83R593 BEF-D

By: Paxton S.B. No. 1015

A BILL TO BE ENTITLED

AN ACT

relating to a franchise tax or insurance premium tax credit for contributions made to certain certified 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 L to read as follows:

SUBCHAPTER L. TAX CREDIT FOR CONTRIBUTIONS TO CERTAIN NONPROFIT

EDUCATIONAL ASSISTANCE ORGANIZATIONS

Sec. 171.601. DEFINITIONS. In this subchapter:

(1) "Educational expenses" means expenses for student tuition, fees, transportation costs, textbooks, school supplies, and tutoring related to:

(A) a course at a public school or charter school that is part of the required curriculum under Section 28.002, Education Code, or a course that is the equivalent at a qualified nonpublic school;

(B) a high school equivalency certificate; or

(C) an apprenticeship training program under Chapter 133, Education Code.

(2) "Eligible student" means a student who is a resident of this state and has not been issued a high school diploma or a high school equivalency certificate. For purposes of this subchapter, a student who attends a juvenile justice alternative education program under Section 37.011, Education Code, is not an eligible student.

(3) "Qualified nonpublic school" means a nonpublic primary or secondary school located in this state that is accredited or actively in the process of accreditation by a state, regional, or national organization that is recognized by the Texas Private School Accreditation Commission.

Sec. 171.602. ELIGIBILITY AND AMOUNT OF CREDIT. (a) Except as otherwise provided by this subchapter, a taxable entity that makes a contribution of $500 or more to a certified nonprofit educational assistance organization may claim a credit against the tax imposed under this chapter in the amount and under the conditions and limitations provided by this subchapter.

(b) Subject to Section 171.607, the amount of the credit that may be claimed on a report is equal to the lesser of 100 percent of total contributions made to a certified nonprofit educational assistance organization during the calendar year that contains the end of the accounting period on which the report is based or 75 percent of the taxable entity's tax liability under this chapter.

(c) If a taxable entity is eligible for a credit that exceeds the limitation prescribed by Subsection (b) or Section 171.607, the taxable entity may carry the unused credit forward for not more than two consecutive reports.

(d) A taxable entity may not claim a credit under this subchapter for a contribution made to a certified nonprofit educational assistance organization if the taxable entity requires that the contribution benefit a particular student or school.

Sec. 171.603. ELIGIBILITY REQUIREMENTS FOR CERTIFICATION OF NONPROFIT EDUCATIONAL ASSISTANCE ORGANIZATION. (a) An organization may apply to the comptroller for certification as a certified nonprofit educational assistance organization. To qualify for certification, the organization:

(1) must be exempt from federal tax under Section 501(a) of the Internal Revenue Code of 1986 by being listed as an exempt organization in Section 501(c)(3) of that code and meeting all other applicable requirements for that exemption;

(2) must be in good standing with the state;

(3) must agree to allocate at least 90 percent of its annual revenue from contributions received from taxable entities to provide scholarships to eligible students for educational expenses;

(4) must agree not to award 100 percent of the scholarships described by Subdivision (3) to students who attend a particular school or to pay educational expenses incurred only at a particular school;

(5) must agree not to award or decline to award a scholarship described by Subdivision (3) on the basis of a student's race, color, ethnicity, gender, or national origin;

(6) must agree to deposit contributions from taxable entities that are allocated for scholarships described by Subdivision (3) in a bank account separate from any other account the organization may have;

(7) must agree not to award a scholarship described by Subdivision (3) in an amount that exceeds the amount prescribed by Section 171.606;

(8) must agree not to award a scholarship described by Subdivision (3) based solely on a student's athletic ability or potential; and

(9) must not be owned or operated by a person who has during the previous seven state fiscal years filed for bankruptcy.

(b) For purposes of Subsection (a)(9), a person is considered to operate an organization if the person has the ability to directly influence or direct the management, expenditures, or policies of the organization.

(c) The comptroller may certify an organization as a certified nonprofit educational assistance organization only if the organization qualifies under Subsection (a) and also agrees to:

(1) notify the comptroller of the organization's intent to provide scholarships described by Subsection (a)(3);

(2) submit an annual information report as provided by Section 171.605;

(3) cooperate with the comptroller when conducting a criminal background check on the owner or operator of the organization;

(4) comply with the other requirements of this subchapter, including Sections 171.604(d) and (f) and 171.606; and

(5) pay the comptroller the amount of any revenue that is not awarded as required by Section 171.604.

Sec. 171.604. AWARD OF SCHOLARSHIPS. (a) Except as provided by Subsection (b), a certified nonprofit educational assistance organization shall award all revenue from a contribution from a taxable entity allocated to provide scholarships to eligible students for educational expenses not later than the first anniversary of the date the contribution was made.

(b) A certified nonprofit educational assistance organization may carry forward not more than 10 percent of the revenue described by Subsection (a) for an additional year, but shall award that revenue not later than the second anniversary of the date the contribution was made.

(c) If a certified nonprofit educational assistance organization does not award revenue described by Subsection (a) as required by Subsections (a) and (b), the organization shall pay the comptroller an amount equal to the amount of revenue not awarded as required by those subsections not later than the 30th day after the last day the revenue was required to be awarded.

(d) A certified nonprofit educational assistance organization must award at least 25 percent of its annual revenue used to provide scholarships to students described by Subsection (e), unless the pool of eligible students who apply for a scholarship is insufficient to meet the requirement.

(e) A scholarship provided to satisfy the requirement of Subsection (d) must be provided to a student who:

(1) is educationally disadvantaged, as defined by Section 5.001, Education Code; and

(2) attends school in a public school district or at a campus that was assigned a performance rating that reflects unacceptable performance in the most recent performance ratings released under Section 39.054, Education Code.

(f) A certified nonprofit educational assistance organization may not award a scholarship to a student to attend a qualified nonpublic school unless the organization first obtains the written consent of the student's parent or legal guardian.

Sec. 171.605. ANNUAL REPORT. (a) Not later than June 30 of each year, each certified nonprofit educational assistance organization shall report to the Texas Education Agency:

(1) the name and address of the organization;

(2) the total number and dollar amount of contributions from taxable entities received by the organization under this subchapter and Chapter 230, Insurance Code, since the previous report was submitted;

(3) the total number and dollar amount of scholarships awarded by the organization under this subchapter and Chapter 230, Insurance Code, since the previous report was submitted;

(4) the percentage of the organization's revenue from contributions used to award scholarships under this subchapter and Chapter 230, Insurance Code, since the previous report was submitted;

(5) the name and address of each school attended by an eligible student who was awarded a scholarship by the organization under this subchapter and Chapter 230, Insurance Code, since the previous report was submitted;

(6) the total number and dollar amount of scholarships awarded to eligible students by the organization under this subchapter and Chapter 230, Insurance Code, per school since the previous report was submitted; and

(7) any other information the Texas Education Agency or the comptroller requires.

(b) The report must:

(1) comply with generally accepted accounting principles; and

(2) be certified as free of material misstatements by a certified public accountant.

(c) The Texas Education Agency shall post on its website for at least three years each report submitted under this section.

(d) The Texas Education Agency, after consulting with the comptroller, may adopt rules and forms to implement this section.

Sec. 171.606. SCHOLARSHIP LIMIT AMOUNT. (a) Subject to Subsection (b), the maximum scholarship amount a certified nonprofit educational assistance organization may award under this subchapter may not exceed 75 percent of the amount of funding equal to the statewide average amount to which a school district would be entitled under the Foundation School Program under Chapter 42, Education Code, for a student in average daily attendance.

(b) A certified nonprofit educational assistance organization may award not more than $500 per school year to an eligible student who elects to use the scholarship to pay only the cost of:

(1) transportation to attend a public school or charter school located outside the school district in which the student resides; or

(2) textbooks, school supplies, or tutoring related to a course at a public school or charter school.

Sec. 171.607. TOTAL AMOUNT OF CREDITS THAT MAY BE CLAIMED. (a) For contributions made during 2014, the total amount of tax credits that may be claimed by all taxable entities under this subchapter may not exceed $100 million. For contributions made during 2015 and subsequent years, the total amount of tax credits that may be claimed by all taxable entities under this subchapter is equal to:

(1) 100 percent of the maximum amount of tax credits that could have been claimed by all taxable entities under this subchapter for contributions made during the preceding year if the total amount of tax credits actually claimed by taxable entities under this subchapter for contributions made during the preceding year was less than 90 percent of the maximum amount that could have been claimed; and

(2) 110 percent of the maximum amount of tax credits that could have been claimed by all taxable entities under this subchapter for contributions made during the preceding year if the total amount of tax credits actually claimed by taxable entities under this subchapter for contributions made during the preceding year was equal to or greater than 90 percent of the maximum amount that could have been claimed.

(b) The comptroller shall publish on the comptroller's website the total amount of tax credits available under this subchapter for each year.

(c) The comptroller by rule shall prescribe procedures by which the comptroller may allocate credits under this subchapter. The procedures must provide that credits are allocated on a "first-come, first-served" basis, based on the date the contribution was initially made.

Sec. 171.608. IDENTIFICATION OF CERTIFIED NONPROFIT EDUCATIONAL ASSISTANCE ORGANIZATION. The comptroller shall establish a procedure by which a taxable entity can:

(1) determine whether an organization is a certified nonprofit educational assistance organization; and

(2) claim a credit under this subchapter.

Sec. 171.609. NATURE OF FUNDING. The funding authorized by this subchapter or Chapter 230, Insurance Code, is private, voluntary, nongovernmental funding. The provision of assistance by a certified nonprofit educational assistance organization is not an appropriation of public money or the provision of public assistance to any school.

Sec. 171.610. APPLICATION FOR CREDIT. A taxable entity must apply for a credit under this subchapter on or with the tax report for the period for which the credit is claimed.

Sec. 171.611. RULES; PROCEDURES; FORMS. The comptroller shall adopt rules, procedures, and forms to administer this subchapter.

Sec. 171.612. ASSIGNMENT PROHIBITED; EXCEPTION. A taxable entity may not convey, assign, or transfer the credit allowed under this subchapter to another taxable entity unless all assets of the taxable entity are conveyed, assigned, or transferred in the same transaction.

Sec. 171.613. REVOCATION. (a) The comptroller shall revoke a certification provided under Section 171.603 if the comptroller finds that a certified nonprofit educational assistance organization:

(1) is no longer eligible under Section 171.603(a);

(2) intentionally and substantially violated an agreement made under Section 171.603; or

(3) intentionally and substantially violates this subchapter.

(b) Revocation of a certification under this section does not affect the validity of a tax credit relating to a contribution made before the date of revocation.

SECTION 2. Subtitle B, Title 3, Insurance Code, is amended by adding Chapter 230 to read as follows:

CHAPTER 230. TAX CREDIT AGAINST PREMIUM TAXES FOR CERTAIN

CONTRIBUTIONS

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 230.001. DEFINITIONS. In this chapter:

(1) "Certified nonprofit educational assistance organization" means an organization certified by the comptroller under Section 171.603, Tax Code.

(2) "State premium tax liability" means any liability incurred by an entity under Chapters 221 through 224.

Sec. 230.002. AWARD OF SCHOLARSHIPS. A certified nonprofit educational assistance organization shall comply with any requirement prescribed by Subchapter L, Chapter 171, Tax Code, in relation to awarding scholarships under that subchapter.

[Sections 230.003-230.050 reserved for expansion]

SUBCHAPTER B. CREDIT

Sec. 230.051. ELIGIBILITY AND AMOUNT OF CREDIT. (a) An entity that makes a contribution of $500 or more to a certified nonprofit educational assistance organization may claim a credit against the entity's state premium tax liability in the amount and under the conditions and limitations provided by this chapter.

(b) Subject to Section 230.052, the amount of the credit that may be claimed on a report is equal to the lesser of 100 percent of total contributions made to a certified nonprofit educational assistance organization during the year or 75 percent of the entity's state premium tax liability if the contribution and the organization that received the contribution meet the requirements prescribed by Subchapter L, Chapter 171, Tax Code.

(c) If an entity is eligible for a credit that exceeds the limitation prescribed by Subsection (b) or Section 230.052, the entity may carry the unused credit forward for not more than two years following the year in which the contribution was made.

(d) An entity may not claim a credit under this chapter for a contribution made to a certified nonprofit educational assistance organization if the entity requires that the contribution benefit a particular student or school.

Sec. 230.052. TOTAL AMOUNT OF CREDITS THAT MAY BE CLAIMED. (a) For contributions made during 2014, the total amount of tax credits that may be claimed by all entities under this chapter may not exceed $25 million. For contributions made during 2015 and subsequent years, the total amount of tax credits that may be claimed by all entities under this chapter is equal to:

(1) 100 percent of the maximum amount of tax credits that could have been claimed by all entities under this chapter for contributions made during the preceding year if the total amount of tax credits actually claimed by entities under this chapter for contributions made during the preceding year was less than 90 percent of the maximum amount that could have been claimed; and

(2) 110 percent of the maximum amount of tax credits that could have been claimed by all entities under this chapter for contributions made during the preceding year if the total amount of tax credits actually claimed by entities under this chapter for contributions made during the preceding year was equal to or greater than 90 percent of the maximum amount that could have been claimed.

(b) The comptroller shall publish on the comptroller's website the total amount of tax credits available under this chapter for each year.

(c) The comptroller by rule shall prescribe procedures by which the comptroller may allocate credits under this chapter. The procedures must provide that credits are allocated on a "first-come, first-served" basis, based on the date the contribution was initially made.

Sec. 230.053. APPLICATION FOR CREDIT. An entity must apply for a credit under this chapter on or with a tax report for which the credit is claimed.

Sec. 230.054. RULES; PROCEDURES; FORMS. The comptroller shall adopt rules, procedures, and forms to administer this chapter.

Sec. 230.055. ASSIGNMENT PROHIBITED; EXCEPTION. An entity may not convey, assign, or transfer the credit allowed under this chapter to another entity unless all assets of the entity are conveyed, assigned, or transferred in the same transaction.

SECTION 3. A taxable entity may claim a credit under Subchapter L, Chapter 171, Tax Code, as added by this Act, or Chapter 230, Insurance Code, as added by this Act, only for a contribution made on or after January 1, 2014, and only in relation to taxes due on or after January 1, 2014.

SECTION 4. (a) Except as provided by Subsection (b) of this section, this Act takes effect January 1, 2014.

(b) Section 171.611, Tax Code, as added by this Act, and Section 230.054, Insurance Code, as added by this Act, take effect September 1, 2013.