House File 292 - Introduced HOUSE FILE 292 BY GUSTOFF A BILL FOR An Act creating a private instruction organization tax credit 1 available against the individual and corporate income taxes, 2 and including effective date and retroactive applicability 3 provisions. 4 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 5 TLSB 1941YH (2) 90 jm/jh
H.F. 292 Section 1. NEW SECTION . 422.11X Private instruction 1 organization tax credit. 2 1. The taxes imposed under this subchapter, less the credits 3 allowed under section 422.12, shall be reduced by a private 4 instruction tax credit equal to sixty-five percent of the 5 amount of the voluntary cash or noncash contributions made 6 by the taxpayer during the tax year to a private instruction 7 organization, subject to the maximum total value of tax credits 8 allowed in subsection 8. The tax credit shall be claimed by 9 use of a tax credit certificate as provided in subsection 7. 10 2. To be eligible for this credit, all of the following 11 shall apply: 12 a. A deduction pursuant to section 170 of the Internal 13 Revenue Code for any amount of the contribution is not taken 14 for state tax purposes. 15 b. The contribution does not designate that any part of the 16 contribution be used for the direct benefit of any dependent of 17 the taxpayer or any other student designated by the taxpayer. 18 c. The value of a noncash contribution shall be appraised 19 pursuant to rules of the director. 20 3. Any credit in excess of the tax liability is not 21 refundable but the excess for the tax year may be credited to 22 the tax liability for the following five tax years or until 23 depleted, whichever is the earlier. 24 4. Married taxpayers who file separate returns must 25 determine the tax credit under subsection 1 based upon their 26 combined net income and allocate the total credit amount to 27 each spouse in the proportion that each spouses respective net 28 income bears to the total combined net income. Nonresidents 29 or part-year residents of Iowa must determine their tax credit 30 in the ratio of their Iowa source net income to their all 31 source net income. Nonresidents or part-year residents who are 32 married and elect to file separate returns must allocate the 33 tax credit between the spouses in the ratio of each spouses 34 Iowa source net income to the combined Iowa source net income 35 -1- LSB 1941YH (2) 90 jm/jh 1/ 6
H.F. 292 of the taxpayers. 1 5. An individual may claim the tax credit allowed a 2 partnership, limited liability company, S corporation, estate, 3 or trust electing to have the income taxed directly to the 4 individual. The amount claimed by the individual shall be 5 based upon the pro rata share of the individuals earnings of 6 the partnership, limited liability company, S corporation, 7 estate, or trust. 8 6. For purposes of this section: 9 a. Eligible student means a student who is a member of 10 a household whose total annual income during the calendar 11 year before the student receives a grant for purposes of this 12 section does not exceed an amount equal to four times the most 13 recently published federal poverty guidelines in the federal 14 register by the United States department of health and human 15 services. 16 b. Grant means grants to students to cover all or part of 17 qualified private instruction. 18 c. Private instruction organization means a charitable 19 organization in this state that is exempt from federal taxation 20 under section 501(c)(3) of the Internal Revenue Code and that 21 does all of the following: 22 (1) Allocates at least ninety percent of its annual revenue 23 in grants for eligible students to allow them to receive 24 qualified private instructions of their parents choice. 25 (2) Only awards grants to eligible students who reside in 26 Iowa. 27 (3) Provides grants to eligible students without limiting 28 availability to a type of qualified private instruction. 29 (4) Only provides grants to eligible students in a certain 30 geographic area within the state. 31 (5) Prepares an annual reviewed financial statement 32 certified by a public accounting firm. 33 d. Qualified private instruction means independent private 34 instruction or competent private instruction under chapter 35 -2- LSB 1941YH (2) 90 jm/jh 2/ 6
H.F. 292 299A. 1 7. a. In order for the taxpayer to claim the private 2 instruction organization tax credit under subsection 1, a 3 tax credit certificate issued by the private instruction 4 organization to which the contribution was made shall be 5 included with the persons tax return. The tax credit 6 certificate shall contain the taxpayers name, address, tax 7 identification number, the amount of the contribution, the 8 amount of the credit, and other information required by the 9 department. 10 b. (1) The department shall authorize a private instruction 11 organization to issue tax credit certificates for contributions 12 made to the private instruction organization, limited by the 13 maximum total dollar value of the tax credits available for the 14 calendar year in subsection 8. The aggregate amount of tax 15 credit certificates that the department shall authorize for a 16 private instruction organization for a calendar year shall be 17 determined for that organization by the department equal to the 18 product of the following: 19 (a) The maximum total dollar value of the tax credits 20 available for the calendar year. 21 (b) The ratio of the number of households submitting a 22 participation form to the department for a particular private 23 instruction organization to the total participation forms 24 submitted. 25 (2) However, a private instruction organization shall not 26 be authorized to issue tax credit certificates unless the 27 organization is controlled by a board of directors consisting 28 of at least seven members. The names and addresses of the 29 members shall be provided to the department and shall be made 30 available by the department to the public, notwithstanding any 31 state confidentiality restrictions. 32 c. Pursuant to rules of the department, a private 33 instruction organization shall initially register with the 34 department. The organizations registration shall include 35 -3- LSB 1941YH (2) 90 jm/jh 3/ 6
H.F. 292 proof of Internal Revenue Code section 501(c)(3) status 1 and provide the geographic area the private instruction 2 organization serves. Once the private instruction organization 3 has registered, it is not required to subsequently register 4 unless the geographic area it serves changes. 5 d. Each household that receives funds from a private 6 instruction organization shall submit a participation form 7 annually to the department by November 1. For the 2023 8 calendar year only, each household served by a private 9 instruction organization shall submit a participation form to 10 the department by August 1, 2023. 11 8. The maximum total dollar value of the tax credits for 12 the 2023 calendar year shall not exceed ten million dollars. 13 For calendar years beginning on or after January 1, 2024, the 14 maximum total value of tax credits shall not exceed twenty 15 million dollars. 16 9. Each year by December 1, the department shall authorize 17 private instruction organizations to issue tax credit 18 certificates for the following calendar year. However, for the 19 2023 calendar year only, the department, by September 1, 2023, 20 shall authorize private instruction organizations to issue tax 21 credit certificates for the 2023 calendar year. 22 10. A private instruction organization that receives a 23 voluntary cash or noncash contribution pursuant to this section 24 shall report to the department, on a form prescribed by the 25 department, by January 15 of each calendar year all of the 26 following information: 27 a. The name and address of the members and the chairperson 28 of the governing board of the private instruction organization. 29 b. The total number and dollar value of contributions 30 received and the total number and dollar value of the tax 31 credits approved during the previous calendar year. 32 c. A list of the individual donors for the previous calendar 33 year that includes the dollar value of each donation and the 34 dollar value of each approved tax credit. 35 -4- LSB 1941YH (2) 90 jm/jh 4/ 6
H.F. 292 d. The total number of eligible students utilizing grants 1 for the school year in progress and the total dollar value of 2 the grants. 3 e. The name and address of each household at which grants 4 are currently being utilized. 5 f. The name of the person providing private instruction and 6 the number of eligible students receiving private instruction 7 by the person. 8 Sec. 2. Section 422.33, Code 2023, is amended by adding the 9 following new subsection: 10 NEW SUBSECTION . 33. The taxes imposed under this subchapter 11 shall be reduced by a private instruction organization tax 12 credit as provided pursuant to section 422.11X. 13 Sec. 3. EFFECTIVE DATE. This Act, being deemed of immediate 14 importance, takes effect upon enactment. 15 Sec. 4. RETROACTIVE APPLICABILITY. This Act applies 16 retroactively to January 1, 2023, for tax years beginning on 17 or after that date. 18 EXPLANATION 19 The inclusion of this explanation does not constitute agreement with 20 the explanations substance by the members of the general assembly. 21 This bill provides an individual and corporate income 22 tax credit equal to a maximum 65 percent of the voluntary 23 contributions made to a private instruction organization that 24 is exempt from federal income tax. At least 90 percent of 25 total contributions must be used by the private instruction 26 organization to provide grants to students who are members 27 of households that have total annual income that does not 28 exceed four times the most recently published federal poverty 29 guidelines. The contribution may not be deducted as a 30 charitable deduction for state tax purposes or be designated 31 for the direct benefit of a dependent or any other student 32 designated by the taxpayer. 33 The private instruction organization must limit the grants 34 to students who reside in Iowa, must provide grants without 35 -5- LSB 1941YH (2) 90 jm/jh 5/ 6
H.F. 292 limiting the type of private instruction received, and only 1 provide grants to students in a certain geographic area. 2 The tax credit is claimed by attaching a tax credit 3 certificate to the taxpayers tax return. A private 4 instruction organization is authorized to issue a tax credit 5 certificate in an amount determined by the department. The 6 amount available for each private instruction organization 7 is determined by multiplying the maximum total value of tax 8 credits available for the calendar year with the ratio of the 9 number of households submitting a participation form to the 10 department of revenue for a particular private instruction 11 organization to the total participation forms submitted. Each 12 household that receives funds from a private instruction 13 organization must submit a participation form to the department 14 of revenue. For calendar year 2023 the maximum total value 15 of tax credits available shall not exceed $10 million and for 16 calendar years beginning on or after January 1, 2024, the 17 maximum total value of credits shall not exceed $20 million. 18 The private instruction organization must report to the 19 department of revenue by January 15 of each calendar year 20 the members of the governing board, the total dollar value 21 of contributions received and the total dollar value of 22 tax credits approved, a list of donors, the total number of 23 students receiving grants for the school year, the name and 24 address of each household utilizing the grants, and the name 25 of the person providing private instruction and the number of 26 eligible students receiving private instruction by the person. 27 The bill takes effect upon enactment and applies 28 retroactively to tax years beginning on or after January 1, 29 2023. 30 -6- LSB 1941YH (2) 90 jm/jh 6/ 6