[Congressional Bills 117th Congress]
[From the U.S. Government Publishing Office]
[H.R. 889 Introduced in House (IH)]
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117th CONGRESS
1st Session
H. R. 889
To amend the Internal Revenue Code of 1986 to establish tax credits to
encourage individual and corporate taxpayers to contribute to
scholarships for elementary and secondary students through eligible
scholarship-granting organizations, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
February 5, 2021
Mr. Owens (for himself, Mr. Allen, Mr. Aderholt, Mrs. Lesko, Mr.
LaMalfa, Mr. Lamborn, Mr. Gaetz, Mr. Posey, Mr. Webster of Florida, Mr.
Hice of Georgia, Mr. Baird, Mr. Guthrie, Mr. Moolenaar, Mr. Guest, Ms.
Foxx, Mr. Bishop of North Carolina, Mr. Budd, Mr. Chabot, Mr. Jordan,
Mr. Latta, Mr. Stivers, Mr. Perry, Mr. Keller, Mr. Joyce of
Pennsylvania, Mr. Wilson of South Carolina, Mr. Norman, Mr. Rice of
South Carolina, Mr. DesJarlais, Mr. Jackson, Mr. Weber of Texas, Mr.
Cline, and Mr. Gallagher) introduced the following 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 consideration 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 taxpayers to contribute to
scholarships for elementary and secondary students through eligible
scholarship-granting organizations, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Education Freedom Scholarships and
Opportunity Act''.
SEC. 2. PURPOSE.
The purpose of this Act is to encourage individual and corporate
taxpayers to contribute to scholarships for individual elementary and
secondary students through eligible scholarship-granting organizations,
as identified by States.
TITLE I--AMENDMENTS TO THE INTERNAL REVENUE CODE OF 1986
SEC. 101. REFERENCES TO THE INTERNAL REVENUE CODE OF 1986.
Except as otherwise expressly provided, whenever in this title an
amendment or repeal is expressed in terms of an amendment to, or repeal
of, a section or other provision, the reference shall be considered to
be made to a section or other provision of the Internal Revenue Code of
1986.
SEC. 102. TAX CREDITS FOR CONTRIBUTIONS TO ELIGIBLE SCHOLARSHIP-
GRANTING ORGANIZATIONS.
(a) Credit for Individuals.--
(1) In general.--Subpart A of part IV of subchapter A of
chapter 1 is amended by adding after section 25D the following
new section:
``SEC. 25E. CONTRIBUTIONS TO ELIGIBLE SCHOLARSHIP-GRANTING
ORGANIZATIONS.
``(a) Allowance of Credit.--In the case of an individual, there
shall be allowed as a credit against the tax imposed by this chapter
for the taxable year an amount equal to the sum of any qualified
contributions made by the taxpayer during the taxable year.
``(b) Amount of Credit.--The credit allowed under subsection (a)
for any taxable year shall not exceed 10 percent of the taxpayer's
adjusted gross income for the taxable year.
``(c) Definitions.--For purposes of this section--
``(1) Qualified contribution.--The term `qualified
contribution' means a contribution of cash to any eligible
scholarship-granting organization.
``(2) Qualified expense.--The term `qualified expense'
means any educational expense that is--
``(A) for an individual student's elementary or
secondary education, as recognized by the State, or
``(B) for the secondary education component of an
individual elementary or secondary student's career and
technical education, as defined by section 3(5) of the
Carl D. Perkins Career and Technical Education Act of
2006 (20 U.S.C. 2302(5)).
``(3) Secretary.--The term `Secretary' means the Secretary
of Education.
``(4) Eligible scholarship-granting organization.--The term
`eligible scholarship-granting organization' means--
``(A) an organization that--
``(i) is described in section 501(c)(3) and
exempt from taxation under section 501(a);
``(ii) provides qualifying scholarships to
individual elementary and secondary students
who--
``(I) reside in the State in which
the eligible scholarship-granting
organization is recognized; or
``(II) in the case of the Bureau of
Indian Education, are members of a
federally recognized tribe;
``(iii) a State reports to the Secretary as
an eligible scholarship-granting organization
under subsection (e)(5)(B);
``(iv) allocates at least 90 percent of
qualified contributions to qualifying
scholarships; and
``(v) provides scholarships to--
``(I) more than 1 eligible student;
``(II) more than 1 eligible family;
and
``(III) different eligible students
attending more than one education
provider; or
``(B) an organization that--
``(i) is described in section 501(c)(3) and
exempt from taxation under section 501(a); and
``(ii) pursuant to State law, was able, as
of the date of the enactment of the Education
Freedom Scholarships and Opportunity Act, to
receive contributions that are eligible for a
State tax credit if such contributions are used
by the organization to provide scholarships to
individual elementary and secondary students,
including scholarships for attending private
schools.
``(5) Qualifying scholarship.--The term `qualifying
scholarship' means a scholarship granted by an eligible
scholarship-granting organization to an individual elementary
or secondary student under this section or section 45T.
``(6) State.--The term `State' means each of the 50 States,
the District of Columbia, the Commonwealth of Puerto Rico, the
outlying areas (as defined in section 1121(c) of the Elementary
and Secondary Education Act of 1965), and the Department of the
Interior (acting through the Bureau of Indian Education).
``(d) Rules of Construction.--
``(1) In general.--A scholarship awarded to a student from
the proceeds of a qualified contribution under this section or
section 45T shall not be considered assistance to the school or
other educational provider that enrolls, or provides
educational services to, the student or the student's parents.
``(2) Not treated as income.--The amount of any such
scholarship shall not be treated as income of the child or his
or her parents for purposes of Federal tax laws or for
determining eligibility for any other Federal program.
``(3) Prohibition of control over nonpublic education
providers.--
``(A) Nothing in this Act shall be construed to
permit, allow, encourage, or authorize any Federal
control over any aspect of any private, religious, or
home education provider, whether or not a home
education provider is treated as a private school or
home school under State law. This Act shall not be
construed to exclude private, religious, or home
education providers from participation in programs or
services under this Act.
``(B) Nothing in this Act shall be construed to
permit, allow, encourage, or authorize an entity
submitting a list of eligible scholarship-granting
organizations on behalf of a State to mandate, direct,
or control any aspect of a private or home education
provider, regardless of whether or not a home education
provider is treated as a private school under State
law.
``(C) No participating State or entity acting on
behalf of a State shall exclude, discriminate against,
or otherwise disadvantage any education provider with
respect to programs or services under this Act based in
whole or in part on the provider's religious character
or affiliation, including religiously or mission-based
policies or practices.
``(4) Parental rights to use scholarships.--No
participating State or entity acting on behalf of a State shall
disfavor or discourage the use of such scholarships for the
purchase of elementary and secondary education services,
including those services provided by private or nonprofit
entities, such as faith-based providers.
``(5) State and local authority.--Nothing in this section
or section 45T shall be construed to modify a State or local
government's authority and responsibility to fund education.
``(e) Limitations.--
``(1) Tax liability.--No credit allowed under this section
or section 45T shall exceed the taxpayer's Federal income tax
liability for the taxable year.
``(2) Prohibitions.--A taxpayer is prohibited from selling
or transferring any portion of a tax credit allowed under this
section or section 45T.
``(3) Denial of double benefit.--The Secretary of the
Treasury shall prescribe such regulations or other guidance to
ensure that the sum of the tax benefits provided by Federal,
State, or local law for a qualified contribution receiving a
Federal tax credit in any taxable year shall not exceed the sum
of the qualified contributions made by the taxpayer for the
taxable year.
``(f) Carryover of Credit.--If a tax credit allowed under this
section or section 45T is not fully used within the applicable taxable
year because of insufficient tax liability on the part of the taxpayer,
the unused amount may be carried forward for a period not to exceed 5
years.
``(g) Election.--This section shall apply to a taxpayer for a
taxable year only if the taxpayer elects to have this section or
section 45T apply for such taxable year.
``(h) Alternative Minimum Tax.--For purposes of calculating the
alternative minimum tax under section 55, a taxpayer may use any credit
received for a qualified contribution under this section.''.
(2) Clerical amendment.--The table of sections for subpart
A of part IV of subchapter A of chapter 1 is amended by
inserting after the item relating to section 25D the following
new item:
``Sec. 25E. Contributions to eligible scholarship-granting
organizations.''.
(b) Credit for Corporations.--
(1) In general.--Subpart D of part IV of subchapter A of
chapter 1 is amended by adding at the end the following new
section:
``SEC. 45T. CONTRIBUTIONS TO ELIGIBLE SCHOLARSHIP-GRANTING
ORGANIZATIONS.
``(a) Allowance of Credit.--For purposes of section 38, in the case
of a domestic corporation, there shall be allowed as a credit against
the tax imposed by this chapter for the taxable year an amount equal to
the sum of any qualified contributions (as defined in section
25E(c)(1)) made by such corporation taxpayer during the taxable year.
``(b) Amount of Credit.--The credit allowed under subsection (a)
for any taxable year shall not exceed 5 percent of the taxable income
(as defined in section 170(b)(2)(D)) of the domestic corporation for
such taxable year.
``(c) Additional Provisions.--For purposes of this section, any
qualified contributions made by a domestic corporation shall be subject
to the provisions of section 25E, to the extent applicable.''.
(2) Credit part of general business credit.--Section 38(b)
is amended--
(A) by striking ``plus'' at the end of paragraph
(31),
(B) by striking the period at the end of paragraph
(32) and inserting ``, plus'', and
(C) by adding at the end the following new
paragraph:
``(33) the credit for qualified contributions determined
under section 45T(a).''.
(3) Clerical amendment.--The table of sections for subpart
D of part IV of subchapter A of chapter 1 is amended by adding
at the end the following new item:
``Sec. 45T. Contributions to eligible scholarship-granting
organizations.''.
TITLE II--EDUCATION FREEDOM SCHOLARSHIPS WEB PORTAL AND ADMINISTRATION
SEC. 201. EDUCATION FREEDOM SCHOLARSHIPS WEB PORTAL AND ADMINISTRATION.
(a) In General.--The Secretary of Education shall, in coordination
with the Secretary of the Treasury, establish, host, and maintain a web
portal that--
(1) lists all scholarship-granting organizations that are
eligible under section 25E or 45T of the Internal Revenue Code
of 1986;
(2) enables a taxpayer to make a qualifying contribution to
one or more eligible scholarship-granting organizations and to
immediately obtain both a pre-approval of a tax credit for that
contribution and a receipt for tax filings;
(3) provides information about the tax benefits of
Education Freedom Scholarships under the Internal Revenue Code
of 1986; and
(4) enables a State to submit and update information about
its programs and its eligible scholarship-granting
organizations for informational purposes only, including
information on--
(A) student eligibility;
(B) allowable educational expenses;
(C) the types of allowable education providers;
(D) the percentage of funds an organization may use
for program administration; and
(E) the percentage of total contributions the
organization awards in a calendar year.
(b) Nonportal Contributions.--A taxpayer may opt to make a
contribution directly to an eligible scholarship-granting organization,
instead of through the web portal described in subsection (a), provided
that the taxpayer, or the eligible scholarship-granting organization on
behalf of the taxpayer, applies for, and receives pre-approval for a
tax credit from the Secretary of Education in coordination with the
Secretary of the Treasury.
(c) National and State Caps on Credits.--
(1) National cap.--There is a cap of $5,000,000,000 on the
sum of the contributions that qualify for a credit under
section 25E and section 45T of the Internal Revenue Code of
1986 for each calendar year.
(2) Allocation of cap.--
(A) Initial allocations.--For each calendar year,
the Secretary shall--
(i) first reserve, for each State, an
amount equal to the sum of the qualifying
contributions made in the State in the previous
year; and
(ii) next, allocate the remaining amount
among the participating States by allocating to
each State the sum of--
(I) an amount that bears the same
relationship to 20 percent of such
remaining amount as the number of
individuals aged 5 through 17 in the
State, as determined by the Secretary
on the basis of the most recent
satisfactory data, bears to the number
of those individuals in all such
States, as so determined; and
(II) an amount that bears the same
relationship to 80 percent of such
remaining amount as the number of
individuals aged 5 through 17 from
families with incomes below the poverty
line in the State, as determined by the
Secretary, on the basis of the most
recent satisfactory data, bears to the
number of those individuals in all such
States, as so determined.
(B) Minimum allocation.--Notwithstanding
subparagraph (A), no State receiving an allotment under
this section may receive less than one-half of one
percent of the amount allotted for a fiscal year.
(C) Alternative allocation.--
(i) In general.--Not later than the end of
the fifth year of the program or one year after
the end of the first fiscal year for which the
total amount of credits claimed under section
25E and section 45T of the Internal Revenue
Code of 1986 is $2,500,000,000 or more,
whichever comes first, the Secretary shall, by
regulation, provide for an alternative
allocation method that shall take effect
beginning with the first fiscal year after the
regulation takes effect.
(ii) Alternative allocation method.--The
alternative allocation method shall be
expressed as a formula based on a combination
of the following data for each State, as
reported by the State to the Secretary:
(I) The relative percentage of
students in the State who receive a
elementary or secondary scholarship
through a State program that is
financed through State tax-credited
donations or appropriations and that
permits the elementary or secondary
scholarship to be used to attend a
private school.
(II) The total amount of all
elementary and secondary scholarships
awarded through a State program that is
financed through State tax-credited
donations or appropriations compared to
the total amount of current State and
local expenditures for free public
education in the State.
(iii) Allocation formula.--For any fiscal
year to which clause (i) applies, the Secretary
shall--
(I) first reserve, for each State,
an amount equal to the sum of the
qualifying contributions made in the
State in the previous year;
(II) next, allocate two-thirds of
the remaining amount of the national
cap for that year using the alternative
allocation method in clause (ii); and
(III) then, allocate one-third of
the remaining amount in accordance with
subparagraph (A)(ii).
(iv) Ineligibility.--For any fiscal year to
which clause (i) applies, a State that does not
provide the Secretary with information
described in clause (ii) is not eligible to
receive an allocation through the alternative
allocation method under clause (ii).
(3) Allowable partnerships.--A State may choose to
administer the allocation it receives under paragraph (2) in
partnership with 1 or more States, provided that the eligible
scholarship-granting organizations in each partner State serve
students who reside in all States in the partnership.
(4) Total allocation.--A State's allocation, for any fiscal
year, is the sum of the amount determined for it under
subparagraphs (A) and (B) of paragraph (2), except as provided
in paragraph (2)(C).
(5) Allocation and adjustments.--
(A) Initial allocation to states.--No later than
November 1 of the year preceding a year for which there
is a national cap on credits under paragraph (1)
(hereafter in this section, the ``applicable year''),
or as early as practicable with respect to the first
year, the Secretary shall announce the State
allocations under paragraph (2) for the applicable
year.
(B) List of eligible scholarship-granting
organizations.--No later than January 1 of each
applicable year, or as early as practicable with
respect to the first year, each State shall provide the
Secretary a list of eligible scholarship-granting
organizations described in section 25E(c)(4)(A) of the
Internal Revenue Code of 1986, including a
certification that the entity submitting the list on
behalf of the State has the authority to perform this
function. Neither this Act nor any other Federal law
shall be construed as limiting the entities that may
submit the list on behalf of a State.
(C) Reallocation of unclaimed credits.--The
Secretary shall reallocate a State's allocation to
other States, in accordance with paragraph (2), if the
State--
(i) chooses not to identify scholarship-
granting organizations under subparagraph (B)
in any applicable year; or
(ii) does not have an existing eligible
scholarship-granting organization (as defined
in section 25E(c)(4)(B) of the Internal Revenue
Code of 1986).
(D) Reallocation.--On or after April 1 of any
applicable year, the Secretary may reallocate, to 1 or
more other States that have eligible scholarship-
granting organizations in the States, without regard to
paragraph (2), the allocation of a State for which the
State's allocation has not been claimed.
(d) Definitions.--The definitions of terms in section 25E(c) of the
Internal Revenue Code of 1986 apply to those terms as used in this
title.
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