84R5321 BEF-F
By: Bettencourt S.B. No. 642
A BILL TO BE ENTITLED
AN ACT
relating to a franchise or insurance premium tax credit for
contributions made to certain 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 K to read as follows:
SUBCHAPTER K. TAX CREDIT FOR CONTRIBUTIONS TO CERTAIN EDUCATIONAL
ASSISTANCE ORGANIZATIONS
Sec. 171.551. DEFINITION. In this subchapter, "educational
assistance organization" means an organization that:
(1) has the ability according to the organization's
charter, to award scholarships to or pay educational expenses for
eligible students in:
(A) public elementary or secondary schools
located in this state; or
(B) nonpublic elementary or secondary schools
located in this state:
(i) that meet the requirements of Section
171.553;
(ii) at which a student may fulfill this
state's compulsory attendance requirements; and
(iii) that are not in violation of the
federal Civil Rights Act of 1964 (42 U.S.C. Section 2000a et seq.);
and
(2) uses part of its annual revenue for the purpose
provided by Subdivision (1).
Sec. 171.552. ELIGIBILITY REQUIREMENTS FOR CERTIFICATION
OF EDUCATIONAL ASSISTANCE ORGANIZATION. (a) An organization may
apply to the comptroller for certification as a certified
educational assistance organization.
(b) To be eligible for certification, the organization:
(1) must:
(A) be exempt from federal tax under Section
501(a) of the Internal Revenue Code by being listed as an exempt
organization in Section 501(c)(3) of that code;
(B) be in good standing with the state;
(C) be located in the state;
(D) allocate at least 90 percent of its annual
revenue from contributions that are designated for scholarships or
educational expense assistance for eligible students under this
subchapter for student scholarships and assistance for educational
expenses, including tuition, transportation, textbooks, and other
supplies, and for other related educational expense assistance as
described by this section;
(E) award scholarships and assistance for
qualifying educational expenses to eligible students who
demonstrate the greatest financial and academic need;
(F) give each donor a receipt for money
contributed to the organization that includes the name of the
organization, the name of the donor, the amount of the
contribution, the information required by Section 171.556(c), and
any other information required by the comptroller;
(G) demonstrate experience and technical
expertise in:
(i) accepting, processing, and tracking
applications for scholarships or educational expense assistance;
and
(ii) awarding scholarships to students in
primary or secondary schools;
(H) agree to be independently audited on an
annual basis and file the audit with the comptroller; and
(I) disburse within two academic years of receipt
contributions received from and designated by taxable entities for
scholarships or educational expense assistance under this
subchapter; and
(2) may not:
(A) award all scholarships under this subchapter
to students who attend a particular school or pay educational
expenses incurred only at a particular school;
(B) provide to a student a scholarship in an
annual amount that exceeds the amount provided under Section
171.557(a) unless the money used to provide the portion of the
scholarship in excess of that amount was contributed by a person
other than an entity that notifies the organization under Section
171.556(c) that the entity may apply for a tax credit for the
contribution; and
(C) provide to a student educational expense
assistance in excess of the amount provided under Section
171.557(b) per academic year, including assistance for:
(i) facility fees;
(ii) textbooks;
(iii) school supplies;
(iv) tutoring;
(v) academic after-school programs;
(vi) school or lab fees;
(vii) before-school or after-school child
care; and
(viii) transportation expenses, including
the cost to transfer from one public school to another.
(c) The comptroller may certify as a certified educational
assistance organization an organization that applies under
Subsection (a) if the organization meets the requirements of
Subsection (b). The comptroller has broad discretion in determining
whether to grant or deny an application for certification.
(d) The comptroller shall notify an organization in writing
of the comptroller's decision to grant or deny the application
under Subsection (a). If the comptroller denies an organization's
application, the comptroller shall include in the notice of denial
the reasons for the comptroller's decision.
(e) If the comptroller denies an organization's application
under Subsection (a), the organization may request in writing a
reconsideration of the application not later than the 10th day
after the date of the notice under Subsection (d). If the
organization does not request a reconsideration of the application
on or before that date, the comptroller's decision is final.
(f) An organization that requests a reconsideration under
Subsection (e) may submit to the comptroller not later than the 30th
day after the date the request for reconsideration is submitted
additional information and documents to support the organization's
request for reconsideration.
(g) The comptroller's reconsideration of an application
under this section is not a contested case under Chapter 2001,
Government Code. The comptroller's decision on a request for
reconsideration of an application is final and is not appealable.
(h) This section does not create a cause of action to
contest a decision of the comptroller to deny an application for
certification as a certified educational assistance organization.
Sec. 171.553. NONPUBLIC SCHOOL REQUIREMENTS. A certified
educational assistance organization may not award scholarships to
or pay educational expenses for eligible students enrolled in a
nonpublic school unless the nonpublic school executes a notarized
affidavit, with supporting documents, concerning the school's
qualification for scholarships and educational expense assistance
for eligible students who receive assistance from a certified
educational assistance organization, including evidence of:
(1) accreditation or of actively being in the process
of accreditation by the Texas Education Agency or by an
organization recognized by the Texas Private School Accreditation
Commission;
(2) annual administration of a nationally
norm-referenced assessment instrument or the appropriate
assessment instrument required under Section 39.023, Education
Code;
(3) valid certificate of occupancy; and
(4) policy statements regarding:
(A) admissions;
(B) curriculum;
(C) safety;
(D) food service inspection; and
(E) student to teacher ratios.
Sec. 171.554. ELIGIBILITY. A taxable entity may apply for a
credit against the tax imposed under this chapter in the amount and
under the conditions and limitations provided by this subchapter.
The comptroller shall award credits as provided by Section 171.559.
Sec. 171.555. ELIGIBILITY OF STUDENTS; INCLUSION IN
CALCULATION OF EQUALIZED WEALTH LEVEL. (a) To be eligible to apply
for assistance from a certified educational assistance
organization under this subchapter, a student must be assigned to
attend a public school campus with an enrollment of more than 100
students located in a county with a population greater than 50,000
and:
(1) the student:
(A) must:
(i) be in foster care;
(ii) be in institutional care; or
(iii) have a household income not greater
than 200 percent of the income guidelines necessary to qualify for
the national free or reduced-price lunch program established under
42 U.S.C. Section 1751 et seq.; and
(B) must:
(i) have been enrolled in a public school
during the preceding school year;
(ii) be starting school in the state for the
first time;
(iii) be the sibling of a student who is
eligible; or
(iv) if the person attends a nonpublic
school, qualify as a student who is not counted toward a public
school's average daily attendance during the year in which the
student receives the scholarship or educational expense assistance
to attend the school, except as provided by Subsection (c); or
(2) the student must have previously qualified under
Subdivision (1).
(b) A certified educational assistance organization shall
award scholarships and educational expense assistance to eligible
students who apply in accordance with this subchapter.
(c) A student who receives a scholarship under this
subchapter is included in the weighted average daily attendance of
the school district the student would otherwise attend for purposes
of determining the district's equalized wealth level under Chapter
41, Education Code.
Sec. 171.556. CREDIT FOR CONTRIBUTIONS. (a) A taxable
entity may apply for a credit under this subchapter only for money
contributed to a certified educational assistance organization and
designated for scholarships or educational expense assistance for
eligible students.
(b) A taxable entity may not apply for a credit under this
subchapter for a contribution made to a certified educational
assistance organization if:
(1) the taxable entity requires that the contribution
benefit a particular person or school; or
(2) the contribution is designated to provide a
scholarship or educational expense assistance for a taxable entity
employee or for a spouse or dependent of a taxable entity employee.
(c) An entity shall notify a certified educational
assistance organization in writing when the entity makes a
contribution if the entity may apply for a tax credit under this
subchapter or Chapter 230, Insurance Code, for the contribution. An
entity may not apply for a credit for the contribution unless the
entity provides the notification at the time the contribution is
made. The certified educational assistance organization shall
indicate on the receipt provided under Section 171.552(b)(1)(F)
that the entity made the notification under this subsection.
Sec. 171.557. LIMIT ON AMOUNT OF SCHOLARSHIP OR EDUCATIONAL
EXPENSE ASSISTANCE. (a) The maximum scholarship amount a
certified educational assistance organization may award to a
student under this subchapter using money contributed by an entity
that notifies the organization under Section 171.556(c) that the
entity may apply for a tax credit for the contribution 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) The maximum educational expense assistance a certified
educational assistance organization may award to a student under
this subchapter may not exceed $500 for the 2016 state fiscal year,
increased by five percent each subsequent year.
Sec. 171.558. AMOUNTS; LIMITATION ON TOTAL CREDITS. (a)
Subject to Subsections (b) and (c), the amount of a taxable entity's
annual credit is equal to the lesser of the amount of the qualifying
contributions made by the taxable entity or 50 percent of the
taxable entity's tax liability under this chapter.
(b) For the 2016 state fiscal year, the total amount of tax
credits that may be awarded under this subchapter and Chapter 230,
Insurance Code, may not exceed $100 million. For each subsequent
state fiscal year, the total amount of tax credits that may be
awarded is an amount equal to 105 percent of the total amount of tax
credits that may be awarded in the previous state fiscal 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.
(d) The comptroller may require a taxable entity to notify
the comptroller of the amount the taxable entity intends or expects
to apply for under this subchapter before the beginning of a state
fiscal year or at any other time required by the comptroller.
Sec. 171.559. APPLICATION FOR CREDIT. (a) A taxable entity
must apply for a credit under this subchapter on or with the tax
report for the period.
(b) The comptroller shall adopt a form for the application
for the credit. A taxable entity must use this form in applying for
the credit and submit with the application the receipt issued under
Section 171.552(b)(1)(F), including the information required by
Section 171.556(c).
(c) The comptroller may award a credit to a taxable entity
that applies for the credit under Subsection (a) if the taxable
entity is eligible for the credit and the credit is available under
Section 171.558(b). The comptroller has broad discretion in
determining whether to grant or deny an application for a credit.
(d) The comptroller shall notify a taxable entity in writing
of the comptroller's decision to grant or deny the application
under Subsection (a). If the comptroller denies a taxable entity's
application, the comptroller shall include in the notice of denial
the reasons for the comptroller's decision.
(e) If the comptroller denies a taxable entity's
application under Subsection (a), the taxable entity may request in
writing a reconsideration of the application not later than the
10th day after the date of the notice under Subsection (d). If the
taxable entity does not request a reconsideration of the
application on or before that date, the comptroller's decision is
final.
(f) A taxable entity that requests a reconsideration under
Subsection (e) may submit to the comptroller not later than the 30th
day after the date the request for reconsideration is submitted
additional information and documents to support the taxable
entity's request for reconsideration.
(g) The comptroller's reconsideration of an application
under this section is not a contested case under Chapter 2001,
Government Code. The comptroller's decision on a request for
reconsideration of an application is final and is not appealable.
(h) This section does not create a cause of action to
contest a decision of the comptroller to deny an application for a
credit under this subchapter.
Sec. 171.560. RULES; PROCEDURES. (a) The comptroller
shall adopt rules and procedures to implement, administer, and
enforce this subchapter.
(b) A rule adopted under Subsection (a) is binding on an
organization that applies for certification as an educational
assistance organization, a taxable entity that applies for a
credit, and a state or local governmental entity, including a
political subdivision, as necessary to implement, administer, and
enforce this subchapter.
Sec. 171.561. 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. 171.562. REVOCATION. (a) The comptroller shall
revoke a certification provided under Section 171.552 if the
comptroller finds that a certified educational assistance
organization:
(1) is no longer eligible under Section 171.552; or
(2) intentionally and substantially violates this
subchapter.
(b) The comptroller has broad discretion in determining
whether to revoke a certification under Subsection (a).
(c) The comptroller shall notify a certified educational
assistance organization in writing of the comptroller's decision to
revoke the organization's certification. If the comptroller
revokes an organization's certification, the comptroller shall
include in the notice of revocation the reasons for the revocation.
(d) If the comptroller revokes a certified educational
assistance organization's certification under Subsection (a), the
organization may request in writing a reconsideration of the
revocation not later than the 10th day after the date of the notice
under Subsection (c) or the revocation is final.
(e) An organization that requests a reconsideration under
Subsection (d) may submit to the comptroller not later than the 30th
day after the date the request for reconsideration is submitted
additional information and documents to support the organization's
request for reconsideration.
(f) The comptroller's reconsideration of a revocation under
this section is not a contested case under Chapter 2001, Government
Code. The comptroller's decision on a request for reconsideration
of a revocation is final and is not appealable.
(g) This section does not create a cause of action to
contest a decision of the comptroller to revoke a certified
educational assistance organization's certification under this
subchapter.
(h) 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.
Sec. 171.563. REPORT OF NET SAVINGS TO PUBLIC EDUCATION.
(a) In this section, "net savings" means any positive difference in
a state fiscal year between:
(1) the amount by which state spending on public
education for that year is reduced as a result of students receiving
scholarships and educational expense assistance from certified
educational assistance organizations under this subchapter; and
(2) the amount by which state revenue derived from
this chapter and Chapter 230, Insurance Code, is reduced as a result
of tax credits under this subchapter and Chapter 230, Insurance
Code.
(b) Not later than December 31 of each even-numbered year,
the comptroller shall determine the amount of net savings for the
previous state fiscal biennium and make available to the public a
report of that amount of savings.
SECTION 2. Subtitle B, Title 3, Insurance Code, is amended
by adding Chapter 230 to read as follows:
CHAPTER 230. CREDIT AGAINST PREMIUM TAXES
FOR CERTAIN CONTRIBUTIONS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 230.001. DEFINITIONS. In this chapter:
(1) "Educational assistance organization" has the
meaning assigned by Section 171.551, Tax Code.
(2) "State premium tax liability" means any liability
incurred by an entity under Chapters 221 through 226.
SUBCHAPTER B. CREDIT
Sec. 230.051. CREDIT. An entity may apply for a credit
against the entity's state premium tax liability in the amount and
under the conditions and limitations provided by this chapter. The
comptroller shall award credits as provided by Section 230.053.
Sec. 230.052. AMOUNTS; LIMITATION ON TOTAL CREDITS. (a)
Subject to Subsections (b) and (c), the amount of an entity's credit
is equal to the lesser of the amount of the qualifying contributions
made to a certified educational assistance organization or 50
percent of the entity's state premium tax liability if the
contributions and the organizations that received the
contributions meet the requirements prescribed by Subchapter K,
Chapter 171, Tax Code.
(b) For the 2016 state fiscal year, the total amount of tax
credits that may be awarded under this chapter and Subchapter K,
Chapter 171, Tax Code, may not exceed $100 million. For each
subsequent state fiscal year, the total amount of tax credits that
may be awarded is an amount equal to 105 percent of the total amount
of tax credits that may be applied for in the previous state fiscal
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.
(d) The comptroller may require an entity to notify the
comptroller of the amount the entity intends or expects to apply for
under this chapter before the beginning of a state fiscal year or at
any other time required by the comptroller.
Sec. 230.053. APPLICATION FOR CREDIT. (a) An entity must
apply for a credit under this chapter on or with the tax return for
the taxable year and submit with the application the receipt issued
under Section 171.552(b)(1)(F), Tax Code, including the
information required by Section 171.556(c), Tax Code.
(b) The comptroller shall adopt a form for the application
for the credit. An entity must use this form in applying for the
credit.
(c) The comptroller may award a credit to an entity that
applies for the credit under Subsection (a) if the entity is
eligible for the credit and the credit is available under Section
230.052(b). The comptroller has broad discretion in determining
whether to grant or deny an application for a credit.
(d) The comptroller shall notify an entity in writing of the
comptroller's decision to grant or deny the application under
Subsection (a). If the comptroller denies an entity's application,
the comptroller shall include in the notice of denial the reasons
for the comptroller's decision.
(e) If the comptroller denies an entity's application under
Subsection (a), the entity may request in writing a reconsideration
of the application not later than the 10th day after the date of the
notice under Subsection (d). If the entity does not request a
reconsideration of the application on or before that date, the
comptroller's decision is final.
(f) An entity that requests a reconsideration under
Subsection (e) may submit to the comptroller not later than the 30th
day after the date the request for reconsideration is submitted
additional information and documents to support the entity's
request for reconsideration.
(g) The comptroller's reconsideration of an application
under this section is not a contested case under Chapter 2001,
Government Code. The comptroller's decision on a request for
reconsideration of an application is final and is not appealable.
(h) This section does not create a cause of action to
contest a decision of the comptroller to deny an application for a
credit under this chapter.
Sec. 230.054. RULES; PROCEDURES. (a) The comptroller
shall adopt rules and procedures to implement, administer, and
enforce this chapter.
(b) A rule adopted under Subsection (a) is binding on an
organization that applies for certification as an educational
assistance organization, an entity that applies for a credit, and a
state or local governmental entity, including a political
subdivision, as necessary to implement, administer, and enforce
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 of the assets of the entity are
conveyed, assigned, or transferred in the same transaction.
SECTION 3. (a) The constitutionality and other validity
under the state or federal constitution of all or any part of
Subchapter K, Chapter 171, Tax Code, or Chapter 230, Insurance
Code, as added by this Act, may be determined in an action for
declaratory judgment in a district court in Travis County under
Chapter 37, Civil Practice and Remedies Code, except that this
section does not authorize an award of attorney's fees against this
state and Section 37.009, Civil Practice and Remedies Code, does
not apply to an action filed under this section. This section does
not authorize a taxpayer suit to contest the denial of a tax credit
by the comptroller of public accounts.
(b) An appeal of a declaratory judgment or order, however
characterized, of a district court, including an appeal of the
judgment of an appellate court, holding or otherwise determining
that all or any part of Subchapter K, Chapter 171, Tax Code, or
Chapter 230, Insurance Code, as added by this Act, is
constitutional or unconstitutional, or otherwise valid or invalid,
under the state or federal constitution is an accelerated appeal.
(c) If the judgment or order is interlocutory, an
interlocutory appeal may be taken from the judgment or order and is
an accelerated appeal.
(d) A district court in Travis County may grant or deny a
temporary or otherwise interlocutory injunction or a permanent
injunction on the grounds of the constitutionality or
unconstitutionality, or other validity or invalidity, under the
state or federal constitution of all or any part of Subchapter K,
Chapter 171, Tax Code, or Chapter 230, Insurance Code, as added by
this Act.
(e) There is a direct appeal to the supreme court from an
order, however characterized, of a trial court granting or denying
a temporary or otherwise interlocutory injunction or a permanent
injunction on the grounds of the constitutionality or
unconstitutionality, or other validity or invalidity, under the
state or federal constitution of all or any part of Subchapter K,
Chapter 171, Tax Code, or Chapter 230, Insurance Code, as added by
this Act.
(f) The direct appeal is an accelerated appeal.
(g) This section exercises the authority granted by Section
3-b, Article V, Texas Constitution.
(h) The filing of a direct appeal under this section will
automatically stay any temporary or otherwise interlocutory
injunction or permanent injunction granted in accordance with this
section pending final determination by the supreme court, unless
the supreme court makes specific findings that the applicant
seeking such injunctive relief has pleaded and proved that:
(1) the applicant has a probable right to the relief it
seeks on final hearing; and
(2) the applicant will suffer a probable injury that
is imminent and irreparable, and that the applicant has no other
adequate legal remedy.
(i) An appeal under this section, including an
interlocutory, accelerated, or direct appeal, is governed, as
applicable, by the Texas Rules of Appellate Procedure, including
Rules 25.1(d)(6), 26.1(b), 28.1, 28.3, 32.1(g), 37.3(a)(1),
38.6(a) and (b), 40.1(b), and 49.4.
SECTION 4. An entity may apply for a credit under Subchapter
K, Chapter 171, Tax Code, or Chapter 230, Insurance Code, as added
by this Act, only for an expenditure made on or after the effective
date of this Act.
SECTION 5. Not later than February 15, 2016, the
comptroller of public accounts shall adopt rules as provided by
Section 171.560(a), Tax Code, and Section 230.054(a), Insurance
Code, as added by this Act.
SECTION 6. The comptroller of public accounts shall make
the initial determination of net savings and report regarding that
savings as required by Section 171.563, Tax Code, as added by this
Act, not later than December 31, 2018, based on the state fiscal
biennium ending August 31, 2017.
SECTION 7. This Act takes effect January 1, 2016.