[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[S. 4284 Introduced in Senate (IS)]
<DOC>
116th CONGRESS
2d Session
S. 4284
To provide for emergency education freedom grants, to amend the
Internal Revenue Code of 1986 to establish tax credits to encourage
individual and corporate taxpayers to contribute to scholarships for
students through eligible scholarship-granting organizations, and for
other purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
July 22, 2020
Mr. Scott of South Carolina (for himself, Mr. Alexander, and Mr. Cruz)
introduced the following bill; which was read twice and referred to the
Committee on Finance
_______________________________________________________________________
A BILL
To provide for emergency education freedom grants, to amend the
Internal Revenue Code of 1986 to establish tax credits to encourage
individual and corporate taxpayers to contribute to scholarships for
students through eligible scholarship-granting organizations, and for
other purposes.
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 ``School Choice Now Act''.
TITLE I--EMERGENCY EDUCATION FREEDOM GRANTS
SEC. 101. EMERGENCY EDUCATION FREEDOM GRANTS.
(a) Definitions.--In this title:
(1) Definitions from the internal revenue code of 1986.--
The definitions in section 25E(c) of the Internal Revenue Code
of 1986, as added by section 201, shall apply to this section,
except as otherwise provided.
(2) Emergency education freedom grant funds.--The term
``emergency education freedom grant funds'' means the amount of
funds available under subsection (b)(1) for this section that
are not reserved under subsection (c)(1).
(3) Secretary.--The term ``Secretary'' means the Secretary
of Education.
(4) State.--The term ``State'' means each of the 50 States,
the District of Columbia, and the Commonwealth of Puerto Rico.
(b) Grants.--
(1) Program authorized.--From any amounts appropriated for
section 18003 of division B of the CARES Act on or after the
date of enactment of this Act, the Secretary shall,
notwithstanding any other provision of title XVIII of division
B of the CARES Act (Public Law 116-136), use 10 percent of such
amounts to carry out subsection (c) and award emergency
education freedom grants to States with approved applications,
in order to enable the States to award subgrants to eligible
scholarship-granting organizations under subsection (d).
(2) Timing.--The Secretary shall make the allotments
required under this subsection by not later than 30 days after
the date of enactment of this Act.
(c) Reservation and Allotments.--
(1) In general.--From the amounts made available under
subsection (b)(1), the Secretary shall--
(A) reserve--
(i) one-half of 1 percent for allotments
for the United States Virgin Islands, Guam,
American Samoa, and the Commonwealth of the
Northern Mariana Islands, to be distributed
among those outlying areas on the basis of
their relative need, as determined by the
Secretary, in accordance with the purpose of
this title; and
(ii) one-half of 1 percent of such amounts
for the Secretary of the Interior, acting
through the Bureau of Indian Education, to be
used to provide subgrants described in
subsection (d) to eligible scholarship-granting
organizations that serve students attending
elementary schools or secondary schools
operated or funded by the Bureau of Indian
Education; and
(B) subject to paragraph (2), allot each State that
submits an approved application under this section the
sum of--
(i) the amount that bears the same relation
to 20 percent of the emergency education
freedom grant funds as the number of
individuals aged 5 through 17 in the State, as
determined by the Secretary on the basis of the
most recent satisfactory data, bears to the
number of those individuals, as so determined,
in all such States that submitted approved
applications; and
(ii) an amount that bears the same
relationship to 80 percent of the emergency
education freedom grant funds as the number of
individuals aged 5 through 17 from families
with incomes below the poverty line in the
State, as determined by the Secretary on the
basis of the most recent satisfactory data,
bears to the number of those individuals, as so
determined, in all such States that submitted
approved applications.
(2) Minimum allotment.--No State shall receive an allotment
under this subsection for a fiscal year that is less than \1/2\
of 1 percent of the amount of emergency education freedom grant
funds available for such fiscal year.
(d) Subgrants to Eligible Scholarship-Granting Organizations.--
(1) In general.--A State that receives an allotment under
this section shall use the allotment to award subgrants, on a
basis determined appropriate by the State, to eligible
scholarship-granting organizations in the State.
(2) Initial timing.--
(A) States with existing tax credit scholarship
program.--By not later than 30 days after receiving an
allotment under subsection (c)(1)(B), a State with an
existing, as of the date of application for an
allotment under this section, tax credit scholarship
program shall use not less than 50 percent of the
allotment to award subgrants to eligible scholarship-
granting organizations in the State.
(B) States without tax credit scholarship
programs.--By not later than 60 days after receiving an
allotment under subsection (c)(1)(B), a State without a
tax credit scholarship program shall use not less than
50 percent of the allotment to award subgrants to
eligible scholarship-granting organizations in the
State.
(3) Uses of funds.--An eligible scholarship-granting
organization that receives a subgrant under this subsection--
(A) may reserve not more than 5 percent of the
subgrant funds for public outreach, student and family
support activities, and administrative expenses related
to the subgrant; and
(B) shall use not less than 95 percent of the
subgrant funds to provide qualifying scholarships for
qualified expenses only to individual elementary school
and secondary school students who reside in the State
in which the eligible scholarship-granting organization
is recognized.
(e) Reallocation.--A State shall return to the Secretary any
amounts of the allotment received under this section that the State
does not award as subgrants under subsection (d) by March 30, 2021, and
the Secretary shall reallocate such funds to the remaining eligible
States in accordance with subsection (c)(1)(B).
(f) Rules of Construction.--The rules of construction under section
25E(d) of the Internal Revenue Code of 1986, as added by section 201,
shall apply to this section in the same manner as such rules apply to
section 25E of such Code, as so added.
TITLE II--TAX CREDITS FOR CONTRIBUTIONS TO ELIGIBLE SCHOLARSHIP-
GRANTING ORGANIZATIONS
SEC. 201. TAX CREDITS FOR CONTRIBUTIONS TO ELIGIBLE SCHOLARSHIP-
GRANTING ORGANIZATIONS.
(a) Credit for Individuals.--Subpart A of part IV of subchapter A
of chapter 1 of the Internal Revenue Code of 1986 is amended by adding
after section 25D the following new section:
``SEC. 25E. CONTRIBUTIONS TO ELIGIBLE SCHOLARSHIP-GRANTING
ORGANIZATIONS.
``(a) Allowance of Credit.--Subject to section 202(c) of the School
Choice Now Act, in the case of an individual, there shall be allowed as
a credit against the tax imposed by this chapter for the taxable year
an amount equal to the sum of any qualified contributions made by the
taxpayer during the taxable year.
``(b) Amount of Credit.--The credit allowed under subsection (a)
for any taxable year shall not exceed 10 percent of the taxpayer's
adjusted gross income for the taxable year.
``(c) Definitions.--For purposes of this section--
``(1) Eligible scholarship-granting organization.--The term
`eligible scholarship-granting organization' means--
``(A) an organization that--
``(i) is described in section 501(c)(3) and
exempt from taxation under section 501(a),
``(ii) provides qualifying scholarships to
individual elementary and secondary students
who--
``(I) reside in the State in which
the eligible scholarship-granting
organization is recognized, or
``(II) in the case of the Bureau of
Indian Education, are members of a
federally recognized tribe,
``(iii) a State identifies to the Secretary
as an eligible scholarship-granting
organization under section 202(c)(5)(B) of the
School Choice Now Act,
``(iv) allocates at least 90 percent of
qualified contributions to qualifying
scholarships on an annual basis, and
``(v) provides qualifying scholarships to--
``(I) more than 1 eligible student,
``(II) more than 1 eligible family,
and
``(III) different eligible students
attending more than 1 education
provider, or
``(B) an organization that--
``(i) is described in section 501(c)(3) and
exempt from taxation under section 501(a), and
``(ii) pursuant to State law, was able, as
of January 1, 2021, to receive contributions
that are eligible for a State tax credit if
such contributions are used by the organization
to provide scholarships to individual
elementary and secondary students, including
scholarships for attending private schools.
``(2) Qualified contribution.--The term `qualified
contribution' means a contribution of cash to any eligible
scholarship-granting organization.
``(3) Qualified expense.--The term `qualified expense'
means any educational expense that is--
``(A) for an individual student's elementary or
secondary education, as recognized by the State, or
``(B) for the secondary education component of an
individual elementary or secondary student's career and
technical education, as defined by section 3(5) of the
Carl D. Perkins Career and Technical Education Act of
2006 (20 U.S.C. 2302(5)).
``(4) Qualifying scholarship.--The term `qualifying
scholarship' means a scholarship granted by an eligible
scholarship-granting organization to an individual elementary
or secondary student for a qualified expense.
``(5) State.--The term `State' means each of the 50 States,
the District of Columbia, the Commonwealth of Puerto Rico, the
outlying areas (as defined in section 1121(c) of the Elementary
and Secondary Education Act of 1965 (20 U.S.C. 6331(c)), and
the Department of the Interior (acting through the Bureau of
Indian Education).
``(d) Rules of Construction.--
``(1) In general.--A qualifying scholarship awarded to a
student from the proceeds of a qualified contribution under
this section shall not be considered assistance to the school
or other educational provider that enrolls, or provides
educational services to, the student or the student's parents.
``(2) Exclusion from income.--Gross income shall not
include any amount received by an individual as a qualifying
scholarship and such amount shall not be taken into account as
income or resources for purposes of determining the eligibility
of such individual or any other individual for benefits or
assistance, or the amount or extent of such benefits or
assistance, under any Federal program or under any State or
local program financed in whole or in part with Federal funds.
``(3) Prohibition of control over nonpublic education
providers.--
``(A)(i) Nothing in this section shall be construed
to permit, allow, encourage, or authorize any Federal
control over any aspect of any private, religious, or
home education provider, whether or not a home
education provider is treated as a private school or
home school under State law.
``(ii) This section shall not be construed to
exclude private, religious, or home education providers
from participation in programs or services under this
section.
``(B) Nothing in this section shall be construed to
permit, allow, encourage, or authorize an entity
submitting a list of eligible scholarship-granting
organizations on behalf of a State pursuant to section
202(c)(5) of the School Choice Now Act to mandate,
direct, or control any aspect of a private or home
education provider, regardless of whether or not a home
education provider is treated as a private school under
State law.
``(C) No participating State or entity acting on
behalf of a State pursuant to section 202(c)(5) of the
School Choice Now Act shall exclude, discriminate
against, or otherwise disadvantage any education
provider with respect to programs or services under
this section based in whole or in part on the
provider's religious character or affiliation,
including religiously-based or mission-based policies
or practices.
``(4) Parental rights to use scholarships.--No
participating State or entity acting on behalf of a State
pursuant to section 202(c)(5) of the School Choice Now Act
shall disfavor or discourage the use of qualifying scholarships
for the purchase of elementary and secondary education
services, including those services provided by private or
nonprofit entities, such as faith-based providers.
``(5) State and local authority.--Nothing in this section
shall be construed to modify a State or local government's
authority and responsibility to fund education.
``(e) Denial of Double Benefit.--The Secretary shall prescribe such
regulations or other guidance to ensure that the sum of the tax
benefits provided by Federal, State, or local law for a qualified
contribution receiving a Federal tax credit in any taxable year does
not exceed the sum of the qualified contributions made by the taxpayer
for the taxable year.
``(f) Carryforward of Credit.--If a tax credit allowed under this
section is not fully used within the applicable taxable year because of
insufficient tax liability on the part of the taxpayer, the unused
amount may be carried forward for a period not to exceed 5 years.
``(g) Election.--This section shall apply to a taxpayer for a
taxable year only if the taxpayer elects to have this section apply for
such taxable year.
``(h) Alternative Minimum Tax.--For purposes of calculating the
alternative minimum tax under section 55, a taxpayer may use any credit
received for a qualified contribution under this section.''.
(b) Clerical Amendment.--The table of sections for subpart A of
part IV of subchapter A of chapter 1 of the Internal Revenue Code of
1986 is amended by inserting after the item relating to section 25D the
following new item:
``Sec. 25E. Contributions to eligible scholarship-granting
organizations.''.
(c) Credit for Corporations.--Subpart D of part IV of subchapter A
of chapter 1 of the Internal Revenue Code of 1986 is amended by adding
at the end the following new section:
``SEC. 45U. CONTRIBUTIONS TO ELIGIBLE SCHOLARSHIP-GRANTING
ORGANIZATIONS.
``(a) Allowance of Credit.--Subject to section 202(c) of the School
Choice Now Act, for purposes of section 38, in the case of a domestic
corporation, there shall be allowed as a credit against the tax imposed
by this chapter for the taxable year an amount equal to the sum of any
qualified contributions (as defined in section 25E(c)(2)) made by such
corporation taxpayer during the taxable year.
``(b) Amount of Credit.--The credit allowed under subsection (a)
for any taxable year shall not exceed 5 percent of the taxable income
(as defined in section 170(b)(2)(D)) of the domestic corporation for
such taxable year.
``(c) Additional Provisions.--For purposes of this section, any
qualified contributions made by a domestic corporation shall be subject
to the provisions of section 25E (including subsection (d) of such
section), to the extent applicable.
``(d) Election.--This section shall apply to a taxpayer for a
taxable year only if the taxpayer elects to have this section apply for
such taxable year.''.
(d) Credit Part of General Business Credit.--Section 38(b) is
amended--
(1) by striking ``plus'' at the end of paragraph (32);
(2) by striking the period at the end of paragraph (33) and
inserting ``, plus''; and
(3) by adding at the end the following new paragraph:
``(34) the credit for qualified contributions determined
under section 45U(a).''.
(e) Clerical Amendment.--The table of sections for subpart D of
part IV of subchapter A of chapter 1 is amended by adding at the end
the following new item:
``Sec. 45U. Contributions to eligible scholarship-granting
organizations.''.
(f) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2020.
SEC. 202. EDUCATION FREEDOM SCHOLARSHIPS WEB PORTAL AND ADMINISTRATION.
(a) In General.--The Secretary of the Treasury shall, in
coordination with the Secretary of Education, establish, host, and
maintain a web portal that--
(1) lists all eligible scholarship-granting organizations;
(2) enables a taxpayer to make a qualifying contribution to
one or more eligible scholarship-granting organizations and to
immediately obtain both a pre-approval of a tax credit for that
contribution and a receipt for tax filings;
(3) provides information about the tax benefits under
sections 25E and 45U of the Internal Revenue Code of 1986; and
(4) enables a State to submit and update information about
its programs and its eligible scholarship-granting
organizations for informational purposes only, including
information on--
(A) student eligibility;
(B) allowable educational expenses;
(C) the types of allowable education providers;
(D) the percentage of funds an organization may use
for program administration; and
(E) the percentage of total contributions the
organization awards in a calendar year.
(b) Nonportal Contributions.--A taxpayer may opt to make a
contribution directly to an eligible scholarship-granting organization,
instead of through the web portal described in subsection (a), provided
that the taxpayer, or the eligible scholarship-granting organization on
behalf of the taxpayer, applies for, and receives pre-approval for a
tax credit from the Secretary of the Treasury in coordination with the
Secretary of Education.
(c) National and State Limitations on Credits.--
(1) National limitation.--For each fiscal year, the total
amount of qualifying contributions for which a credit is
allowed under sections 25E and 45U of the Internal Revenue Code
of 1986 shall not exceed $5,000,000,000.
(2) Allocation of limitation.--
(A) Initial allocations.--For each calendar year,
with respect to the limitation under paragraph (1), the
Secretary of the Treasury, in consultation with the
Secretary of Education, shall--
(i) allocate to each State an amount equal
to the sum of the qualifying contributions made
in the State in the previous year; and
(ii) from any amounts remaining following
allocations made under clause (i), allocate to
each participating State an amount equal to the
sum of--
(I) an amount that bears the same
relationship to 20 percent of such
remaining amount as the number of
individuals aged 5 through 17 in the
State, as determined by the Secretary
of Education on the basis of the most
recent satisfactory data, bears to the
number of those individuals in all such
States, as so determined; and
(II) an amount that bears the same
relationship to 80 percent of such
remaining amount as the number of
individuals aged 5 through 17 from
families with incomes below the poverty
line in the State, as determined by the
Secretary of Education, on the basis of
the most recent satisfactory data,
bears to the number of those
individuals in all such States, as so
determined.
(B) Minimum allocation.--Notwithstanding
subparagraph (A), no State receiving an allocation
under this section may receive less than \1/2\ of 1
percent of the amount allocated for a fiscal year.
(C) Alternative allocation.--
(i) In general.--Not later than the end of
the fifth year of the program or 1 year after
the end of the first fiscal year for which the
total amount of credits claimed under section
25E and section 45U of the Internal Revenue
Code of 1986 is $2,500,000,000 or more,
whichever comes first, the Secretary of the
Treasury, in consultation with the Secretary of
Education, shall, by regulation, provide for an
alternative allocation method that shall take
effect beginning with the first fiscal year
after such regulation takes effect.
(ii) Alternative allocation method.--The
alternative allocation method shall be
expressed as a formula based on a combination
of the following data for each State, as
reported by the State to the Secretary of the
Treasury:
(I) The relative percentage of
students in the State who receive an
elementary or secondary scholarship
through a State program that is
financed through State tax-credited
donations or appropriations and that
permits the elementary or secondary
scholarship to be used to attend a
private school.
(II) The total amount of all
elementary and secondary scholarships
awarded through a State program that is
financed through State tax-credited
donations or appropriations compared to
the total amount of current State and
local expenditures for free public
education in the State.
(iii) Allocation formula.--For any fiscal
year to which clause (i) applies, the Secretary
of Treasury, in consultation with the Secretary
of Education, shall--
(I) for each State, allocate an
amount equal to the sum of the
qualifying contributions made in the
State in the previous year;
(II) allocate \2/3\ of the
remaining amount (after application of
subclause (I)) of the national
limitation for that year using the
alternative allocation method under
clause (ii); and
(III) allocate \1/3\ of the
remaining amount (after application of
subclause (I) and (II)) in accordance
with subparagraph (A)(ii).
(iv) Ineligibility.--For any fiscal year to
which clause (i) applies, a State that does not
provide the Secretary of the Treasury with
information described in clause (ii) is not
eligible to receive an allocation through the
alternative allocation method under such
clause.
(3) Allowable partnerships.--A State may choose to
administer the allocation it receives under paragraph (2) in
partnership with one or more States, provided that the eligible
scholarship-granting organizations in each partner State serve
students who reside in all States in the partnership.
(4) Total allocation.--A State's allocation, for any fiscal
year, is the sum of the amount determined for such State under
subparagraphs (A) and (B) of paragraph (2), except as provided
in paragraph (2)(C).
(5) Allocation and adjustments.--
(A) Initial allocation to states.--Not later than
November 1 of the year preceding a year for which there
is a national limitation on credits under paragraph (1)
(referred to in this section as the ``applicable
year''), or as early as practicable with respect to the
first year, the Secretary of the Treasury shall
announce the State allocations under paragraph (2) for
the applicable year.
(B) List of eligible scholarship-granting
organizations.--
(i) In general.--Not later than January 1
of each applicable year, or as early as
practicable with respect to the first year,
each State shall provide the Secretary of the
Treasury a list of eligible scholarship-
granting organizations, including a
certification that the entity submitting the
list on behalf of the State has the authority
to perform this function.
(ii) Rule of construction.--Neither this
section nor any other Federal law shall be
construed as limiting the entities that may
submit the list on behalf of a State.
(C) Reallocation of unclaimed credits.--The
Secretary of the Treasury shall reallocate a State's
allocation to other States, in accordance with
paragraph (2), if the State--
(i) chooses not to identify scholarship-
granting organizations under subparagraph (B)
in any applicable year; or
(ii) does not have an existing eligible
scholarship-granting organization.
(D) Reallocation.--On or after April 1 of any
applicable year, the Secretary of the Treasury may
reallocate, to one or more other States that have
eligible scholarship-granting organizations in the
States, without regard to paragraph (2), the allocation
of a State for which the State's allocation has not
been claimed.
(d) Definitions.--Any term used in this section which is also used
in section 25E of the Internal Revenue Code of 1986 shall have the same
meaning as when used in such section.
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