To establish the Supportive Communities Helping Offer Opportunities for Learning Program and to allow an income tax credit for contributions to qualified scholarship granting organizations.

May 18, 2005

Mr. GREEN of Wisconsin (for himself, Mr. PETRI, Ms. HART, Mr. JINDAL, Mr. MILLER of Florida, Mr. HOSTETTLER, Mr. FEENEY, and Mr. SOUDER) introduced the following bill; which was referred to the Committee on Ways and Means, and in addition to the Committee on Education and the Workforce, 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

To establish the Supportive Communities Helping Offer Opportunities for Learning Program and to allow an income tax credit for contributions to qualified scholarship granting organizations.

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 `Supportive Communities Helping Offer Opportunities for Learning Act of 2005' or as the `SCHOOL Act of 2005'.

SEC. 2. ESTABLISHMENT OF SUPPORTIVE COMMUNITIES HELPING OFFER OPPORTUNITIES FOR LEARNING PROGRAM.

(a) In General- The Secretary of Education shall establish a program to be known as the `Supportive Communities Helping Offer Opportunities for Learning Program' or as the `SCHOOL Program'.

(b) Certification of Scholarship Granting Organizations-

(1) IN GENERAL- The Secretary of Education may certify an organization as a scholarship granting organization participating in the SCHOOL Program if such organization meets all of the following requirements:

(A) Notifies the Secretary of its intent to provide educational scholarships for eligible students attending qualified schools.

(B) Demonstrates to the Secretary that it is described in section 501(c)(3) of the Internal Revenue Code of 1986 and exempt from tax under section 501(a) of such Code.

(C) Provides a receipt to taxpayers for contributions made to the organization.

(D) Ensures that at least 90 percent of its annual receipts are spent on educational scholarships, and that all receipts from interest or investments is spent on educational scholarships.

(E) Spends each year a portion of its expenditures on scholarships for low-income eligible students equal to the percentage of low-income eligible students in the county where the organization expends the majority of its scholarships.

(F) Ensures that at least 30 percent of first time recipients of educational scholarships were not continuously enrolled in a private elementary or secondary school during the previous year.

(G) Distributes 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.

(H) Cooperates with the Secretary in conducting criminal background checks on all of its employees and board members and excluding from employment or governance any individual that might reasonably pose a risk to the appropriate use of contributed funds.

(I) Ensures that scholarships are portable during the school year and can be used at any qualified school that accepts the student according to a parent's wishes.

(J) Ensures that if a student moves to a new qualified school during a school year, the scholarship amount may be prorated.

(K) Demonstrates its financial accountability by--

(i) submitting a financial information report for the organization that complies with uniform financial accounting standards established by the Secretary and that has been conducted by a certified public accountant; and

(ii) having an auditor certify that the report is free of material misstatements.

(L) Demonstrates its financial viability, if the organization is to receive donations of $50,000 or more during any school year (as determined by the Secretary), by--

(i) filing with the Secretary prior to the start of the school year a surety bond payable to the Federal Government in an amount equal to the aggregate amount of contributions expected to be received during the school year; or

(ii) filing with the Secretary prior to the start of the school year financial information that demonstrates the financial viability of the organization.

(M) Ensures that qualified schools that accept its scholarship students will--

(i) comply with all health and safety laws or codes that apply to the school;

(ii) hold a valid occupancy permit if required by their municipality;

(iii) certify that they will not discriminate in admissions on the basis of race, color, national origin, religion or disability; and

(iv) provide academic accountability to parents of the students in the program by regularly reporting to the parent on the student's progress.

(N) Does not provide educational scholarships for students to attend any school with paid staff or board members, or relatives thereof, in common with the organization.

(O) Publicly reports to the Secretary by June 1 of each year the following information prepared by a certified public accountant for the previous calendar year--

(i) the name and address of the organization;

(ii) the total number and total dollar amount of contributions received during the previous calendar year;

(iii) the total number and total dollar amount of educational scholarships awarded during the previous calendar year;

(iv) the total number and total dollar amount of educational scholarships awarded during the previous year to low-income eligible students; and

(v) the percentage of first time recipients of educational scholarships who were continuously enrolled in a public elementary or secondary school during the previous year.

(2) DEFINITIONS- For purposes of this subsection--

(A) EDUCATIONAL SCHOLARSHIPS- The term `educational scholarships' means grants for eligible students to cover all or part of--

(i) in the case of a private or religious school which charges tuition or fees, the tuition and fees of such school,

(ii) in the case of a public school, the cost of transportation to such school, and

(iii) in the case of any other school or program, such expenses as the Secretary of Education may provide.

(B) QUALIFIED SCHOOL- The term `qualified school' means any public, private, religious, or other school or program which provides elementary or secondary education (as determined under State law).

(C) ELIGIBLE STUDENT- The term `eligible student' means any student who--

(i) has not--

(I) attained age 21, or

(II) been graduated from high school, and

(ii) as of the time that such student first receives assistance under the SCHOOL Program, is a member of a household whose total annual income during the year before receipt of such assistance does not exceed an amount equal to 2.5 times the highest amount of income which qualifies for a reduced price lunch under section 9(b)(1) of the Richard B. Russell National School Lunch Act.

(D) LOW-INCOME ELIGIBLE STUDENT- The term `low-income eligible student' means a student who meets the requirements of paragraph (3)(A) and who qualifies for a free or reduced price lunch under section 9(b)(1) of the Richard B. Russell National School Lunch Act.

(E) PARENT- The term `parent' includes a guardian, custodian, or other person with authority to act on behalf of the child.

(c) Duties of the Secretary of Education- The Secretary of Education shall--

(1) adopt such rules and procedures as are necessary or appropriate to implement the SCHOOL Program; and

(2) provide a standardized format for certified organizations to report the information described in subsection (b)(1)(O).

SEC. 3. EDUCATIONAL IMPROVEMENT CONTRIBUTIONS CREDIT.

(a) In General- Subpart B of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to other credits) is amended by adding at the end the following new section:

`SEC. 30B. EDUCATIONAL IMPROVEMENT CONTRIBUTIONS CREDIT.

`(a) In General- There shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the aggregate amount of the qualified contributions made by the taxpayer to qualified scholarship granting organizations during the taxable year.

`(b) Limitation-

`(1) INDIVIDUALS- In the case of an individual, the amount of the credit determined under this section for any taxable year shall not exceed $3,000 ($6,000 in the case of a joint return).

`(2) CORPORATIONS- In the case of a corporation, the amount of the credit determined under this section for any taxable year shall not exceed the lesser of--

`(A) 5 percent of the taxpayer's regular tax liability for the taxable year, or

`(B) $20,000.

`(c) Qualified Scholarship Granting Organization- For purposes of this section, the term `qualified scholarship granting organization' means any organization which--

`(1) is described in section 501(c)(3) and exempt from tax under section 501(a), and

`(2) has in effect a certification from the Secretary of Education that such organization is a scholarship granting organization participating in the SCHOOL Program (within the meaning of section 2 of the SCHOOL Act of 2005).

`(d) Qualified Contributions- For purposes of this section, the term `qualified contribution' means any cash contribution which the taxpayer elects (at such time and in such form and manner as the Secretary may prescribe) to treat as a qualified contribution.

`(e) Coordination With Other Credits; Carryover of Unused Credit-

`(1) IN GENERAL- If the credit allowable under subsection (a) for a taxable year exceeds the limitation imposed by paragraph (2) for such taxable year, such excess shall be carried over to the succeeding taxable year and added to the credit allowable under subsection (a) for such succeeding taxable year. No credit may be carried forward under this subsection to any taxable year following the third taxable year after the taxable year in which the credit arose. For purposes of the preceding sentence, credits shall be treated as used on a first-in first-out basis.

`(2) APPLICATION WITH OTHER CREDITS- The credit allowed by subsection (a) for any taxable year shall not exceed the excess (if any) of--

`(A) the regular tax liability for the taxable year reduced by the sum of the credits allowed by this part (other than this section), over

`(B) the tentative minimum tax for the taxable year.

`(f) Special Rules-

`(1) SUBSTANTIATION- No credit shall be allowed under subsection (a) with respect to any contribution to a qualified scholarship granting organization unless the taxpayer attaches to the taxpayer's return for the taxable year a receipt from such organization which meets such requirements as the Secretary may establish.

`(2) CONTROLLED GROUPS- Rules similar to the rules of paragraphs (1) and (2) of section 41(f) shall apply for purposes of this section.

`(3) DENIAL OF DOUBLE BENEFIT- No deduction or credit shall be allowed under this subtitle for any contribution which is taken into account under this section.

`(g) Regulations- The Secretary may prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section.'.

(b) Coordination With Limitations on Charitable Deductions- Subsection (c) of section 170 of such Code is amended by adding at the end the following: `Such term shall not include any contribution taken into account under section 30B.'

(c) Clerical Amendment- The table of sections for subpart B of part IV of subchapter A of chapter 1 of such Code is amended by adding at the end the following new item:

`Sec. 30B. Educational improvement contributions credit.'.

(d) Effective Date- The amendments made by this section shall apply to contributions made during taxable years beginning after the date of the enactment of this Act.

END