BILL REQ. #:  H-1832.2 

Read first time 05/22/13.   Referred to Committee on Education.

     AN ACT Relating to establishing an education investment tax credit; and adding a new chapter to Title 82 RCW.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION.  Sec. 1   (1) The legislature finds that:
     (a) Expanding educational opportunities, improving the quality of educational services within the state, and ensuring that all parents may exercise and enjoy their basic right to educate their children are valid public purposes; and
     (b) Expanding educational opportunities for children and promoting healthy competition among education providers to serve children are critical to improving the quality of education in the state and ensuring that all children have the opportunity to receive a high quality education.
     (2) The legislature intends to:
     (a) Allow maximum freedom to parents to provide for the educational needs of children;
     (b) Promote the general welfare by expanding educational opportunities for children;
     (c) Enable children in this state to achieve a higher level of excellence in their education; and
     (d) Improve the quality of education in this state, both by expanding educational opportunities for children and by creating incentives for schools to achieve excellence.

NEW SECTION.  Sec. 2   The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.
     (1) "Approved private school" means a school that is an approved private school for purposes of RCW 28A.225.010(3).     
     (2) "Contribution receipt" means a document submitted by a scholarship organization to the department and to the person who made a contribution to the scholarship organization, which contains:
     (a) The name, address, and federal taxpayer identification number of the person who made the contribution;
     (b) The scholarship organization's name and address; and
     (c) The contribution amount and date received.
     (3) "Educational expenses" means the total amount of money charged for the cost of an eligible student to be educated at an approved private school, including, but not limited to: Tuition, education-related transportation fees, and other instruction-related expenses, subject to the approval of the scholarship organization.
     (4) "Eligible student" means a Washington resident who:
     (a) Is at least five years of age and no more than twenty-one years of age;
     (b) Has not graduated from high school; and
     (c) Meets at least one of the following requirements:
     (i) Has an annual household income of less than or equal to two hundred twenty-five percent of the federal poverty guidelines as updated annually by the United States department of health and human services under 42 U.S.C. Sec. 9902(2) and either is enrolled in kindergarten at an approved private school or attended a public primary or secondary school as a full-time student in the preceding fiscal year and transferred from such school to an approved private school;
     (ii) Received a scholarship pursuant to (c)(i) of this subsection (4) or pursuant to this subsection (4)(c)(ii) in the prior fiscal year and has an annual household income of less than or equal to two hundred seventy-five percent of the federal poverty guidelines as updated annually by the United States department of health and human services under 42 U.S.C. Sec. 9902(2);
     (iii) Has been identified as having a disability under 29 U.S.C. Sec. 794 or has been identified at any time by a school district as a child with a disability for purposes of RCW 28A.155.020;
     (iv) Has an annual household income of less than or equal to two hundred twenty-five percent of the federal poverty guidelines as updated annually by the United States department of health and human services under 42 U.S.C. Sec. 9902(2); or
     (v) Received a scholarship pursuant to (c)(iv) of this subsection (4) or pursuant to this subsection (4)(c)(v) in the prior fiscal year and has an annual household income of less than or equal to two hundred seventy-five percent of the federal poverty guidelines as updated annually by the United States department of health and human services under 42 U.S.C. Sec. 9902(2).
     (5) "Fiscal year" means the twelve-month period from July 1st of the calendar year to June 30th of the next calendar year.
     (6) "Parent" means the natural or adoptive parent or legal guardian of a child.
     (7) "Scholarship organization" means an entity that is exempt from taxation under 26 U.S.C. Sec. 501(c)(3) of the federal internal revenue code of 1986, as amended, as of January 1, 2013, and that does not discriminate on the basis of race, color, disability, or national origin.

NEW SECTION.  Sec. 3   (1) The education investment tax credit program is created. Under this program, beginning January 1, 2014, a credit is allowed against the tax imposed under chapter 82.04 RCW for approved contributions made by a person to a scholarship organization.
     (2) Prior to claiming a credit under this section, a person must submit an application to the department, in the form and manner determined by the department, which includes the requested contribution amount. No applications may be accepted under this section prior to January 1, 2014. Applications must be approved by the department within thirty days on a first-come basis, subject to the limits provided in this subsection. Notice of the approval must be provided to the applicant and include the approved contribution amount and the date of the approval. Partial credit approval is permitted if the partial credit approval is necessary to prevent exceeding the aggregate tax credit amount allowable under this subsection.
     (a) In calendar year 2014, the department may not approve any credits under this section that would cause the total amount of credits claimed under this section to exceed one hundred million dollars. In subsequent calendar years, the total amount of credits that may be claimed under this section must be the same as in the prior calendar year, except as provided otherwise under (b) of this subsection (2).
     (b) If the total amount of credits claimed under this section in any calendar year exceeds ninety percent of the total amount of credits allowed during that year, the total amount of credits that may be claimed under this section during subsequent calendar years must be increased by forty percent.
     (c) To receive a tax credit under this section, a person must make a contribution within thirty days from the date of application approval by the department. Contributions may be made to multiple scholarship organizations, but a tax credit is only available under this section for the total amount contributed by the person, up to the amount approved by the department. Any credit amount approved by the department under this section, or any portion thereof, that is not contributed to a scholarship organization within thirty days from the date of application approval may not be counted towards the aggregate tax credit amount under this subsection (2).
     (3) To participate in the education investment tax credit program, a scholarship organization must:
     (a) Have submitted to the department a notice of intent to participate in the education investment tax credit program, in the form and manner determined by the department, certifying that the scholarship organization is a tax exempt entity under 26 U.S.C. Sec. 501(c)(3) of the federal internal revenue code;     
     (b) Provide scholarships to eligible students for educational expenses. An eligible student may not receive more than one scholarship in a single fiscal year and may not receive a scholarship from more than one scholarship organization in a single fiscal year. Scholarships may not extend beyond a single fiscal year, and an eligible student with a scholarship must reapply for a scholarship in subsequent fiscal years;
     (c)(i) In fiscal years 2013 and 2014, limit the highest value of any scholarship awarded to:
     (A) Five thousand dollars or less for an eligible student, other than an eligible student defined under section 2(4)(c)(iii) of this act; and
     (B) Ten thousand three hundred fifty dollars or less for an eligible student defined under section 2(4)(c)(iii) of this act.
     (ii) Beginning in fiscal year 2015, the department must annually adjust the limits in (c)(i) of this subsection (3) for inflation as provided in the consumer price index for all urban consumers, northwest region, using the "services less medical care services" special aggregate index, as published by the United States department of labor, bureau of labor statistics;
     (d) In fiscal years 2013 and 2014, award one hundred percent of all scholarships funded with contributions received under this section as scholarships to eligible students defined under section 2(4)(c) (i) and (ii) of this act. Beginning in fiscal year 2015, the percentage of scholarships funded with contributions required to be awarded to eligible students defined under section 2(4)(c)(i) of this act must be reduced ten percentage points annually. Beginning in fiscal year 2024, there is no required minimum percentage of scholarships reserved only for eligible students defined under section 2(4)(c) (i) and (ii) of this act;
     (e) Provide scholarships for use at a minimum of two different approved private schools and not restrict or reserve contributions for the use of specific students;
     (f) Verify a student's eligibility to apply for and receive a scholarship. The office of the superintendent of public instruction must assist scholarship organizations, upon request, in assessing a student's eligibility under section 2(4)(c)(i) of this act by verifying the student's attendance at a public primary or secondary school as a full-time student;
     (g) Within fifteen days of receiving a contribution from a person pursuant to this section, send a contribution receipt to the department and to the person who made the contribution;
     (h) Not have a director, officer, or employee who:
     (i) Owns or operates an approved private school that enrolls children who have received scholarships under this section; or
     (ii) Has filed within the previous seven years for personal bankruptcy or corporate bankruptcy in a business of which he or she owned more than twenty percent;
     (i) Maintain a separate account for contributions received under this section;
     (j) Not award a scholarship to any lineal descendent or equivalent stepchild of any of its directors, officers, or employees;
     (k) Use at least ninety percent of the revenue received from contributions under this section in each fiscal year to fund scholarships under this section during the same fiscal year in which the contributions were received or in the next succeeding fiscal year;
     (l) Require that students receiving a scholarship under this section use the scholarship on a full-time basis. If a student ceases to attend an approved private school before completing an entire school year, the school must refund a prorated amount of the scholarship to the scholarship organization that awarded the scholarship. The scholarship organization must use any refunds it receives under this subsection to fund scholarships under this section;
     (m) Allow the parents of a student who receives a scholarship under this section to choose any approved private school at which the scholarship organization allows its scholarships to be used and that has enrolled the student or accepted the student for enrollment;
     (n) On or before September 30th of each year, submit a scholarship organization report, in the form and manner as determined by the department, to the department, which is a public document and must contain the following, at a minimum:
     (i) The total number and total dollar amount of contributions received under this section during the previous fiscal year;
     (ii) The total number and total dollar amount of scholarships granted under this section during the previous fiscal year, with a subtotal itemizing the number and dollar amount of such scholarships that were granted under section 2(4)(c) (i) through (v) of this act; and
     (iii) Itemized for each school that enrolled an eligible student who received a scholarship from a scholarship organization under this section during the previous fiscal year, the name and address of the school, the number of such students who attended the school, and the total dollar amount of such scholarships.
     (4) Credits earned under this section may be claimed against taxes due for the calendar year in which the contribution is made. The amount of credit claimed under this section for a reporting period may not exceed the tax otherwise due under chapter 82.04 RCW for that reporting period.
     (5) The amount of credit that may be earned by a person in each calendar year under this section may not exceed the amount of approved contributions made by the person to a scholarship organization during that calendar year.
     (6) Unused credit may be carried over and used in subsequent tax reporting periods, except that no credit may be claimed more than three years from the end of the calendar year in which the credit was earned. Credits carried over must be applied to tax liability before new credits. No refunds may be granted for credits under this section.
     (7) No credit may be received for any contribution that is directed, assigned, or restricted for the use of a particular student or a particular approved private school.
     (8) A person claiming the credit under this section is subject to the provisions of chapter 82.32 RCW in such manner and to such extent as indicated in chapter 82.04 RCW.
     (9) To claim a credit under this section, a person must electronically file with the department all returns, forms, and any other information required by the department, in an electronic format as provided or approved by the department. Any return, form, or information required to be filed in an electronic format under this section is not filed until received by the department in an electronic format. As used in this subsection, "returns" has the same meaning as "return" in RCW 82.32.050.
     (10) Any contribution made by a person to a scholarship organization for which the person does not seek a tax credit under this section is not subject to the requirements of this chapter.

NEW SECTION.  Sec. 4   (1)(a) The department must create and maintain a public list of all scholarship organizations that meet the requirements of this chapter. The department must post this list on the department's web site and update the list as frequently as the department determines necessary. The department must provide the list created under this section to the office of the superintendent of public institution, which must post the list on its web site, including any updates made by the department.
     (b) The department must create, maintain, and post on its web site any forms and reports necessary for the administration of this chapter. Any reports published under this section are subject to all applicable public disclosure laws.
     (c) The department must post an up-to-date total of the amount of credits available during the current calendar year on its web site.
     (2) Within fifteen days of receiving a contribution receipt from a scholarship organization, the department must notify the scholarship organization and the person who made the contribution to that scholarship organization as to how much of the contribution was within the amount approved under section 3 of this act.
     (3)(a) The department must send written notice by certified mail or electronically to a scholarship organization not in compliance with the provisions of this chapter.
     (b) A scholarship organization that receives a notice of noncompliance under this subsection has ninety days to correct the violation identified in the notice. If a scholarship organization fails or refuses to comply after ninety days, the department may revoke the scholarship organization's approval and remove the organization from the list of approved scholarship organizations posted on the department's web site under this section. A scholarship organization whose approval is revoked must notify any person who attempts to make a contribution to the scholarship organization under this chapter that the contribution is not eligible for a tax credit under this chapter and offer to refund any contribution received under this chapter after the department's revocation of approval.
     (c) Upon request by the department, the office of the superintendent of public instruction must assist the department in determining noncompliance by a scholarship organization under this chapter.
     (4) The department may adopt rules, as the department deems necessary, to implement this chapter.
     (5) The administrative procedure act, chapter 34.05 RCW, applies to this chapter.

NEW SECTION.  Sec. 5   An approved private school is not considered an agent of the state or federal government as a result of accepting a student who has received a scholarship from a scholarship organization under this chapter. An approved private school's acceptance of a student who has received a scholarship from a scholarship organization does not provide any state or local governmental entity the authority to regulate the educational program of that school. The provisions of this chapter regarding the relationship of approved private schools and scholarship organizations apply only to approved private schools that choose to accept students with scholarships provided under this chapter.

NEW SECTION.  Sec. 6   Sections 1 through 5 of this act constitute a new chapter in Title 82 RCW.

NEW SECTION.  Sec. 7   If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.