Education Freedom Scholarships and Opportunity Act

I 116TH CONGRESS 1ST SESSION H. R. 1434 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 28, 2019 Mr. BYRNE (for himself, Mr. WRIGHT, Mr. LAMALFA, Ms. FOXX of North Carolina, Mr. ROONEY of Florida, Mrs. LESKO, Mr. BANKS, Mr. GAETZ, Mr. MITCHELL, Mrs. WALORSKI, Mr. ALLEN, Mr. POSEY, Mr. BUDD, Mr. STIVERS, Mr. GOSAR, Mr. BISHOP of Utah, Mr. MOONEY of West Virginia, Mr. MEADOWS, Mr. HAGEDORN, Mr. GIANFORTE, Mr. HUIZENGA, Mr. BIGGS, Mr. WALBERG, Mr. TIMMONS, Mr. WEBER of Texas, Mr. NEWHOUSE, Mr. NORMAN, Mr. SCALISE, Mr. FLORES, Mr. ROGERS of Alabama, Mr. SMITH of Nebraska, Mr. HARRIS, Mrs. ROBY, Mr. WILSON of South Carolina, Mr. YOHO, Mr. LOUDERMILK, Mr. CHABOT, Mr. BABIN, Mr. BARR, and Mr. DUNCAN) introduced the fol- lowing 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 consider- ation 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. VerDate Sep 11 2014 03:34 Mar 14, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6652 E:\BILLS\H1434.IH H1434 pbinns on DSK79D2C42PROD with BILLS 2 •HR 1434 IH 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 ‘‘Education Freedom 4 Scholarships and Opportunity Act’’. 5 SEC. 2. PURPOSE. 6 The purpose of this Act is to encourage individual 7 and corporate taxpayers to contribute to scholarships for 8 individual elementary and secondary students through eli- 9 gible scholarship-granting organizations, as identified by 10 States. 11 TITLE I—AMENDMENTS TO THE 12 INTERNAL REVENUE CODE 13 OF 1986 14 SEC. 101. REFERENCES TO THE INTERNAL REVENUE CODE 15 OF 1986. 16 Except as otherwise expressly provided, whenever in 17 this title an amendment or repeal is expressed in terms 18 of an amendment to, or repeal of, a section or other provi- 19 sion, the reference shall be considered to be made to a 20 section or other provision of the Internal Revenue Code 21 of 1986. 22 SEC. 102. TAX CREDITS FOR CONTRIBUTIONS TO ELIGIBLE 23 SCHOLARSHIP-GRANTING ORGANIZATIONS. 24 (a) CREDIT FOR INDIVIDUALS.— 25 VerDate Sep 11 2014 03:34 Mar 14, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H1434.IH H1434 pbinns on DSK79D2C42PROD with BILLS 3 •HR 1434 IH (1) IN GENERAL.—Subpart A of part IV of sub- 1 chapter A of chapter 1 is amended by adding after 2 section 25D the following new section: 3 ‘‘SEC. 25E. CONTRIBUTIONS TO ELIGIBLE SCHOLARSHIP- 4 GRANTING ORGANIZATIONS. 5 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in- 6 dividual, there shall be allowed as a credit against the tax 7 imposed by this chapter for the taxable year an amount 8 equal to the sum of any qualified contributions made by 9 the taxpayer during the taxable year. 10 ‘‘(b) AMOUNT OF CREDIT.—The credit allowed under 11 subsection (a) for any taxable year shall not exceed 10 12 percent of the taxpayer’s adjusted gross income for the 13 taxable year. 14 ‘‘(c) DEFINITIONS.—For purposes of this section— 15 ‘‘(1) QUALIFIED CONTRIBUTION.—The term 16 ‘qualified contribution’ means a contribution of cash 17 to any eligible scholarship-granting organization. 18 ‘‘(2) QUALIFIED EXPENSE.—The term ‘quali- 19 fied expense’ means any educational expense that 20 is— 21 ‘‘(A) for an individual student’s elementary 22 or secondary education, as recognized by the 23 State, or 24 VerDate Sep 11 2014 03:34 Mar 14, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H1434.IH H1434 pbinns on DSK79D2C42PROD with BILLS 4 •HR 1434 IH ‘‘(B) for the secondary education compo- 1 nent of an individual elementary or secondary 2 student’s career and technical education, as de- 3 fined by section 3(5) of the Carl D. Perkins Ca- 4 reer and Technical Education Act of 2006 (20 5 U.S.C. 2302(5)). 6 ‘‘(3) SECRETARY.—The term ‘Secretary’ means 7 the Secretary of Education. 8 ‘‘(4) ELIGIBLE SCHOLARSHIP-GRANTING ORGA- 9 NIZATION.—The term ‘eligible scholarship-granting 10 organization’ means— 11 ‘‘(A) an organization that— 12 ‘‘(i) is described in section 501(c)(3) 13 and exempt from taxation under section 14 501(a); 15 ‘‘(ii) provides qualifying scholarships 16 to individual elementary and secondary 17 students who— 18 ‘‘(I) reside in the State in which 19 the eligible scholarship-granting orga- 20 nization is recognized; or 21 ‘‘(II) in the case of the Bureau of 22 Indian Education, are members of a 23 federally recognized tribe; 24 VerDate Sep 11 2014 03:34 Mar 14, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H1434.IH H1434 pbinns on DSK79D2C42PROD with BILLS 5 •HR 1434 IH ‘‘(iii) a State reports to the Secretary 1 as an eligible scholarship-granting organi- 2 zation under subsection (e)(5)(B); 3 ‘‘(iv) allocates at least 90 percent of 4 qualified contributions to qualifying schol- 5 arships; and 6 ‘‘(v) provides scholarships to— 7 ‘‘(I) more than 1 eligible student; 8 ‘‘(II) more than 1 eligible family; 9 and 10 ‘‘(III) different eligible students 11 attending more than one education 12 provider; or 13 ‘‘(B) an organization that— 14 ‘‘(i) is described in section 501(c)(3) 15 and exempt from taxation under section 16 501(a); and 17 ‘‘(ii) pursuant to State law, was able, 18 as of the date of the enactment of the 19 Education Freedom Scholarships and Op- 20 portunity Act, to receive contributions that 21 are eligible for a State tax credit if such 22 contributions are used by the organization 23 to provide scholarships to individual ele- 24 VerDate Sep 11 2014 03:34 Mar 14, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H1434.IH H1434 pbinns on DSK79D2C42PROD with BILLS 6 •HR 1434 IH mentary and secondary students, including 1 scholarships for attending private schools. 2 ‘‘(5) QUALIFYING SCHOLARSHIP.—The term 3 ‘qualifying scholarship’ means a scholarship granted 4 by an eligible scholarship-granting organization to 5 an individual elementary or secondary student under 6 this section or section 45T. 7 ‘‘(6) STATE.—The term ‘State’ means each of 8 the 50 States, the District of Columbia, the Com- 9 monwealth of Puerto Rico, the outlying areas (as de- 10 fined in section 1121(c) of the Elementary and Sec- 11 ondary Education Act of 1965), and the Department 12 of the Interior (acting through the Bureau of Indian 13 Education). 14 ‘‘(d) RULES OF CONSTRUCTION.— 15 ‘‘(1) IN GENERAL.—A scholarship awarded to a 16 student from the proceeds of a qualified contribution 17 under this section or section 45T shall not be con- 18 sidered assistance to the school or other educational 19 provider that enrolls, or provides educational services 20 to, the student or the student’s parents. 21 ‘‘(2) NOT TREATED AS INCOME.—The amount 22 of any such scholarship shall not be treated as in- 23 come of the child or his or her parents for purposes 24 VerDate Sep 11 2014 03:34 Mar 14, 2019 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H1434.IH H1434 pbinns on DSK79D2C42PROD with BILLS 7 •HR 1434 IH of Federal tax laws or for determining eligibility for 1 any other Federal program. 2 ‘‘(3) PROHIBITION OF CONTROL OVER NON- 3 PUBLIC EDUCATION PROVIDERS.— 4 ‘‘(A) Nothing in this Act shall be con- 5 strued to permit, allow, encourage, or authorize 6 any Federal control over any aspect of any pri- 7 vate, religious, or home education provider, 8 whether or not a home education provider is 9 treated as a private school or home school 10 under State law. This Act shall not be con- 11 strued to exclude private, religious, or home 12 education providers from participation in pro- 13 grams or services under this Act. 14 ‘‘(B) Nothing in this Act shall be con- 15 strued to permit, allow, encourage, or authorize 16 an entity submitting a list of eligible scholar- 17 ship-granting organizations on behalf of a State 18 to mandate, direct, or control any aspect of a 19 private or home education provider, regardless 20 of whether or not a home education provider is 21 treated as a private school under State law. 22 ‘‘(C) No participating State or entity act- 23 ing on behalf of a State shall exclude, discrimi- 24 nate against, or otherwise disadvantage any 25 VerDate Sep 11 2014 03:34 Mar 14, 2019 Jkt 089200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H1434.IH H1434 pbinns on DSK79D2C42PROD with BILLS 8 •HR 1434 IH education provider with respect to programs or 1 services under this Act based in whole or in 2 part on the provider’s religious character or af- 3 filiation, including religiously or mission-based 4 policies or practices. 5 ‘‘(4) PARENTAL RIGHTS TO USE SCHOLAR- 6 SHIPS.—No participating State or entity acting on 7 behalf of a State shall disfavor or discourage the use 8 of such scholarships for the purchase of elementary 9 and secondary education services, including those 10 services provided by private or nonprofit entities, 11 such as faith-based providers. 12 ‘‘(5) STATE AND LOCAL AUTHORITY.—Nothing 13 in this section or section 45T shall be construed to 14 modify a State or local government’s authority and 15 responsibility to fund education. 16 ‘‘(e) LIMITATIONS.— 17 ‘‘(1) TAX LIABILITY.—No credit allowed under 18 this section or section 45T shall exceed the tax- 19 payer’s Federal income tax liability for the taxable 20 year. 21 ‘‘(2) PROHIBITIONS.—A taxpayer is prohibited 22 from selling or transferring any portion of a tax 23 credit allowed under this section or section 45T. 24 VerDate Sep 11 2014 03:34 Mar 14, 2019 Jkt 089200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H1434.IH H1434 pbinns on DSK79D2C42PROD with BILLS 9 •HR 1434 IH ‘‘(3) DENIAL OF DOUBLE BENEFIT.—The Sec- 1 retary of the Treasury shall prescribe such regula- 2 tions or other guidance to ensure that the sum of 3 the tax benefits provided by Federal, State, or local 4 law for a qualified contribution receiving a Federal 5 tax credit in any taxable year shall not exceed the 6 sum of the qualified contributions made by the tax- 7 payer for the taxable year. 8 ‘‘(f) CARRYOVER OF CREDIT.—If a tax credit allowed 9 under this section or section 45T is not fully used within 10 the applicable taxable year because of insufficient tax li- 11 ability on the part of the taxpayer, the unused amount 12 may be carried forward for a period not to exceed 5 years. 13 ‘‘(g) ELECTION.—This section shall apply to a tax- 14 payer for a taxable year only if the taxpayer elects to have 15 this section or section 45T apply for such taxable year. 16 ‘‘(h) ALTERNATIVE MINIMUM TAX.—For purposes of 17 calculating the alternative minimum tax under section 55, 18 a taxpayer may use any credit received for a qualified con- 19 tribution under this section.’’. 20 (2) CLERICAL AMENDMENT.—The table of sec- 21 tions for subpart A of part IV of subchapter A of 22 chapter 1 is amended by inserting after the item re- 23 lating to section 25D the following new item: 24 ‘‘Sec. 25E. Contributions to eligible scholarship-granting organizations.’’. (b) CREDIT FOR CORPORATIONS.— 25 VerDate Sep 11 2014 03:34 Mar 14, 2019 Jkt 089200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H1434.IH H1434 pbinns on DSK79D2C42PROD with BILLS 10 •HR 1434 IH (1) IN GENERAL.—Subpart D of part IV of 1 subchapter A of chapter 1 is amended by adding at 2 the end the following new section: 3 ‘‘SEC. 45T. CONTRIBUTIONS TO ELIGIBLE SCHOLARSHIP- 4 GRANTING ORGANIZATIONS. 5 ‘‘(a) ALLOWANCE OF CREDIT.—For purposes of sec- 6 tion 38, in the case of a domestic corporation, there shall 7 be allowed as a credit against the tax imposed by this 8 chapter for the taxable year an amount equal to the sum 9 of any qualified contributions (as defined in section 10 25E(c)(1)) made by such corporation taxpayer during the 11 taxable year. 12 ‘‘(b) AMOUNT OF CREDIT.—The credit allowed under 13 subsection (a) for any taxable year shall not exceed 5 per- 14 cent of the taxable income (as defined in section 15 170(b)(2)(D)) of the domestic corporation for such taxable 16 year. 17 ‘‘(c) ADDITIONAL PROVISIONS.—For purposes of this 18 section, any qualified contributions made by a domestic 19 corporation shall be subject to the provisions of section 20 25E, to the extent applicable.’’. 21 (2) CREDIT PART OF GENERAL BUSINESS 22 CREDIT.—Section 38(b) is amended— 23 (A) by striking ‘‘plus’’ at the end of para- 24 graph (31), 25 VerDate Sep 11 2014 03:34 Mar 14, 2019 Jkt 089200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H1434.IH H1434 pbinns on DSK79D2C42PROD with BILLS 11 •HR 1434 IH (B) by striking the period at the end of 1 paragraph (32) and inserting ‘‘, plus’’, and 2 (C) by adding at the end the following new 3 paragraph: 4 ‘‘(33) the credit for qualified contributions de- 5 termined under section 45T(a).’’. 6 (3) CLERICAL AMENDMENT.—The table of sec- 7 tions for subpart D of part IV of subchapter A of 8 chapter 1 is amended by adding at the end the fol- 9 lowing new item: 10 ‘‘Sec. 45T. Contributions to eligible scholarship-granting organizations.’’. TITLE II—EDUCATION FREEDOM 11 SCHOLARSHIPS WEB PORTAL 12 AND ADMINISTRATION 13 SEC. 201. EDUCATION FREEDOM SCHOLARSHIPS WEB POR- 14 TAL AND ADMINISTRATION. 15 (a) IN GENERAL.—The Secretary of Education shall, 16 in coordination with the Secretary of the Treasury, estab- 17 lish, host, and maintain a Web portal that— 18 (1) lists all scholarship-granting organizations 19 that are eligible under section 25E or 45T of the In- 20 ternal Revenue Code of 1986; 21 (2) enables a taxpayer to make a qualifying 22 contribution to one or more eligible scholarship- 23 granting organizations and to immediately obtain 24 VerDate Sep 11 2014 03:34 Mar 14, 2019 Jkt 089200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H1434.IH H1434 pbinns on DSK79D2C42PROD with BILLS 12 •HR 1434 IH both a pre-approval of a tax credit for that contribu- 1 tion and a receipt for tax filings; 2 (3) provides information about the tax benefits 3 of Education Freedom Scholarships under the Inter- 4 nal Revenue Code of 1986; and 5 (4) enables a State to submit and update infor- 6 mation about its programs and its eligible scholar- 7 ship-granting organizations for informational pur- 8 po [Text truncated for display. 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