H. B. 2323
(By Delegate J. Miller)
[Introduced January 11, 2012; 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.
This article may be cited as “The Family Education Tax Credit Act.”
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.
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.
(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 may claim a separate family education tax credit for the tuition, fees and other educational expenses of each of their children. Parents may also claim a credit for certain home schooling expenses.
(c) The family education tax credit is 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 equals 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 equals 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.
(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 may 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 may 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.
This article is new; therefore, it has been completely underscored.