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78R4561 CBH-F
By: Paxton H.B. No. 2563
A BILL TO BE ENTITLED
AN ACT
relating to a franchise or insurance premium tax credit for
contributions made to certain nonprofit educational assistance
organizations.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Chapter 171, Tax Code, is amended by adding
Subchapter V to read as follows:
SUBCHAPTER V. TAX CREDIT FOR CONTRIBUTIONS TO CERTAIN NONPROFIT
EDUCATIONAL ASSISTANCE ORGANIZATIONS
Sec. 171.971. DEFINITION. In this subchapter, "educational
assistance organization" means an organization that:
(1) uses its annual revenue to award scholarships to
and pay educational expenses of public or nonpublic elementary or
secondary schools located in this state at which a student may
fulfill this state's compulsory attendance requirements and that
are not in violation of the federal Civil Rights Act of 1964 (42
U.S.C. Section 2000a et seq.), as amended;
(2) is exempt from federal tax under Section 501(a),
Internal Revenue Code of 1986, as amended, by being listed as an
exempt organization under Section 501(c)(3);
(3) is not in violation of the federal Civil Rights Act
of 1964 (42 U.S.C. Section 2000a et seq.), as amended; and
(4) does not award scholarships only to students of a
particular school or pay educational expenses incurred only at a
particular school.
Sec. 171.972. ELIGIBILITY. A corporation is eligible for a
credit against the tax imposed under this chapter in the amount and
under the conditions and limitations provided by this subchapter.
Sec. 171.973. CREDIT FOR CONTRIBUTIONS. (a) A corporation
may claim a credit under this subchapter only for money contributed
to an educational assistance organization that meets the
requirements prescribed by this section and uses the money in the
manner prescribed by this section.
(b) An educational assistance organization must:
(1) be located in this state;
(2) allocate at least 90 percent of its annual
revenue, and all interest accruing on contributions for which a
corporation may receive a credit under this section, only for
student scholarships to pay for tuition, transportation,
textbooks, and other supplies and for other related educational
assistance;
(3) allocate the remainder of its annual revenue only
for marketing and administrative expenses;
(4) allocate each state fiscal year at least 50
percent of the contributions for which a corporation may receive a
credit under this subchapter to provide scholarships for students,
including kindergarten students, who are not counted toward a
public school's average daily attendance during the year in which
the student receives the scholarship and who:
(A) were enrolled in a public school during the
preceding school year and were eligible to participate in the
national free or reduced-price lunch program established under 42
U.S.C. Section 1751 et seq., as amended; or
(B) received a scholarship from the organization
during a previous school year;
(5) demonstrate a pattern of giving priority in
awarding scholarships to students who demonstrate the greatest
need; and
(6) give the corporation a receipt for money
contributed to the organization that includes the name of the
organization, the name of the corporation, the amount of the
contribution, and any other information required by the
comptroller.
(c) An educational assistance organization may not provide
to a student who does not have a disability a scholarship in an
annual amount that exceeds $3,700, plus or minus an amount to be
determined annually by the comptroller to reflect changes in the
consumer price index published by the federal Bureau of Labor
Statistics.
(d) Except as provided by Subsection (e), an educational
assistance organization may not provide to a student who has a
disability a scholarship in an annual amount that exceeds the
amount computed by dividing the amount of state funding
appropriated in the General Appropriations Act for purposes of
Chapter 42, Education Code, for the appropriate fiscal year by the
total estimated average daily attendance for that fiscal year, as
determined by the commissioner of education.
(e) An educational assistance organization may provide
scholarships to students in an annual amount that exceeds the
amount computed under Subsection (d) only if the increased amount
of the scholarships is offset by a reduction in the annual amount of
the scholarships provided to students under Subsection (f).
(f) After allocating contributions under Subsection (b)(4),
the educational assistance organization may allocate the remainder
of the contributions to:
(1) provide scholarships to students who are not
described by Subsection (b)(4) and who are eligible to participate
in the national free or reduced-price lunch program established
under 42 U.S.C. Section 1751 et seq., as amended;
(2) directly assist a student who attends a public
school in defraying the costs of transportation to and from the
school to the extent the transportation is not paid by a school
district or this state;
(3) pay for after-school programs; and
(4) marketing and administrative expenses, but only to
the extent allowed by Subsection (b).
(g) A corporation may not claim a credit under this
subchapter for a contribution made to an educational assistance
organization if:
(1) the corporation requires that the contribution
benefit a particular person; or
(2) the contribution is used to pay tuition, activity
fees, or other educational expenses of a corporation employee or of
a spouse or dependent of a corporation employee.
Sec. 171.974. AMOUNTS; LIMITATION ON TOTAL CREDITS. (a)
Subject to Subsection (b), the amount of a corporation's credit is
equal to 50 percent of the qualifying contributions made by the
corporation.
(b) The total amount of valid credits that may be claimed by
all corporations each year may not exceed $10 million. If the total
number of valid claims for credits in a year exceeds $10 million,
the comptroller shall determine the amount of a corporation's
credit by multiplying the full amount claimed by that corporation
by a fraction:
(1) the numerator of which is $10 million; and
(2) the denominator of which is the total amount of
valid credits claimed.
Sec. 171.975. APPLICATION FOR CREDIT. (a) A corporation
must apply for a credit under this subchapter on or with the tax
report for the period for which the credit is claimed.
(b) The comptroller shall adopt a form for the application
for the credit. A corporation must use this form in applying for
the credit.
Sec. 171.976. ASSIGNMENT PROHIBITED. A corporation may not
convey, assign, or transfer the credit allowed under this
subchapter to another entity unless all of the assets of the
corporation are conveyed, assigned, or transferred in the same
transaction.
SECTION 2. Chapter 4, Insurance Code, is amended by adding
Article 4.11D to read as follows:
Art. 4.11D. CREDIT AGAINST PREMIUM TAXES FOR CERTAIN
CONTRIBUTIONS
Sec. 1. DEFINITIONS. In this article:
(1) "Educational assistance organization" has the
meaning assigned by Section 171.971, Tax Code.
(2) "Insurance carrier" has the meaning described by
Section 1, Article 4.10, and Section 1, Article 4.11. The term
includes a "reciprocal exchange" as that term is defined by Section
1, Article 4.11B.
Sec. 2. CREDIT. (a) An insurance carrier is eligible for a
credit against the taxes imposed by Article 4.10, 4.11, or 4.11B, as
appropriate, in the amount and under the conditions and limitations
provided by this article.
(b) The amount of the credit is equal to 50 percent of
contributions made to an educational assistance organization if the
contributions and the organizations that received the
contributions meet the requirements prescribed by Section 171.973,
Tax Code.
Sec. 3. LIMITATION. (a) The total credit claimed under
this article for a taxable year may not exceed the lesser of the
amount determined under Subsection (b) or the amount of tax due for
the taxable year after any other applicable credits.
(b) The total amount of valid credits that may be claimed by
all insurance carriers each year may not exceed $10 million. If the
total number of valid claims for credits in a year exceeds $10
million, the comptroller shall determine the amount of an insurance
carrier's credit by multiplying the full amount claimed by the
carrier by a fraction:
(1) the numerator of which is $10 million; and
(2) the denominator of which is the total amount of
valid credits claimed.
Sec. 4. APPLICATION FOR CREDIT. (a) An insurance carrier
must apply for a credit under this article on or with the tax return
for the taxable year for which the credit is claimed.
(b) The comptroller shall adopt a form for the application
for the credit. An insurance carrier must use this form in applying
for the credit.
Sec. 5. ASSIGNMENT PROHIBITED. An insurance carrier may not
convey, assign, or transfer the credit allowed under this article
to another entity unless all of the assets of the carrier are
conveyed, assigned, or transferred in the same transaction.
SECTION 3. (a) This Act takes effect immediately if it
receives a vote of two-thirds of all the members elected to each
house, as provided by Section 39, Article III, Texas Constitution.
If this Act does not receive the vote necessary for immediate
effect, this Act takes effect September 1, 2003.
(b) A corporation or insurance carrier may claim a credit
under Subchapter V, Chapter 171, Tax Code, or Article 4.11D,
Insurance Code, as added by this Act, only for an expenditure made
on or after the effective date of this Act.