THE 10 INTERNAL REVENUE CODE 11 OF 1986 12 SEC. 101. REFERENCES TO THE INTERNAL REVENUE CODE 13 OF 1986. 14 Except as otherwise expressly provided, whenever in 15 this title an amendment or repeal is expressed in terms 16 of an amendment to, or repeal of, a section or other provi- 17 sion, the reference shall be considered to be made to a 18 section or other provision of the Internal Revenue Code 19 of 1986. 20 SEC. 102. TAX CREDITS FOR CONTRIBUTIONS TO ELIGIBLE 21 SCHOLARSHIP-GRANTING ORGANIZATIONS. 22 (a) CREDIT FOR INDIVIDUALS.— 23 (1) IN GENERAL.—Subpart A of part IV of sub- 24 chapter A of chapter 1 is amended by adding after 25 section 25D the following new section: 26 VerDate Sep 11 2014 23:49 Feb 25, 2021 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H889.IH H889 pamtmann on DSKBC07HB2PROD with BILLS 3 •HR 889 IH ‘‘SEC. 25E. CONTRIBUTIONS TO ELIGIBLE SCHOLARSHIP- 1 GRANTING ORGANIZATIONS. 2 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in- 3 dividual, there shall be allowed as a credit against the tax 4 imposed by this chapter for the taxable year an amount 5 equal to the sum of any qualified contributions made by 6 the taxpayer during the taxable year. 7 ‘‘(b) AMOUNT OF CREDIT.—The credit allowed under 8 subsection (a) for any taxable year shall not exceed 10 9 percent of the taxpayer’s adjusted gross income for the 10 taxable year. 11 ‘‘(c) DEFINITIONS.—For purposes of this section— 12 ‘‘(1) QUALIFIED CONTRIBUTION.—The term 13 ‘qualified contribution’ means a contribution of cash 14 to any eligible scholarship-granting organization. 15 ‘‘(2) QUALIFIED EXPENSE.—The term ‘quali- 16 fied expense’ means any educational expense that 17 is— 18 ‘‘(A) for an individual student’s elementary 19 or secondary education, as recognized by the 20 State, or 21 ‘‘(B) for the secondary education compo- 22 nent of an individual elementary or secondary 23 student’s career and technical education, as de- 24 fined by section 3(5) of the Carl D. Perkins Ca- 25 VerDate Sep 11 2014 23:49 Feb 25, 2021 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H889.IH H889 pamtmann on DSKBC07HB2PROD with BILLS 4 •HR 889 IH reer and Technical Education Act of 2006 (20 1 U.S.C. 2302(5)). 2 ‘‘(3) SECRETARY.—The term ‘Secretary’ means 3 the Secretary of Education. 4 ‘‘(4) ELIGIBLE SCHOLARSHIP-GRANTING ORGA- 5 NIZATION.—The term ‘eligible scholarship-granting 6 organization’ means— 7 ‘‘(A) an organization that— 8 ‘‘(i) is described in section 501(c)(3) 9 and exempt from taxation under section 10 501(a); 11 ‘‘(ii) provides qualifying scholarships 12 to individual elementary and secondary 13 students who— 14 ‘‘(I) reside in the State in which 15 the eligible scholarship-granting orga- 16 nization is recognized; or 17 ‘‘(II) in the case of the Bureau of 18 Indian Education, are members of a 19 federally recognized tribe; 20 ‘‘(iii) a State reports to the Secretary 21 as an eligible scholarship-granting organi- 22 zation under subsection (e)(5)(B); 23 VerDate Sep 11 2014 23:49 Feb 25, 2021 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H889.IH H889 pamtmann on DSKBC07HB2PROD with BILLS 5 •HR 889 IH ‘‘(iv) allocates at least 90 percent of 1 qualified contributions to qualifying schol- 2 arships; and 3 ‘‘(v) provides scholarships to— 4 ‘‘(I) more than 1 eligible student; 5 ‘‘(II) more than 1 eligible family; 6 and 7 ‘‘(III) different eligible students 8 attending more than one education 9 provider; or 10 ‘‘(B) an organization that— 11 ‘‘(i) is described in section 501(c)(3) 12 and exempt from taxation under section 13 501(a); and 14 ‘‘(ii) pursuant to State law, was able, 15 as of the date of the enactment of the 16 Education Freedom Scholarships and Op- 17 portunity Act, to receive contributions that 18 are eligible for a State tax credit if such 19 contributions are used by the organization 20 to provide scholarships to individual ele- 21 mentary and secondary students, including 22 scholarships for attending private schools. 23 ‘‘(5) QUALIFYING SCHOLARSHIP.—The term 24 ‘qualifying scholarship’ means a scholarship granted 25 VerDate Sep 11 2014 23:49 Feb 25, 2021 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H889.IH H889 pamtmann on DSKBC07HB2PROD with BILLS 6 •HR 889 IH by an eligible scholarship-granting organization to 1 an individual elementary or secondary student under 2 this section or section 45T. 3 ‘‘(6) STATE.—The term ‘State’ means each of 4 the 50 States, the District of Columbia, the Com- 5 monwealth of Puerto Rico, the outlying areas (as de- 6 fined in section 1121(c) of the Elementary and Sec- 7 ondary Education Act of 1965), and the Department 8 of the Interior (acting through the Bureau of Indian 9 Education). 10 ‘‘(d) RULES OF CONSTRUCTION.— 11 ‘‘(1) IN GENERAL.—A scholarship awarded to a 12 student from the proceeds of a qualified contribution 13 under this section or section 45T shall not be con- 14 sidered assistance to the school or other educational 15 provider that enrolls, or provides educational services 16 to, the student or the student’s parents. 17 ‘‘(2) NOT TREATED AS INCOME.—The amount 18 of any such scholarship shall not be treated as in- 19 come of the child or his or her parents for purposes 20 of Federal tax laws or for determining eligibility for 21 any other Federal program. 22 ‘‘(3) PROHIBITION OF CONTROL OVER NON- 23 PUBLIC EDUCATION PROVIDERS.— 24 VerDate Sep 11 2014 23:49 Feb 25, 2021 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H889.IH H889 pamtmann on DSKBC07HB2PROD with BILLS 7 •HR 889 IH ‘‘(A) Nothing in this Act shall be con- 1 strued to permit, allow, encourage, or authorize 2 any Federal control over any aspect of any pri- 3 vate, religious, or home education provider, 4 whether or not a home education provider is 5 treated as a private school or home school 6 under State law. This Act shall not be con- 7 strued to exclude private, religious, or home 8 education providers from participation in pro- 9 grams or services under this Act. 10 ‘‘(B) Nothing in this Act shall be con- 11 strued to permit, allow, encourage, or authorize 12 an entity submitting a list of eligible scholar- 13 ship-granting organizations on behalf of a State 14 to mandate, direct, or control any aspect of a 15 private or home education provider, regardless 16 of whether or not a home education provider is 17 treated as a private school under State law. 18 ‘‘(C) No participating State or entity act- 19 ing on behalf of a State shall exclude, discrimi- 20 nate against, or otherwise disadvantage any 21 education provider with respect to programs or 22 services under this Act based in whole or in 23 part on the provider’s religious character or af- 24 VerDate Sep 11 2014 23:49 Feb 25, 2021 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H889.IH H889 pamtmann on DSKBC07HB2PROD with BILLS 8 •HR 889 IH filiation, including religiously or mission-based 1 policies or practices. 2 ‘‘(4) PARENTAL RIGHTS TO USE SCHOLAR- 3 SHIPS.—No participating State or entity acting on 4 behalf of a State shall disfavor or discourage the use 5 of such scholarships for the purchase of elementary 6 and secondary education services, including those 7 services provided by private or nonprofit entities, 8 such as faith-based providers. 9 ‘‘(5) STATE AND LOCAL AUTHORITY.—Nothing 10 in this section or section 45T shall be construed to 11 modify a State or local government’s authority and 12 responsibility to fund education. 13 ‘‘(e) LIMITATIONS.— 14 ‘‘(1) TAX LIABILITY.—No credit allowed under 15 this section or section 45T shall exceed the tax- 16 payer’s Federal income tax liability for the taxable 17 year. 18 ‘‘(2) PROHIBITIONS.—A taxpayer is prohibited 19 from selling or transferring any portion of a tax 20 credit allowed under this section or section 45T. 21 ‘‘(3) DENIAL OF DOUBLE BENEFIT.—The Sec- 22 retary of the Treasury shall prescribe such regula- 23 tions or other guidance to ensure that the sum of 24 the tax benefits provided by Federal, State, or local 25 VerDate Sep 11 2014 23:49 Feb 25, 2021 Jkt 019200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H889.IH H889 pamtmann on DSKBC07HB2PROD with BILLS 9 •HR 889 IH law for a qualified contribution receiving a Federal 1 tax credit in any taxable year shall not exceed the 2 sum of the qualified contributions made by the tax- 3 payer for the taxable year. 4 ‘‘(f) CARRYOVER OF CREDIT.—If a tax credit allowed 5 under this section or section 45T is not fully used within 6 the applicable taxable year because of insufficient tax li- 7 ability on the part of the taxpayer, the unused amount 8 may be carried forward for a period not to exceed 5 years. 9 ‘‘(g) ELECTION.—This section shall apply to a tax- 10 payer for a taxable year only if the taxpayer elects to have 11 this section or section 45T apply for such taxable year. 12 ‘‘(h) ALTERNATIVE MINIMUM TAX.—For purposes of 13 calculating the alternative minimum tax under section 55, 14 a taxpayer may use any credit received for a qualified con- 15 tribution under this section.’’. 16 (2) CLERICAL AMENDMENT.—The table of sec- 17 tions for subpart A of part IV of subchapter A of 18 chapter 1 is amended by inserting after the item re- 19 lating to section 25D the following new item: 20 ‘‘Sec. 25E. Contributions to eligible scholarship-granting organizations.’’. (b) CREDIT FOR CORPORATIONS.— 21 (1) IN GENERAL.—Subpart D of part IV of 22 subchapter A of chapter 1 is amended by adding at 23 the end the following new section: 24 VerDate Sep 11 2014 23:49 Feb 25, 2021 Jkt 019200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H889.IH H889 pamtmann on DSKBC07HB2PROD with BILLS 10 •HR 889 IH ‘‘SEC. 45T. CONTRIBUTIONS TO ELIGIBLE SCHOLARSHIP- 1 GRANTING ORGANIZATIONS. 2 ‘‘(a) ALLOWANCE OF CREDIT.—For purposes of sec- 3 tion 38, in the case of a domestic corporation, there shall 4 be allowed as a credit against the tax imposed by this 5 chapter for the taxable year an amount equal to the sum 6 of any qualified contributions (as defined in section 7 25E(c)(1)) made by such corporation taxpayer during the 8 taxable year. 9 ‘‘(b) AMOUNT OF CREDIT.—The credit allowed under 10 subsection (a) for any taxable year shall not exceed 5 per- 11 cent of the taxable income (as defined in section 12 170(b)(2)(D)) of the domestic corporation for such taxable 13 year. 14 ‘‘(c) ADDITIONAL PROVISIONS.—For purposes of this 15 section, any qualified contributions made by a domestic 16 corporation shall be subject to the provisions of section 17 25E, to the extent applicable.’’. 18 (2) CREDIT PART OF GENERAL BUSINESS 19 CREDIT.—Section 38(b) is amended— 20 (A) by striking ‘‘plus’’ at the end of para- 21 graph (31), 22 (B) by striking the period at the end of 23 paragraph (32) and inserting ‘‘, plus’’, and 24 (C) by adding at the end the following new 25 paragraph: 26 VerDate Sep 11 2014 23:49 Feb 25, 2021 Jkt 019200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H889.IH H889 pamtmann on DSKBC07HB2PROD with BILLS 11 •HR 889 IH ‘‘(33) the credit for qualified contributions de- 1 termined under section 45T(a).’’. 2 (3) CLERICAL AMENDMENT.—The table of sec- 3 tions for subpart D of part IV of subchapter A of 4 chapter 1 is amended by adding at the end the fol- 5 lowing new item: 6 ‘‘Sec. 45T. Contributions to eligible scholarship-granting organizations.’’. TITLE II—EDUCATION FREEDOM 7 SCHOLARSHIPS WEB PORTAL 8 AND ADMINISTRATION 9 SEC. 201. EDUCATION FREEDOM SCHOLARSHIPS WEB POR- 10 TAL AND ADMINISTRATION. 11 (a) IN GENERAL.—The Secretary of Education shall, 12 in coordination with the Secretary of the Treasury, estab- 13 lish, host, and maintain a web portal that— 14 (1) lists all scholarship-granting organizations 15 that are eligible under section 25E or 45T of the In- 16 ternal Revenue Code of 1986; 17 (2) enables a taxpayer to make a qualifying 18 contribution to one or more eligible scholarship- 19 granting organizations and to immediately obtain 20 both a pre-approval of a tax credit for that contribu- 21 tion and a receipt for tax filings; 22 (3) provides information about the tax benefits 23 of Education Freedom Scholarships under the Inter- 24 nal Revenue Code of 1986; and 25 VerDate Sep 11 2014 23:49 Feb 25, 2021 Jkt 019200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H889.IH H889 pamtmann on DSKBC07HB2PROD with BILLS 12 •HR 889 IH (4) enables a State to submit and update infor- 1 mation about its programs and its eligible scholar- 2 ship-granting organizations for informational pur- 3 poses only, including information on— 4 (A) student eligibility; 5 (B) allowable educational expenses; 6 (C) the ty [Text truncated for display. 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