SB 372-FN-LOCAL – AS INTRODUCED

2012 SESSION

12-2995

04/10

SENATE BILL 372-FN-LOCAL

AN ACT establishing an education credit against the business profits tax.

SPONSORS: Sen. Forsythe, Dist 4; Sen. Bradley, Dist 3; Sen. Bragdon, Dist 11; Sen. Carson, Dist 14; Sen. De Blois, Dist 18; Sen. Gallus, Dist 1; Sen. Groen, Dist 6; Sen. Lambert, Dist 13; Sen. Luther, Dist 12; Sen. Sanborn, Dist 7; Sen. White, Dist 9; Rep. Hill, Merr 6; Rep. Bettencourt, Rock 4; Rep. B. Murphy, Rock 18; Rep. Groen, Straf 1

COMMITTEE: Education

ANALYSIS

This bill establishes an education credit against the business profits tax for business organizations that contribute to scholarship organizations which awards scholarships to be used by students to defray the educational expenses of attending an independent school.

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Explanation: Matter added to current law appears in bold italics.

Matter removed from current law appears [in brackets and struckthrough.]

Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.

12-2995

04/10

STATE OF NEW HAMPSHIRE

In the Year of Our Lord Two Thousand Twelve

AN ACT establishing an education credit against the business profits tax.

Be it Enacted by the Senate and House of Representatives in General Court convened:

1 Purpose.

I. The general court finds that:

(a) It has the inherent power to determine subjects of taxation for general or particular public purposes.

(b) Expanding educational opportunities and improving the quality of educational services within the state are valid public purposes that the general court may cherish using its sovereign power to determine subjects of taxation and exemptions from taxation.

(c) Ensuring that all parents, regardless of means, may exercise and enjoy their basic right to educate their children as they see fit is a valid public purpose that the general court may promote using its sovereign power to determine subjects of taxation and exemptions from taxation.

(d) Expanding educational opportunities and thereby promoting healthy competition is critical to improving the quality of education in the state and ensuring that all children have the opportunity to receive a high quality education.

II. The purpose of this act is to:

(a) Allow maximum freedom to parents and independent schools to respond to and, without governmental control, provide for the educational needs of children, and this act shall be liberally construed to achieve that purpose.

(b) Promote the general welfare by expanding educational opportunities for children.

(c) Enable children in this state to achieve a higher level of excellence in their education.

(d) Improve the quality of education in this state, both by expanding educational opportunities for children and by creating incentives for schools to achieve excellence.

2 New Paragraph; Business Profits Tax; Credits. Amend RSA 77-A:5 by inserting after paragraph XIV the following new paragraph:

XV. The education credit as calculated pursuant to RSA 77-A:5-c.

3 New Section; Business Profits Tax; Education Credit. Amend RSA 77-A by inserting after section 5-b the following new section:

77-A:5-c Education Credit.

I. The following definitions shall apply in this section:

(a) “Independent school” means a school located in New Hampshire, other than a public school, at which the compulsory school attendance requirements may be met and that meets state and federal antidiscrimination laws. “Independent school” shall include home schools.

(b) “Owner or operator” means an owner, president, officer, or director of an eligible nonprofit scholarship organization or a person with equivalent decision making authority over an eligible nonprofit scholarship organization.

(c) “Parent” means the natural or adoptive parent or legal guardian of a child.

(d) “Eligible student” means a student who is a New Hampshire resident who is at least 5 years of age and no more than 18 years of age, and has not graduated from high school and

(1) Who is currently attending or eligible to attend a New Hampshire public school, including a chartered public school, or who received a scholarship from a scholarship organization as a result of attending a New Hampshire public school, including a chartered public school, or is starting school for the first time in this state; or

(2) Who is currently attending a nonpublic school or who is home educated pursuant to RSA 193-A.

(e) “Receipt” means a document developed by the commissioner that is issued by the receiving school to the scholarship organization which makes payment for education expenses on behalf of an eligible student and that contains, at a minimum and where applicable:

(1) The name and address of the school if a school is attended.

(2) The name, social security number, and address of the eligible student for whom the expense has been paid.

(3) The name of the payer and the date and amount of the expense paid.

(4) Receipts for all specific, reimbursed educational expenses.

(f) “Receiving school” means an independent school which the eligible student seeks to attend.

(g) “Release of information form” means a document developed by a receiving school, signed by the parent or guardian of an eligible student, and which acknowledges the consent of the parent or guardian to release of information contained in the receipt.

(h) “Scholarship receipt” means a document developed by the New Hampshire department of revenue administration and issued by the student scholarship organization to a business organization or a person that makes a contribution to a student scholarship organization, and that contains at a minimum:

(1) The name, address, and taxpayer identification number of the business or person making the donation.

(2) The owner’s name.

(3) The amount of the donation.

(4) The year in which the donation was made.

(5) The names of all school age children that are dependents of the business owner.

(i) “Scholarship organization” means a charitable organization incorporated or qualified to do business in this state that:

(1) Is exempt from federal income taxation pursuant to section 501(c)(3) of the Internal Revenue Code;

(2) Complies with applicable state and federal antidiscrimination provisions; and

(3) Is registered with the New Hampshire secretary of state’s office.

(j) “Education expenses” means the tuition cost of an eligible student to attend an independent school, or, in the case of a home schooled student, the academic expenses not to exceed $1,500, incurred in a child's home schooling, including instruction-related materials and equipment, online learning services, and tutoring services. Educational expenses shall not include fees or expenses related to participation in athletic programs, transportation expenses, or the cost of a parent’s time expended in the home schooling of his or her child.

II.(a) An eligible student may receive a scholarship to attend an independent school in an amount not to exceed the tuition cost or education expenses of the independent school if the eligible student is not enrolled in a public school at the time the tuition costs or education expenses are incurred.

(b) In each year of the program, the average value of all scholarships awarded by a scholarship organization shall be $2,500. In the first year of the program, a scholarship organization shall award a minimum of 50 percent of all scholarships issued to eligible students as defined in subparagraph I(d)(1). The required minimum percentage of all scholarships issued by a scholarship organization to eligible students as defined in subparagraph I(d)(1) shall be reduced by 10 percent each year for years 2 through 5 of the program, and, at the beginning of the sixth year and every year thereafter, there shall be no required minimum percentage of scholarships.

(c) The minimum value of a scholarship, granted to a student receiving special education programs or services pursuant to RSA 186-C shall be $1,856 or the additional amount granted to special education students under RSA 198:40-a, III, whichever is greater.

(d) A student shall reapply each year for a scholarship.

III. For each contribution made to a scholarship organization, a business organization may claim a credit equal to 75 percent of the contribution against business profits tax due under this chapter. The department of revenue administration shall not grant the credit without a scholarship receipt. No business organization shall direct, assign, or restrict any contribution to a scholarship organization for the use of a particular student or independent school.

IV.(a) The aggregate of tax credits issued by the commissioner of the department of revenue administration to all taxpayers claiming the credit shall not exceed $15,000,000 for the fiscal year ending June 30, 2013, and

(b) For each fiscal year in which the value of the total scholarship receipts exceeds 90 percent of the previous fiscal year’s aggregate of tax credits issued, the aggregate of tax credits for the next fiscal year shall increase by 25 percent.

V.(a) An independent school, except a home education program established under RSA 193-A, that accepts students pursuant to this section shall:

(1) Be included on a list of eligible schools published by the department of education;

(2) Comply with state and federal antidiscrimination laws;

(3) Meet state and local health and safety laws and codes;

(4) Comply with state statutes relating to independent education; and

(5) Accept scholarship students on the basis of the admissions criteria of the school within the school’s capacity to accept additional students.

(b) An independent school that does not meet the requirements of this paragraph shall not be eligible to participate in the education credit program.

VI. A scholarship organization shall:

(a) Allocate at least 90 percent of its annual revenue for which scholarship receipts were issued for tax credit purposes to scholarships for eligible students for educational purposes;

(b) Not have an owner or operator who in the last 7 years has filed for personal bankruptcy or corporate bankruptcy in a business organization of which he or she owned more than 20 percent;

(c) Not have an owner or operator who also owns or operates an independent school that participates in the education credit program;

(d) Provide scholarships from eligible contributions to eligible students to defray educational expenses;

(e) Not restrict or reserve scholarships for use at a single independent school or provide scholarships to a child of an owner or operator;

(f) Verify a student’s eligibility to apply for and receive a scholarship through transcripts and attendance records;

(g) Not use more than 10 percent of eligible contributions received during the state fiscal year in which the contributions are collected, and for which scholarship receipts were issued for tax credit purposes, for administrative expenses. Administrative expenses shall be reasonable and necessary for the organization’s management and distribution of eligible contributions pursuant to this section.

(h) In the first year of the program, expend an amount equal to 100 percent of eligible contributions, less administrative expenses, for annual or partial year scholarships during the state fiscal year in which these contributions are collected. In year 2 and every year thereafter, expend an amount equal to or greater 90 percent of eligible contributions, less administrative expenses, for annual or partial year scholarships during the state fiscal year in which these contributions are collected. No more than 10 percent of eligible contributions in any fiscal year, less administrative expenses, may be carried forward to the following fiscal year. Any amount carried forward shall be expended for annual or partial year scholarships in the fiscal year into which the amount is carried forward. Any eligible contributions remaining on June 30 of each year which are in excess of the 10 percent to be carried forward shall lapse to the general fund.

(i) Maintain separate accounts for scholarship funds, non-tax credit donations, and operating funds.

(j) Provide to the department of revenue administration an annual financial and compliance report of its accounts and records. It also shall include a report on financial statements presented in accordance with generally accepted accounting principles provided by the American Institute of Certified Public Accountants for not for profit organizations and a determination of compliance with statutory eligibility and expenditure requirements provided in this section.

(k) Prepare and submit quarterly reports to the department of revenue administration. Such reports shall contain, at a minimum:

(1) The name and address of the child applying for a scholarship.

(2) The type of applicant based on the following categories: new; public school; special education; nonpublic or private school; nonpublic or private school but received a scholarship in a previous year as a public school student; home schooled student.

(3) The scholarship amount received.

(4) The school last attended by the applicant.

(5) A list of independent schools attended by scholarship recipients.

In addition, an eligible nonprofit scholarship funding organization shall submit in a timely manner any information requested by the commissioner relating to the education credit.

VII. The provisions of this section regarding independent schools and their relation to scholarship organizations shall apply only to independent schools that choose to accept scholarship students.

VIII. The department of revenue shall:

(a) Develop, and annually verify and update, by March 15, a list of eligible nonprofit scholarship funding organizations that meet the requirements of this section. The department shall post this list on the department’s Internet website and update the list at least quarterly. The department shall forward the list and any updates to the commissioner of the department of education who shall post the list on the department of education Internet website.

(b) Verify annually the eligibility of expenditures as provided in this section using the audit procedure.

(c) Notify an eligible nonprofit scholarship funding organization of any of the organization’s identified students who are receiving tax credit scholarships from other eligible nonprofit scholarship funding organizations.

(d) Establish a process by which individuals may notify the department of revenue administration of any violation by a parent or independent school of state laws relating to program participation. The department of revenue administration shall conduct an inquiry of any written complaint of a violation of this section, or make a referral to the appropriate agency for an investigation, if the complaint is signed by the complainant and is legally sufficient. A complaint is legally sufficient if it contains facts demonstrating a violation of this section or any rule adopted pursuant to this section In order to determine legal sufficiency, the department of revenue administration may require supporting information or documentation from the complainant.

(e) Require quarterly reports by an eligible nonprofit scholarship funding organization as required in subparagraph VI(k) and submit such reports to the members of the house and senate education committees and to the department of education.

IX.(a) A receiving independent school that accepts students benefiting from scholarships, grants, or tax credits shall not be an agent of the state or federal government.

(b) Except as provided in this section, no state department, agency or board shall not regulate the educational program of a receiving independent school that accepts students pursuant to this section.

X. Using the unique pupil identification system established in RSA 193-E:5, the department of education shall determine the number of pupils receiving a scholarship under this section who were counted in the calculation of the average daily membership in residence, as defined in RSA 189:1-d, IV, for the pupil’s school district of residence and for each such pupil, shall deduct the amount calculated under RSA 198:40-a, I-III from the adequate education grant amount disbursed to the pupil’s school district of residence.

4 Severability. If any provision of this act or the application thereof to any person or circumstances is held invalid, such invalidity shall not affect other provisions or applications of the act which can be given effect without the invalid provision or application, and to this end the provisions of this act are declared to be severable.

5 Effective Date. This act shall take effect July 1, 2012.

LBAO

12-2995

Revised 01/10/12

SB 372-FN – FISCAL NOTE

AN ACT establishing an education credit against the business profits tax.

FISCAL IMPACT:

METHODOLOGY: