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Children’s Hope Act of 2013

H.R. 422 · 113th Congress · Jan 25, 2013 · Lineage

A BILL

To amend the Internal Revenue Code of 1986 to provide for a credit which is dependent on enactment of State qualified scholarship tax credits and which is allowed against the Federal income tax for charitable contributions to education investment organizations that provide assistance for elementary and secondary education.

1. Short title; findings

(a)
Short title— This Act may be cited as the “Children’s Hope Act of 2013”.
(b)
Findings— Congress finds the following:
(1)
On April 4, 2011, the United States Supreme Court ruled that opponents of Arizona’s private school scholarship tax credit program may not challenge the program on grounds that it violates the Establishment Clause of the First Amendment.
(2)
The Court ruled 5–4 in Garriott v. Winn and Arizona Christian School Tuition Organization v. Winn against a lawsuit by the Arizona chapter of the American Civil Liberties Union, which contested a tax credit program giving Arizona parents choices other than their neighborhood public schools.
(3)
The Children’s Hope Act of 2013 builds on the success of the Arizona private school scholarship tax credit program. Thus far, Arizona taxpayers have raised more than $430 million for scholarships since 1998. In 2011 alone, nearly 75,000 taxpayers awarded more than $47 million for 25,000 scholarships to Arizona children.

2. Tax credit for contributions to education investment organizations

(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 inserting after section 30D the following new section:

“30E. Contributions to education investment organizations

“(a) In General—There shall be allowed as a credit against the tax imposed by this chapter for the taxable year the aggregate amount of qualified contributions for the taxable year.

“(b) Limitation—The amount allowed as a credit under subsection (a) for a taxable year shall not exceed $100 ($200 in the case of a joint return).

“(c) Qualified contributions—For purposes of this section—

“(1) In general—The term qualified contribution means a charitable contribution (as defined by section 170(c)) to an education investment organization.

“(2) Education investment organization—The term education investment organization means any organization described in section 170(c)(2) if—

“(A) normally not less than 90 percent of the annual cash contributions to such organization are disbursed in the form of grants to students for qualified elementary and secondary education expenses, and

“(B) not less than ½ of such disbursements are to students who are eligible for free or reduced-cost lunches under the school lunch program established under the Richard B. Russell National School Lunch Act.

“(3) Qualified elementary and secondary education expenses—The term qualified elementary and secondary education expenses has the meaning given such term by section 530(b)(3), except that “child” shall be substituted for “beneficiary” and “a child” shall be substituted for “the designated beneficiary of the trust” in clauses (i) and (iii) of subparagraph (A).

“(4) State credit must be taken first

“(A) No credit shall be allowed to a taxpayer under this section for a taxable year unless, for the taxable year, the taxpayer is allowed on the taxpayer’s State tax return the minimum State qualified scholarship tax credit (as defined in section 3 of the Children’s Hope Act of 2013).

“(B) No credit shall be allowed to a taxpayer under this section for such taxable year for any contributions that were taken into account for purposes of such State qualified scholarship tax credit.

“(d) Special Rules

“(1) Denial of double benefit—No deduction shall be allowed under any provision of this chapter for any expense for which a credit is allowed under this section.

“(2) Time when contributions deemed made—For purposes of this section, a taxpayer shall be deemed to have made a contribution to an education investment organization on the last day of the preceding taxable year if the contribution is made on account of such taxable year and is made not later than the time prescribed by law for filing the return for such taxable year (not including extensions thereof).”

(b)
Scholarships from education investment organizations excluded from income— Section 74 of such Code (relating to prizes and awards) is amended by adding at the end the following new subsection:

“(d) Scholarships from education investment organizations—Gross income does not include amounts received as a scholarship from an education investment organization (as defined in section 30E(c)(2)) for qualified elementary and secondary education expenses (as defined in section 30E(c)(3)). Such scholarship shall not be taken into account for purposes of determining eligibility for any Federal program.”

(c)
Clerical amendment— The table of sections for such subpart B is amended by inserting after the item relating to section 30D the following new item:
(d)
Effective Date— The amendments made by this section shall apply to taxable years beginning after December 31, 2012.

3. Federal scholarship tax credit conditioned on State qualified scholarship tax credit

(a)
In general— For purposes of section 30E(c)(4) of the Internal Revenue Code of 1986 (as added by section 2 of this Act), a scholarship tax credit shall not be treated as a State qualified scholarship tax credit unless the requirements of subsection (b) are met.
(b)
Requirements relating to State qualified scholarship tax credit—
(1)
In general— For purposes of subsection (a), the requirements of this subsection are met only if—
(A)
the tax credit is for an amount of not less than $250 per taxpayer and is allowed against the State income tax (property tax for those States that don’t have income tax) for the amount of voluntary cash contributions made by the taxpayer during the taxable year to a school tuition organization described in paragraph (2),
(B)
the excess of such credit over tax liability may be carried forward for not more than five years,
(C)
the taxpayer does not require, as a condition of the contribution, that the contribution must benefit a specific child, and
(D)
such credit is not allowable for direct donations to private schools.
(2)
School tuition organization— For purposes of paragraph (1), a school tuition organization is described in this paragraph if such organization—
(A)
is an organization operating in the State and is described in section 501(c)(3), and is exempt from tax under section 501(a), of the Internal Revenue Code of 1986,
(B)
expends at least 90 percent of its annual cash contributions for educational scholarships or tuition grants to children to allow them to attend any qualified school chosen at the sole discretion of their parents, and
(C)
disburses at least 90 percent of its annual cash contributions within one year of their receipt.
(3)
Qualified school— For purposes of paragraph (2), the term qualified school means any elementary school or secondary school that is located in the State in which the taxpayer resides and does not discriminate on the basis of race, color, handicap, familial status, or national origin and that satisfies the requirements prescribed by State law for such schools as of December 31, 2010.
(4)
Educational scholarships or tuition grants— The term educational scholarship or a tuition grant means any scholarship or grant awarded for qualified elementary and secondary education expenses (as defined in section 30E(c)(3) of the Internal Revenue Code of 1986).
(c)
State— For purposes of this section, the term State means any of the several States.