An Act To Create a Scholarship Granting Organization Tax Credit
Be it enacted by the People of the State of Maine as follows:
Sec. 1. 20-A MRSA §5815 is enacted to read:
A scholarship granting organization, as defined in Title 36, section 5219-DD, using voluntary cash contributions provided pursuant to Title 36, section 5219-DD shall report annually by August 1st to the Department of Administrative and Financial Services, Bureau of Revenue Services, in a form prescribed by the bureau:
1. Name. The name, address and contact name of the scholarship granting organization;
2. Number of contributions. The total number of contributions received during the previous calendar year;
3. Amount of contributions. The total dollar amount of contributions received during the previous calendar year;
4. Number of children. The total number of children awarded educational scholarships during the previous calendar year;
5. Amount and type of scholarships. The total dollar amount of educational scholarships awarded during the previous calendar year, the total number and dollar amount of educational scholarships awarded during the previous school year to students qualifying for the federal free and reduced price lunch program pursuant to 42 United States Code, Section 1758(b) and the percentage of first-time educational scholarship recipients who were enrolled in a public school during the previous school year; and
6. School information. For each school to which educational scholarships were awarded: A. The name and address of the school;
B. The number of educational scholarships awarded during the previous calendar year; and
C. The total dollar amount of educational scholarships awarded during the previous calendar year.
Sec. 2. 36 MRSA §5219-DD is enacted to read:
1. Definitions. As used in this section, unless the context otherwise indicates, the following terms have the following meanings. A. "Educational scholarship" means a grant to a student to pay for part or all of the tuition and fees at a qualified school, including transportation to a qualified school outside of the school district in which that student resides.
B.
"Eligible student" means a student who:
(1) Is a dependent in a household in which the annual household income the year immediately prior to receiving an educational scholarship is no more than 250% of the income guidelines developed annually used to qualify for a free and reduced price lunch under the free and reduced price lunch program pursuant to 42 United States Code, Section 1758(b);
(2) Is enrolled in a qualified school, was eligible to attend a public school the preceding semester or is starting school for the first time in this State; and
(3) Is a resident of this State while receiving an educational scholarship.
A student who meets the requirements of subparagraph (1) and who receives an educational scholarship remains an eligible student regardless of household income until the student is graduated from secondary school or attains 21 years of age, whichever occurs first. For purposes of this paragraph, "household income" has the same meaning as in section 6201, subsection 7.
C. "Low-income eligible student" means an eligible student who is a dependent in a household in which, based on the annual household income, the eligible student would qualify for a free or reduced price lunch under the federal free and reduced price lunch program pursuant to 42 United States Code, Section 1758(b).
D.
"Private school" means an academy, seminary, institute or other private corporation or body formed for educational purposes covering kindergarten to grade 12 or any portion thereof that:
(1) Is located in this State; and
(2) Satisfies the requirements prescribed by the laws of this State for private schools.
E. "Qualified school" means a private school or a public school as defined in Title 20-A, section 1, subsection 24.
F. "Scholarship granting organization" means a charitable organization in this State pursuant to Section 501(c)(3) of the Code that provides educational scholarships to eligible students.
2. Duties of scholarship granting organization. A scholarship granting organization, in addition to the requirements of Title 20-A, section 5815, shall: A. Allocate at least 90% of its annual revenue from contributions for educational scholarships and 100% of its income from interest or investments of that revenue for educational scholarships;
B. Provide educational scholarships to a percentage of low-income eligible students equal to or greater than the percentage of low-income eligible students in the county in which the scholarship granting organization expends the majority of its revenue on educational scholarships;
C. Ensure that at least 50% of first-time recipients of educational scholarships were not continuously enrolled in a private school during the year prior to receiving an educational scholarship for the first time;
D. Provide educational scholarships to eligible students without limiting availability of those scholarships to students of a specific qualified school;
E. Demonstrate its financial accountability to the bureau by submitting an annual financial information report for the scholarship granting organization that complies with uniform financial accounting standards established by the bureau. The annual financial report must be completed by a certified public accountant and certified by the assessor as free of material misstatements; and
F.
Demonstrate its financial viability, if the scholarship granting organization expects to receive donations of $50,000 or more during the usual school year, by filing with the bureau prior to the start of the usual school year:
(1) A surety bond payable to the State in an amount equal to the aggregate amount of contributions expected to be received during the usual school year; or
(2) Financial information that demonstrates the financial viability of the scholarship granting organization.
3. Amount. A taxpayer is allowed a credit in the amount of voluntary cash contributions made by the taxpayer during the taxable year to a scholarship granting organization up to a maximum amount of 50% of the tax otherwise due under this Part.
4. Conditions. The credit allowed under subsection 3 is subject to the conditions under this subsection. A. A married couple that files separate returns for a taxable year in which each spouse could have filed a joint return may each claim only 1/2 of the tax credit that would have been allowed for a joint return.
B. Any part of the voluntary cash contribution that is used to reduce the taxpayer's Maine tax liability except as provided in this section is ineligible for the credit provided pursuant to this section.
C.
The tax credit is not allowed for an educational scholarship provided to an eligible student who is attending a school that employs a paid staff or board member, or an immediate family member of that paid staff or board member, who is an immediate family member of a member of the scholarship granting organization. For purposes of this paragraph, "immediate family member" means a person's spouse, parent, grandparent, child, grandchild, sister, brother, stepparent, stepgrandparent, stepchild, stepgrandchild, stepsister, stepbrother, mother-in-law, father-in-law, brother-in-law, sister-in-law, son-in-law, daughter-in-law, guardian, former guardian or domestic partner.
D. The scholarship granting organization must meet the reporting requirements specified in Title 20-A, section 5815.
5. Limitation; carry-forward. The credit under this section may not reduce the tax otherwise due under this Part to less than 50% of that tax. A taxpayer entitled to a credit under this section for any taxable year may carry over and apply to the tax liability for any one or more of the next succeeding 3 taxable years the portion, as reduced from year to year, of any unused credits.
6. Review or audit by bureau; penalties. If the bureau has a reasonable belief that a scholarship granting organization has failed to comply with the requirements of subsection 2 or Title 20-A, section 5815, the bureau may conduct a financial review or an audit of that scholarship granting organization. If the bureau determines that the scholarship granting organization has intentionally and substantially failed to comply with the requirements of subsection 2 or Title 20-A, section 5815, the bureau may bar the scholarship granting organization from participating in the credit. Upon taking such action, the bureau shall notify affected students as soon as practicable.
7. Rulemaking. The bureau shall adopt routine technical rules pursuant to Title 5, chapter 375, subchapter 2-A to implement the provisions of this section, including: A. A method to monitor payments by scholarship granting organizations to qualified schools and eligible students; and
B. A standardized receipt for use by a scholarship granting organization to provide proof of contribution by a taxpayer for use by that taxpayer in claiming the credit under this section.
Sec. 3. Application. This Act applies to tax years beginning on or after January 1, 2009.
summary
This bill establishes a scholarship granting organization credit to provide a tax credit to individuals and corporations who donate to scholarship granting organizations. Scholarship granting organizations are defined as organizations that provide grants or scholarships to public or private school students in kindergarten to grade 12 who are from households that qualify for the federal free and reduced price lunch program.
The maximum amount of the credit is the amount of voluntary cash contributions made to a scholarship granting organization up to a maximum of 50% of the tax owed. Scholarship granting organizations that receive such contributions are subject to reporting requirements. The credit is not available for contributions made to a scholarship granting organization if a member of that organization is an immediate family member of a paid staff member or board member of the public or private school.