Senate Bill text for SB0462

SENATE BILL 462

48th legislature - STATE OF NEW MEXICO - second session, 2008

INTRODUCED BY

James G. Taylor

AN ACT

RELATING TO TAXATION; PROVIDING FOR THE EQUAL OPPORTUNITY SCHOLARSHIP TAX CREDIT FOR CONTRIBUTIONS MADE TO CERTAIN ORGANIZATIONS FOR TUITION SCHOLARSHIPS FOR LOW-INCOME STUDENTS IN NONPUBLIC SCHOOLS.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

Section 1. A new section of the Income Tax Act is enacted to read:

"[NEW MATERIAL] EQUAL OPPORTUNITY SCHOLARSHIP TAX CREDIT.--

A. A taxpayer who files an individual New Mexico income tax return and is not a dependent of another taxpayer may claim a credit for a contribution made to a scholarship granting organization if a receipt has been received from the organization certifying that the contribution will be used for educational scholarships or tuition grants at a qualified school for eligible students. The credit may be claimed in an amount equal to the total contributions made during the taxable year for which the credit is claimed, or prior to April 15 of the following year, but shall not exceed five hundred dollars ($500) in any taxable year for an individual or one thousand dollars ($1,000) for a married couple filing jointly. A husband and wife who file separate returns for a taxable year in which they could have filed a joint return may each claim a credit not exceeding five hundred dollars ($500) for a contribution made to a scholarship granting organization. The credit provided in this subsection shall be known as the "equal opportunity scholarship tax credit".

B. The equal opportunity scholarship tax credit shall not be allowed for a contribution that is included in the taxpayer's itemized deductions, as defined in Section 63 of the Internal Revenue Code, for the taxable year.

C. The equal opportunity scholarship tax credit provided in this section may only be deducted from the taxpayer's New Mexico income tax liability for the taxable year in which the contribution is made.

D. A scholarship granting organization shall:

(1) notify the department of its intent to provide educational scholarships to eligible students attending qualified schools;

(2) demonstrate to the department that it has been granted an exemption from the federal income tax pursuant to Section 501(c)(3) of the Internal Revenue Code;

(3) provide a department-approved receipt to taxpayers for contributions made to the organization;

(4) ensure that at least ninety percent of its revenue from contributions is spent on educational scholarships, and that all revenue from interest or investments is spent on educational scholarships;

(5) cooperate with the public education department to conduct criminal background checks on all of its employees and board members and exclude from employment or governance any individual who might reasonably pose a risk to the appropriate use of contributed funds;

(6) ensure that educational scholarships are portable during the school year and can be used at any qualified school that accepts an eligible student according to a parent's wishes. If an eligible student moves to a new qualified school during a school year, the educational scholarship amount may be prorated;

(7) demonstrate its financial accountability by submitting a financial information report for the organization that complies with uniform financial accounting standards established by the department;

(8) ensure that a qualifying school that accepts its educational scholarships will:

(a) comply with all health and safety laws or codes that apply to nonpublic schools;

(b) hold a valid occupancy permit if required by its municipality;

(d) provide academic accountability to parents of the students in the program by regularly reporting to the parents on the student's progress;

(9) not provide educational scholarships for qualified students to attend any school with paid staff or board members, or relatives thereof, in common with the scholarship granting organization;

(10) publicly report to the department by June 1 of each year the following information regarding its educational scholarships for the previous calendar year:

(a) the name and address of the scholarship granting organization;

(b) the total number and total dollar amount of contributions received during the previous calendar year; and

(11) provide educational scholarships to more than one qualifying school.

E. The department shall:

(1) adopt rules as necessary to implement equal opportunity scholarship tax credits;

(2) provide a standardized format for a receipt to be issued by a scholarship granting organization to a taxpayer to indicate the value of a contribution received. The department shall require a taxpayer to provide a copy of this receipt when claiming an equal opportunity scholarship tax credit;

(3) provide a standardized format for scholarship granting organizations to report the information required pursuant to Paragraph (10) of Subsection D of this section;

(4) have the authority to conduct either a financial review or audit of a scholarship granting organization if possessing evidence of fraud; and

(5) bar a scholarship granting organization from participating in the program if the department establishes that the scholarship granting organization has intentionally and substantially failed to comply with the requirements set forth in Subsection D of this section. If the department decides to bar a scholarship granting organization from the program, it shall notify affected scholarship students and their parents of this decision as quickly as possible.

F. All qualified schools shall:

(1) operate in New Mexico;

(2) comply with all state laws that apply to nonpublic schools regarding criminal background checks for employees and exclude from employment any person not permitted by state law to work in a nonpublic school; and

(3) fill available spaces by a random selection process, except that a qualifying school may give preference to siblings of enrolled students and previously enrolled scholarship students, if a qualifying school has more eligible students applying than spaces available.

G. As used in this section:

(1) "educational scholarships" means grants to eligible students to cover all or part of the tuition and fees at a qualified school;

(2) "eligible student" means a student who:

(a) is a member of a household whose total annual income does not exceed an amount used to qualify for a reduced-price lunch through the federal school lunch programs established pursuant to 42 USCA Sections 1751 through 1770, as amended. Once a student receives a scholarship pursuant to the program, the student shall remain eligible regardless of household income until the student graduates from high school or reaches twenty-one years of age; and

(b) resides in New Mexico while receiving a scholarship from a scholarship granting organization;

(3) "qualified school" means an accredited nonpublic elementary or secondary school in New Mexico that:

(a) does not discriminate in admissions or treatment of students on the basis of a student's race, national origin or ethnicity;

(b) has been granted exemption from the federal income tax as an organization qualified pursuant to Section 501(c)(3) of the Internal Revenue Code;

(d) satisfies the requirements set forth in Subsection F of this section; and

(4) "scholarship granting organization" means an organization that:

(a) demonstrates to the department that it has been granted exemption from the federal income tax as an organization qualified pursuant to Section 501(c)(3) of the Internal Revenue Code;

(b) provides financial assistance for the education of children in the form of educational scholarships or tuition grants to eligible students allowing them to attend any qualified school of their parents' choice;

(c) expends at least ninety percent of its equal opportunity scholarship tax credit qualifying contributions for educational scholarships or tuition grants for children enrolled in a qualified school;

(d) provides one hundred percent of its educational scholarships or tuition grants to children who at the time of initial application for the scholarship or tuition grant qualify for free or reduced-price lunches through the federal school lunch programs established pursuant to 42 USCA Sections 1751 through 1770, as amended; and

(e) satisfies the requirements set forth in Subsection D of this section."

Section 2. A new section of the Corporate Income and Franchise Tax Act is enacted to read:

"[NEW MATERIAL] EQUAL OPPORTUNITY SCHOLARSHIP TAX CREDIT.--

A. A taxpayer that files a New Mexico income tax return may claim a credit for a contribution made to a scholarship granting organization if a receipt has been received from the organization certifying that the contribution will be used for educational scholarships or tuition grants at a qualified school for eligible students. The credit may be claimed in an amount equal to the total contributions made during the taxable year for which the credit is claimed, or prior to April 15 of the following year. The credit provided in this subsection shall be known as the "equal opportunity scholarship tax credit".

B. The equal opportunity scholarship tax credit shall not be allowed for a contribution that is included in a claim for a deduction or credit pursuant to the Internal Revenue Code.

C. The equal opportunity scholarship tax credit provided in this section may only be deducted from the taxpayer's New Mexico corporate income tax liability for the taxable year in which the contribution is made.