School Choice Now Act

II 116TH CONGRESS 2D SESSION S. 4284 To provide for emergency education freedom grants, to amend the Internal Revenue Code of 1986 to establish tax credits to encourage individual and corporate taxpayers to contribute to scholarships for students through eligible scholarship-granting organizations, and for other pur- poses. IN THE SENATE OF THE UNITED STATES JULY 22, 2020 Mr. SCOTT of South Carolina (for himself, Mr. ALEXANDER, and Mr. CRUZ) introduced the following bill; which was read twice and referred to the Committee on Finance A BILL To provide for emergency education freedom grants, to amend the Internal Revenue Code of 1986 to establish tax credits to encourage individual and corporate tax- payers to contribute to scholarships for 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 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘School Choice Now 4 Act’’. 5 VerDate Sep 11 2014 00:37 Aug 09, 2020 Jkt 099200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S4284.IS S4284 kjohnson on DSK79L0C42PROD with BILLS 2 •S 4284 IS TITLE I—EMERGENCY 1 EDUCATION FREEDOM GRANTS 2 SEC. 101. EMERGENCY EDUCATION FREEDOM GRANTS. 3 (a) DEFINITIONS.—In this title: 4 (1) DEFINITIONS FROM THE INTERNAL REV- 5 ENUE CODE OF 1986.—The definitions in section 6 25E(c) of the Internal Revenue Code of 1986, as 7 added by section 201, shall apply to this section, ex- 8 cept as otherwise provided. 9 (2) EMERGENCY EDUCATION FREEDOM GRANT 10 FUNDS.—The term ‘‘emergency education freedom 11 grant funds’’ means the amount of funds available 12 under subsection (b)(1) for this section that are not 13 reserved under subsection (c)(1). 14 (3) SECRETARY.—The term ‘‘Secretary’’ means 15 the Secretary of Education. 16 (4) STATE.—The term ‘‘State’’ means each of 17 the 50 States, the District of Columbia, and the 18 Commonwealth of Puerto Rico. 19 (b) GRANTS.— 20 (1) PROGRAM AUTHORIZED.—From any 21 amounts appropriated for section 18003 of division 22 B of the CARES Act on or after the date of enact- 23 ment of this Act, the Secretary shall, notwith- 24 standing any other provision of title XVIII of divi- 25 VerDate Sep 11 2014 00:37 Aug 09, 2020 Jkt 099200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S4284.IS S4284 kjohnson on DSK79L0C42PROD with BILLS 3 •S 4284 IS sion B of the CARES Act (Public Law 116–136), 1 use 10 percent of such amounts to carry out sub- 2 section (c) and award emergency education freedom 3 grants to States with approved applications, in order 4 to enable the States to award subgrants to eligible 5 scholarship-granting organizations under subsection 6 (d). 7 (2) TIMING.—The Secretary shall make the al- 8 lotments required under this subsection by not later 9 than 30 days after the date of enactment of this 10 Act. 11 (c) RESERVATION AND ALLOTMENTS.— 12 (1) IN GENERAL.—From the amounts made 13 available under subsection (b)(1), the Secretary 14 shall— 15 (A) reserve— 16 (i) one-half of 1 percent for allotments 17 for the United States Virgin Islands, 18 Guam, American Samoa, and the Com- 19 monwealth of the Northern Mariana Is- 20 lands, to be distributed among those out- 21 lying areas on the basis of their relative 22 need, as determined by the Secretary, in 23 accordance with the purpose of this title; 24 and 25 VerDate Sep 11 2014 00:37 Aug 09, 2020 Jkt 099200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S4284.IS S4284 kjohnson on DSK79L0C42PROD with BILLS 4 •S 4284 IS (ii) one-half of 1 percent of such 1 amounts for the Secretary of the Interior, 2 acting through the Bureau of Indian Edu- 3 cation, to be used to provide subgrants de- 4 scribed in subsection (d) to eligible scholar- 5 ship-granting organizations that serve stu- 6 dents attending elementary schools or sec- 7 ondary schools operated or funded by the 8 Bureau of Indian Education; and 9 (B) subject to paragraph (2), allot each 10 State that submits an approved application 11 under this section the sum of— 12 (i) the amount that bears the same 13 relation to 20 percent of the emergency 14 education freedom grant funds as the num- 15 ber of individuals aged 5 through 17 in the 16 State, as determined by the Secretary on 17 the basis of the most recent satisfactory 18 data, bears to the number of those individ- 19 uals, as so determined, in all such States 20 that submitted approved applications; and 21 (ii) an amount that bears the same re- 22 lationship to 80 percent of the emergency 23 education freedom grant funds as the num- 24 ber of individuals aged 5 through 17 from 25 VerDate Sep 11 2014 00:37 Aug 09, 2020 Jkt 099200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S4284.IS S4284 kjohnson on DSK79L0C42PROD with BILLS 5 •S 4284 IS families with incomes below the poverty 1 line in the State, as determined by the Sec- 2 retary on the basis of the most recent sat- 3 isfactory data, bears to the number of 4 those individuals, as so determined, in all 5 such States that submitted approved appli- 6 cations. 7 (2) MINIMUM ALLOTMENT.—No State shall re- 8 ceive an allotment under this subsection for a fiscal 9 year that is less than 1⁄2 of 1 percent of the amount 10 of emergency education freedom grant funds avail- 11 able for such fiscal year. 12 (d) SUBGRANTS TO ELIGIBLE SCHOLARSHIP-GRANT- 13 ING ORGANIZATIONS.— 14 (1) IN GENERAL.—A State that receives an al- 15 lotment under this section shall use the allotment to 16 award subgrants, on a basis determined appropriate 17 by the State, to eligible scholarship-granting organi- 18 zations in the State. 19 (2) INITIAL TIMING.— 20 (A) STATES WITH EXISTING TAX CREDIT 21 SCHOLARSHIP PROGRAM.—By not later than 30 22 days after receiving an allotment under sub- 23 section (c)(1)(B), a State with an existing, as 24 of the date of application for an allotment 25 VerDate Sep 11 2014 00:37 Aug 09, 2020 Jkt 099200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S4284.IS S4284 kjohnson on DSK79L0C42PROD with BILLS 6 •S 4284 IS under this section, tax credit scholarship pro- 1 gram shall use not less than 50 percent of the 2 allotment to award subgrants to eligible schol- 3 arship-granting organizations in the State. 4 (B) STATES WITHOUT TAX CREDIT SCHOL- 5 ARSHIP PROGRAMS.—By not later than 60 days 6 after receiving an allotment under subsection 7 (c)(1)(B), a State without a tax credit scholar- 8 ship program shall use not less than 50 percent 9 of the allotment to award subgrants to eligible 10 scholarship-granting organizations in the State. 11 (3) USES OF FUNDS.—An eligible scholarship- 12 granting organization that receives a subgrant under 13 this subsection— 14 (A) may reserve not more than 5 percent 15 of the subgrant funds for public outreach, stu- 16 dent and family support activities, and adminis- 17 trative expenses related to the subgrant; and 18 (B) shall use not less than 95 percent of 19 the subgrant funds to provide qualifying schol- 20 arships for qualified expenses only to individual 21 elementary school and secondary school stu- 22 dents who reside in the State in which the eligi- 23 ble scholarship-granting organization is recog- 24 nized. 25 VerDate Sep 11 2014 00:37 Aug 09, 2020 Jkt 099200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S4284.IS S4284 kjohnson on DSK79L0C42PROD with BILLS 7 •S 4284 IS (e) REALLOCATION.—A State shall return to the Sec- 1 retary any amounts of the allotment received under this 2 section that the State does not award as subgrants under 3 subsection (d) by March 30, 2021, and the Secretary shall 4 reallocate such funds to the remaining eligible States in 5 accordance with subsection (c)(1)(B). 6 (f) RULES OF CONSTRUCTION.—The rules of con- 7 struction under section 25E(d) of the Internal Revenue 8 Code of 1986, as added by section 201, shall apply to this 9 section in the same manner as such rules apply to section 10 25E of such Code, as so added. 11 TITLE II—TAX CREDITS FOR 12 CONTRIBUTIONS TO ELIGI- 13 BLE SCHOLARSHIP-GRANT- 14 ING ORGANIZATIONS 15 SEC. 201. TAX CREDITS FOR CONTRIBUTIONS TO ELIGIBLE 16 SCHOLARSHIP-GRANTING ORGANIZATIONS. 17 (a) CREDIT FOR INDIVIDUALS.—Subpart A of part 18 IV of subchapter A of chapter 1 of the Internal Revenue 19 Code of 1986 is amended by adding after section 25D the 20 following new section: 21 ‘‘SEC. 25E. CONTRIBUTIONS TO ELIGIBLE SCHOLARSHIP- 22 GRANTING ORGANIZATIONS. 23 ‘‘(a) ALLOWANCE OF CREDIT.—Subject to section 24 202(c) of the School Choice Now Act, in the case of an 25 VerDate Sep 11 2014 00:37 Aug 09, 2020 Jkt 099200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S4284.IS S4284 kjohnson on DSK79L0C42PROD with BILLS 8 •S 4284 IS individual, there shall be allowed as a credit against the 1 tax imposed by this chapter for the taxable year an 2 amount equal to the sum of any qualified contributions 3 made by the taxpayer during the taxable year. 4 ‘‘(b) AMOUNT OF CREDIT.—The credit allowed under 5 subsection (a) for any taxable year shall not exceed 10 6 percent of the taxpayer’s adjusted gross income for the 7 taxable year. 8 ‘‘(c) DEFINITIONS.—For purposes of this section— 9 ‘‘(1) ELIGIBLE SCHOLARSHIP-GRANTING ORGA- 10 NIZATION.—The term ‘eligible scholarship-granting 11 organization’ means— 12 ‘‘(A) an organization that— 13 ‘‘(i) is described in section 501(c)(3) 14 and exempt from taxation under section 15 501(a), 16 ‘‘(ii) provides qualifying scholarships 17 to individual elementary and secondary 18 students who— 19 ‘‘(I) reside in the State in which 20 the eligible scholarship-granting orga- 21 nization is recognized, or 22 ‘‘(II) in the case of the Bureau of 23 Indian Education, are members of a 24 federally recognized tribe, 25 VerDate Sep 11 2014 00:37 Aug 09, 2020 Jkt 099200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S4284.IS S4284 kjohnson on DSK79L0C42PROD with BILLS 9 •S 4284 IS ‘‘(iii) a State identifies to the Sec- 1 retary as an eligible scholarship-granting 2 organization under section 202(c)(5)(B) of 3 the School Choice Now Act, 4 ‘‘(iv) allocates at least 90 percent of 5 qualified contributions to qualifying schol- 6 arships on an annual basis, and 7 ‘‘(v) provides qualifying scholarships 8 to— 9 ‘‘(I) more than 1 eligible student, 10 ‘‘(II) more than 1 eligible family, 11 and 12 ‘‘(III) different eligible students 13 attending more than 1 education pro- 14 vider, or 15 ‘‘(B) an organization that— 16 ‘‘(i) is described in section 501(c)(3) 17 and exempt from taxation under section 18 501(a), and 19 ‘‘(ii) pursuant to State law, was able, 20 as of January 1, 2021, to receive contribu- 21 tions that are eligible for a State tax credit 22 if such contributions are used by the orga- 23 nization to provide scholarships to indi- 24 vidual elementary and secondary students, 25 VerDate Sep 11 2014 00:37 Aug 09, 2020 Jkt 099200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S4284.IS S4284 kjohnson on DSK79L0C42PROD with BILLS 10 •S 4284 IS including scholarships for attending private 1 schools. 2 ‘‘(2) QUALIFIED CONTRIBUTION.—The term 3 ‘qualified contribution’ means a contribution of cash 4 to any eligible scholarship-granting organization. 5 ‘‘(3) QUALIFIED EXPENSE.—The term ‘quali- 6 fied expense’ means any educational expense that 7 is— 8 ‘‘(A) for an individual student’s elementary 9 or secondary education, as recognized by the 10 State, or 11 ‘‘(B) for the secondary education compo- 12 nent of an individual elementary or secondary 13 student’s career and technical education, as de- 14 fined by section 3(5) of the Carl D. Perkins Ca- 15 reer and Technical Education Act of 2006 (20 16 U.S.C. 2302(5)). 17 ‘‘(4) QUALIFYING SCHOLARSHIP.—The term 18 ‘qualifying scholarship’ means a scholarship granted 19 by an eligible scholarship-granting organization to 20 an individual elementary or secondary student for a 21 qualified expense. 22 ‘‘(5) STATE.—The term ‘State’ means each of 23 the 50 States, the District of Columbia, the Com- 24 monwealth of Puerto Rico, the outlying areas (as de- 25 VerDate Sep 11 2014 00:37 Aug 09, 2020 Jkt 099200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S4284.IS S4284 kjohnson on DSK79L0C42PROD with BILLS 11 •S 4284 IS fined in section 1121(c) of the Elementary and Sec- 1 ondary Education Act of 1965 (20 U.S.C. 6331(c)), 2 and the Department of the Interior (acting through 3 the Bureau of Indian Education). 4 ‘‘(d) RULES OF CONSTRUCTION.— 5 ‘‘(1) IN GENERAL.—A qualifying scholarship 6 awarded to a student from the proceeds of a quali- 7 fied contribution under this section shall not be con- 8 sidered assistance to the school or other educational 9 provider that enrolls, or provides educational services 10 to, the student or the student’s parents. 11 ‘‘(2) EXCLUSION FROM INCOME.—Gross income 12 shall not include any amount received by an indi- 13 vidual as a qualifying scholarship and such amount 14 shall not be taken into account as income or re- 15 sources for purposes of determining the eligibility of 16 such individual or any other individual for benefits 17 or assistance, or the amount or extent of such bene- 18 fits or assistance, under any Federal program or 19 under any State or local program financed in whole 20 or in part with Federal funds. 21 ‘‘(3) PROHIBITION OF CONTROL OVER NON- 22 PUBLIC EDUCATION PROVIDERS.— 23 ‘‘(A)(i) Nothing in this section shall be 24 construed to permit, allow, encourage, or au- 25 VerDate Sep 11 2014 00:37 Aug 09, 2020 Jkt 099200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S4284.IS S4284 kjohnson on DSK79L0C42PROD with BILLS 12 •S 4284 IS thorize any Federal control over any aspect of 1 any private, religious, or home education pro- 2 vider, whether or not a home education provider 3 is treated as a private school or home school 4 under State law. 5 ‘‘(ii) This section shall not be construed to 6 exclude private, religious, or home education 7 providers from participation in programs or 8 services under this section. 9 ‘‘(B) Nothing in this section shall be con- 10 strued to permit, allow, encourage, or authorize 11 an entity submitting a list of eligible scholar- 12 ship-granting organizations on behalf of a State 13 pursuant to section 202(c)(5) of the School 14 Choice Now Act to mandate, direct, or control 15 any aspect of a private or home education pro- 16 vider, regardless of whether or not a home edu- 17 cation provider is treated as a private school 18 under State law. 19 ‘‘(C) No participating State or entity act- 20 ing on behalf of a State pursuant to section 21 202(c)(5) of the School Choice Now Act shall 22 exclude, discriminate against, or otherwise dis- 23 advantage any education provider with respect 24 to programs or serv [Text truncated for display. 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