H. B. 3320
(By Delegate J. Miller)
[Introduced January 13, 2010; referred to the
Committee on Education then Finance.]
A BILL to amend the Code of West Virginia, 1931, as amended, by
adding thereto a new article, designated §18-9G-1,
§18-9G-2,
§18-9G-3,
§18-9G-4,
§18-9G-5,
§18-9G-6,
§18-9G-7 and
§18-9G-8,
all relating to creating a tax credit program for individuals
paying qualified educational expenses and for those
individuals or corporations making donations to organizations
granting scholarships for qualified educational expenses;
defining terms; setting forth requirements.
Be it enacted by the Legislature of West Virginia:
That the Code of West Virginia, 1931, as amended, be amended
by adding thereto a new article, designated §18-9G-1,
§18-9G-2,
§18-9G-3,
§18-9G-4,
§18-9G-5,
§18-9G-6,
§18-9G-7
and §18-9G-8, all
to read as follows:
ARTICLE 9G. THE FAMILY EDUCATION TAX CREDIT ACT.
§18-9G-1. Title.
This article may be cited as "The Family Education Tax Credit
Act."
§18-9G-2. Purpose.
The purpose of this article is to create a family education
tax credit for payment of tuition, fees and certain other
educational expenses and a tax credit for individual and corporate
contributions to organizations that provide educational
scholarships to eligible students so they can attend the public and
nonpublic schools of their parent's choice.
§18-9G-3. Definitions.
The following definitions apply in this article:
(1) "Department" means the State Department of Revenue.
(2) "Educational scholarship" means a grant to a student to
cover all or part of the tuition and fees at either a qualifying
nonpublic school or a qualifying public school, including
transportation to a public school outside of a student's resident
school district.
(3)
"Eligible Student" means a student who was eligible to
attend a public school in the state in a preceding semester or is
starting school in this state for the first time and whose parent
has a taxable income that meets the requirements of the program.
(4) "Parent" includes a guardian, custodian or other person
with authority to act on behalf of the student.
(5)
"Program" means the Family Education Tax Credit Program.
(6) "Qualifying school" means either a public elementary or
secondary school outside of the district in which a student resides
or a nonpublic elementary or secondary school in our state that
complies with all of the requirements of the program.
(7) "Scholarship Granting Organization" means an organization
that gives educational scholarships to students attending
qualifying schools and complies with all of the requirements of the
program.
§18-9G-4. Provisions.
(a) Under the provisions of this article, an individual shall
be able to claim a family education tax credit against state income
taxes if the individual directly pays all or part of the tuition,
fees and other educational expenses of an eligible student.
(b) Parents shall be able to claim a separate family education
tax credit for the tuition, fees and other educational expenses of
each of their children. Parents shall also be able to claim a
credit for certain home schooling expenses.
(c) The family education tax credit shall be refundable for
the parents of a student in the program when the parent's income
does not exceed an amount equal to the income standard used to
qualify for a reduced price lunch under the national Free or
Reduced Price Lunch Program established under 42
U.S.C. §
1751 et.
seq.
(d) Parents of a student participating in the program may assign their family education tax credit to their student's
qualifying school.
(e) Under the provisions of this article, individuals and
corporations may claim a family education tax credit against state
income taxes by making contributions to scholarship granting
organizations.
(f) Scholarship granting organizations may solicit
contributions from individuals and corporations and provide
educational scholarships to eligible students who attend qualifying
schools.
(g) A corporate taxpayer, an individual taxpayer or a married
couple filing jointly may carry forward family education tax
credits for three years.
(h) For corporations, the amount of the family education tax
credit shall equal any contributions to scholarship granting
organizations during the taxable year for which the credit is
claimed up to fifty percent of the taxpayer's tax liability.
(i) For an individual taxpayer or a married couple filing
jointly who does not qualify under subsection (c) of this section,
the amount of the family education tax credit shall equal its total
direct payments for tuition, fees and other educational expenses of
eligible students plus any contributions to scholarship granting
organizations during the taxable year for which the credit is claimed up to fifty percent of the taxpayer's tax liability.
§18-9G-
5. Eligibility.
(a) The eligible student's parents must have a taxable income
for the preceding tax year that does not exceed an amount equal to
two and one-half times the income standard used to qualify for a
reduced price lunch under the national Free or Reduced Price Lunch
Program established under 42
U.S.C. §
1751 et. seq.
(b) The eligible student must be enrolled full time in a
qualifying school or in a home schooling program complying with
state law.
(c) The eligible student is a resident of this state who has
not graduated from high school or reached the age of twenty-one.
§18-9G-6. Qualified expenses.
(a) Parents of eligible students attending a qualifying school
may claim a family education tax credit for tuition and any fees
necessary to attend the school including fees for administrative
expenses, transportation costs and academic programs. They may not
claim a tax credit for athletic fees or expenses.
(b) For students taught in a nonpublic home-based program,
parents may claim a family education tax credit for educational
expenses including tutoring, textbooks, school supplies academic
lessons, and membership fees in an association that sets academic
standards or provides educational curricula for home schooling students. They may not claim expenses for tutoring or academic
lessons if the parent conducts them.
(c) Parents will provide the department with a detailed
listing of the educational expenses for each child for which they
seek a tax credit on a form prescribed by the department. They
will attach to the form all receipts necessary to document these
expenses.
(d) Parents may only claim the family education tax credit for
expenses they actually paid.
§18-9G
-7. Scholarship granting organizations.
(a) Each scholarship granting organization shall:
(1) Notify the department of its intent to provide educational
scholarships to students attending qualified schools;
(2) Demonstrate to the department that it has been granted
exemption from the federal income tax as an organization described
in Section 501(c)(3) of the Internal Revenue Code;
(3) Distribute periodic scholarship payments as checks made
out to a student's parent or guardian and mailed to the qualified
school where the student is enrolled. The parent or guardian must
endorse the check before it can be deposited;
(4) Provide a department-approved receipt to taxpayers for
contributions made to the organization;
(5) Ensure that at least ninety percent of its revenue from donations is spent on educational scholarships and all revenue from
interest or investments are spent on educational scholarships;
(6) Spend each year a portion of its expenditures on grants
for low-income eligible students equal to the percentage of
low-income eligible students in the county where the scholarship
granting organization expends the majority of its grants;
(7) Verify annually that no student receiving a scholarship
resides in a household whose income in the preceding tax year
exceeds an amount equal to twice the income standard used to
qualify for a reduced price lunch under the national Free or
Reduced Price Lunch Program established under 42
U.S.C. §
1751 et.
seq;
(8) Ensure that at least fifty percent of first time
recipients of educational scholarships were not continuously
enrolled in a nonpublic school during the previous year;
(9) Cooperate with the department to conduct criminal
background checks on all of its employees and board members and
exclude from employment or governance any people that might
reasonably pose a risk to the appropriate use of contributed funds;
(10) Ensure that scholarships are portable during the school
year and can be used at any qualified school that accepts the
eligible student according to a parent's wishes. If a student moves
to a new qualified school during a school year, the scholarship amount may be prorated;
(11) Demonstrate their financial accountability by:
(A) Submitting a financial information report for the
organization that complies with uniform financial accounting
standards established by the department and conducted by a
certified public accountant; and
(B) Having the Auditor certify that the report is free of
material misstatements; and
(12) Demonstrate their financial viability, if they are to
receive donations of $50,000 or more during the school year, by:
(A) Filing with the department prior to the start of the
school year a surety bond payable to the state in an amount equal
to the aggregate amount of contributions expected to be received
during the school year; or
(B) Filing with the department prior to the start of the
school year financial information that demonstrates the financial
viability of the scholarship granting organization.
(b) Each scholarship granting organization shall ensure that
participating schools that accept its scholarship students:
(1) Comply with all health and safety laws or codes that apply
to nonpublic schools;
(2) Hold a valid occupancy permit if required by its municipality;
(3) Certify that it will not discriminate in admissions on the
basis of race, color, national origin, religion or disability; and
(4) Provide academic accountability to parents of the students
in the program by regularly reporting to the parent on the
student's progress;
(c) Scholarship granting organizations may grant scholarships
to eligible students to cover part or all of the costs associated
with attending a qualifying school or the allowable expenses
incurred by a student in a home school.
(d) Scholarship granting organizations may not award an
educational scholarship to a family member of the organization's
board of directors or its paid staff.
§18-9G
-8. Department of Revenue.
(a) The department shall develop a standardized form for
qualifying schools to document the amount of tuition and fees paid
by a parent.
(b) The department shall ensure that parents are aware of the
family education tax credit and that all procedures for claiming
the credit are easy to follow.
(c) The department shall establish guidelines for parents to
easily assign their tax credit to their student's qualifying
school.
(d) The department shall require all scholarship granting
organizations to register and annually report the information the
department needs to carry out its responsibilities.
(e) The department shall adopt rules and procedures consistent
with this act as necessary to implement the Family Education Tax
Credit Program.
(f) The department shall annually report to the Legislature on
the number of parents claiming the tax credit, the dollar amount of
the credits claimed by parents, the number of schools accepting
eligible students who received a tax credit or educational
scholarship, the number of scholarship granting organizations, the
number and dollar amount of contributions to a scholarship granting
organization and the number and dollar amount of educational
scholarships given to eligible students.
(g) The department shall have the authority to conduct either
a financial review or audit of a scholarship granting organization
if possessing evidence of fraud.
(h) The department may bar a scholarship granting organization
from participating in the program if the department establishes
that the organization has intentionally and substantially failed to
comply with the requirements in section seven of this article.
(i) If the department decides to bar a scholarship granting
organization from the program, it shall notify affected scholarship students and their parents of this decision as quickly as possible.
(j) The department shall allow a taxpayer to divert a prorated
amount of state income tax withholdings to a scholarship granting
organization of the taxpayer's choice up to the maximum credit
allowed by law, including carry-over credits. The department shall
have the authority to develop a procedure to facilitate this
process.
(k) A qualifying school is autonomous and not an agent of the
state or federal government. The department or any other state
agency may not regulate the educational program of a qualifying
school that admits eligible students under this program. The
creation of the Family Education Tax Credit Program does not expand
the regulatory authority of the state, its officers or any local
school district to impose any additional regulation of nonpublic
schools beyond those reasonably necessary to enforce the
requirements of the program.
NOTE: The purpose of this bill is to create a tax credit
program for individuals paying qualified educational expenses and
for those individuals or corporations making donations to
organizations granting scholarships for qualified educational
expenses. The bill defines terms and sets forth requirements.
Strike-throughs indicate language that would be stricken from
the present law, and underscoring indicates new language that would
be added.