SB0398

SENATE BILL 398

50th legislature - STATE OF NEW MEXICO - first session, 2011

INTRODUCED BY

Gerald Ortiz y Pino

AN ACT

RELATING TO TAXATION; ENACTING THE SPECIAL NEEDS STUDENT SCHOLARSHIP ACT; PROVIDING FOR TUITION SCHOLARSHIP ORGANIZATIONS TO GRANT EDUCATIONAL SCHOLARSHIPS TO SPECIAL NEEDS STUDENTS TO ATTEND CERTAIN PUBLIC AND NONPUBLIC SCHOOLS; CREATING INCOME TAX AND CORPORATE INCOME TAX CREDITS FOR CONTRIBUTIONS TO TUITION SCHOLARSHIP ORGANIZATIONS THAT PROVIDE EDUCATIONAL SCHOLARSHIPS FOR SPECIAL NEEDS STUDENTS TO ATTEND PUBLIC OR PRIVATE SCHOOLS OF THE STUDENT'S PARENTS' CHOICE.

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

SECTION 1. [NEW MATERIAL] SHORT TITLE.--Sections 1 through 5 of this act may be cited as the "Special Needs Student Scholarship Act".

SECTION 2. [NEW MATERIAL] DEFINITIONS.--As used in the Special Needs Student Scholarship Act:

A. "certification document" means the document issued by the department to an organization verifying that the organization is a tuition scholarship organization and contributions to that organization for special needs student scholarships may be claimed as a special needs student scholarship tax credit;

B. "contribution receipt" means a document developed by the taxation and revenue department pursuant to the Special Needs Student Scholarship Act and provided to a tuition scholarship organization that in turn provides the document to an individual or corporate contributor that is a taxpayer that intends to claim a special needs student scholarship tax credit as a receipt for a contribution to the tuition scholarship organization;

C. "department" means the public education department;

D. "educational scholarship" means a tuition grant or other grant of funds to a special needs student to cover all or part of the costs of that student at a qualified school, including transportation costs;

E. "eligible student" means a special needs student who attended a public school for the semester prior to first receiving an educational scholarship pursuant to the Special Needs Student Scholarship Act;

F. "parent" means a guardian, custodian or other person with authority to act on behalf of a child;

G. "qualified school" means a public or nonpublic elementary, middle or secondary school located in New Mexico to which a parent has chosen to send a special needs student;

H. "relative" means a person related by affinity or consanguinity to the third degree;

I. "special needs student" means a student who has or is eligible to have an individual education plan as defined in Section 1401 of the federal Individuals with Disabilities Education Act or a plan created pursuant to Section 504 of the federal Rehabilitation Act of 1973 or who is living in foster care;

J. "special needs student scholarship tax credit" means the special needs student scholarship income tax credit provided in the Income Tax Act and the special needs student scholarship corporate income tax credit provided in the Corporate Income and Franchise Tax Act;

K. "tuition grant" means a grant of funds for the purpose of covering the costs of tuition for a qualified school; and

L. "tuition scholarship organization" means an organization that provides educational scholarships to students attending qualified schools of their parents' choice and that meets the criteria established in the Special Needs Student Scholarship Act.

SECTION 3. [NEW MATERIAL] TUITION SCHOLARSHIP ORGANIZATION--CERTIFICATION.--

A. An organization may seek certification from the department as a tuition scholarship organization by submitting an application for certification to the department.

B. To be certified as a tuition scholarship organization by the department, the organization shall provide documentation as deemed appropriate by the department to verify that:

(1) the organization has been granted an exemption from federal income tax as an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986;

(2) the organization has awarded or intends to award educational scholarships to special needs students who are attending or plan to attend qualified schools;

(3) the scholarships are funded from contributions that the organization has received in or prior to the current calendar year or anticipates receiving during the remainder of the calendar year and:

(a) at least ninety percent of the contributions received during a calendar year for which the organization issues a contribution receipt to an individual or corporate taxpayer for purposes of obtaining a special needs student scholarship tax credit is awarded by the organization as educational scholarships and all revenue from interest or investments is expended solely on educational scholarships; and

(b) a scholarship award to an eligible student shall not exceed eighty percent of the three-year rolling average of the state equalization guarantee distribution for the respective level of an eligible student as calculated for the associated program units;

(4) the organization distributes periodic scholarship payments as checks that are issued to an eligible student's parent, that are mailed to the qualified school in which the eligible student is enrolled and that require the endorsement of the parent prior to deposit of the check;

(5) educational scholarships awarded by the organization are portable during the school year and can be used at any qualified school that accepts the eligible student according to a parent's wishes; provided that the scholarship shall be prorated between schools based on the number of days attended at each school by the eligible student;

(6) criminal background checks on all of the organization's employees and board members have been conducted by the organization, with the understanding that individuals who might reasonably pose a risk to the sound fiscal management of the funds of the organization shall be excluded from employment or governance, and all pertinent findings on employees and board members have been provided to the department for review and approval;

(7) the organization has in place systems to provide for financial accountability, including independent annual audits that shall be submitted to the department in the form of a financial information report that complies with generally accepted accounting procedures as specified by the department and is certified to be free of material misstatements by the certified public accountant who performed the audit; and

(8) the organization is financially viable and receives or is likely to receive donations of fifty thousand dollars ($50,000) or more during a school year by filing with the department prior to the start of the school year a surety bond payable to the state in an amount equal to the aggregate amount of contributions expected to be received during the school year.

SECTION 4. [NEW MATERIAL] TUITION SCHOLARSHIP ORGANIZATION--DUTIES.--

A. No later than thirty days prior to the start of a new school year or the start of a new semester, a tuition scholarship organization shall provide to the department the names of eligible students who received scholarships, the respective levels of the students that have special education needs and the students' previous school district or charter school affiliation. The tuition scholarship organization shall provide verification that the eligible students have been awarded a tuition scholarship and have enrolled in a private school for the new school year or the new semester.

B. A tuition scholarship organization shall ensure that a school participating in the tuition scholarship organization's scholarship program:

(1) is in compliance with all health and safety laws or rules that apply to schools;

(2) holds a valid occupancy permit as required by applicable laws;

(3) certifies to the tuition scholarship organization that the school does not discriminate in admissions on the basis of race, color or national origin;

(4) provides academic accountability to parents of the students in the program by regularly reporting to the parent on the student's academic and developmental progress;

(5) certifies that every school employee with unsupervised access to students has undergone a background check as described in Subsection B of Section 22-10A-5 NMSA 1978;

(6) has no paid staff or board members who are also staff or board members of the tuition scholarship organization or who are relatives of the staff or board members of the tuition scholarship organization; and

(7) is a qualified school and, if the school has more applications for educational scholarships from eligible students than positions available for students receiving scholarships, the school fills the available scholarship positions only by using a random selection process.

C. By June 1 of each year beginning in 2012, a tuition scholarship organization shall report the following information to the department and the taxation and revenue department:

(1) the name and address of the tuition scholarship organization;

(2) the total number and dollar amount of contributions received for which contribution receipts were issued during the calendar year ending on December 31 of the prior year;

(3) the total number and dollar amount of all educational scholarships awarded during the calendar year ending on December 31 of the prior year; and

(4) the total number and dollar amount of educational scholarships awarded to eligible students during the calendar year ending on December 31 of the prior year.

D. A tuition scholarship organization shall:

(1) provide to each individual and corporate contributor of funds dedicated for educational scholarships a contribution receipt that shall be completed according to taxation and revenue department requirements;

(2) maintain a list by the sequential number on the contribution receipt identifying to whom each copy is issued, the amount and date of the contribution and any other information deemed necessary by the taxation and revenue department to allow the contributor to receive a special needs student scholarship tax credit; and

(3) account for all copies of contribution receipts damaged, destroyed, lost or otherwise unusable.

SECTION 5. [NEW MATERIAL] DEPARTMENT--DUTIES.--

A. The department shall administer the Special Needs Student Scholarship Act.

B. The department shall:

(1) provide the name of each certified tuition scholarship organization to the taxation and revenue department by no later than thirty days after issuing the certification document to the tuition scholarship organization;

(2) upon notification by the tuition scholarship organization, calculate the associated program units for an eligible student receiving an educational scholarship that would have been generated under the funding formula using the current year unit value and determine the dollar amount of that student's program cost, if that student were to have enrolled in the student's previous school for the new school year or the new semester;

(3) if an eligible student receiving an educational scholarship withdraws prior to the start of a new school year, deduct that student's program cost from the student's previous school district or charter school state equalization guarantee distribution allocation prior to distribution;

(4) if an eligible student receiving an educational scholarship withdraws between semesters, make a prorated reduction in the school district's or charter school's distribution for the remainder of the school year and not distribute the funds attributed to the adjustments, which shall remain undistributed and shall revert to the general fund at the end of the fiscal year;

(5) engage an auditor to conduct a financial and program audit of a tuition scholarship organization, at the expense of the tuition scholarship organization, if there is evidence of fraud or failure to comply with the Special Needs Student Scholarship Act;

(6) deny, suspend or revoke the certification of a tuition scholarship organization for purposes of the special needs student scholarship tax credit if the department determines that the organization has intentionally and substantially failed to comply with the requirements of the Special Needs Student Scholarship Act; and

(7) notify the taxation and revenue department if the certification of an organization as a tuition scholarship organization is denied, suspended or revoked within ten days of the denial, suspension or revocation.

SECTION 6. A new section of the Income Tax Act is enacted to read:

"[NEW MATERIAL] SPECIAL NEEDS STUDENT SCHOLARSHIP INCOME TAX CREDIT.--

A. A taxpayer who files a New Mexico income tax return and is not a dependent of another taxpayer may claim, and the department may approve, a credit against the income tax liability of the taxpayer for a contribution made to a tuition scholarship organization. The credit may be approved in an amount equal to ninety percent of the total contributions made by the taxpayer to a tuition scholarship organization for which contribution receipts have been provided by that organization during the taxable year but shall not exceed fifty percent of the taxpayer's income tax liability for the taxable year. The credit provided in this section may be referred to as the "special needs student scholarship income tax credit".

B. The purpose of the special needs student scholarship income tax credit is to encourage individuals and businesses to contribute money to tuition scholarship organizations that provide scholarships for special needs students to attend public or nonpublic schools that are chosen by the students' parents.

C. To ensure that the department receives the information needed to allow a special needs student scholarship income tax credit, the department shall develop a contribution receipt that requests all of the information needed by the department to determine if a credit is due. The contribution receipts shall be sequentially numbered, and a charge, not to exceed fifty cents ($.50) per numbered copy, may be charged by the department to the tuition scholarship organization.

D. Upon receiving notice from the public education department that an organization has been certified as a tuition scholarship organization, the department shall provide sequentially numbered copies of contribution receipts to a tuition scholarship organization to be distributed by the tuition scholarship organization to its contributors to indicate the recipient, date and value of a contribution to the tuition scholarship organization and other information required by the department.

E. The department shall require a taxpayer claiming the special needs student scholarship income tax credit to submit the numbered copy of the contribution receipt from the tuition scholarship organization to which the taxpayer contributed money with the taxpayer's application for the credit provided by this section.

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

G. A husband and wife who file separate returns for a taxable year in which they could have filed a joint return may each claim only one-half of the special needs student scholarship income tax credit that would have been allowed on a joint return.

H. A taxpayer who otherwise qualifies for and claims a special needs student scholarship income tax credit for a contribution made to a tuition scholarship organization by a partnership or other business association of which the taxpayer is a member may claim a credit only in proportion to the taxpayer's interest in the partnership or business association. The total credit claimed in the aggregate by all members of the partnership or business association in a taxable year with respect to a contribution made to a tuition scholarship organization, including special needs student scholarship corporate income tax credits claimed by a corporate member of the partnership or business association, shall not exceed the maximum credit that would have been allowable pursuant to this section if claimed by a single taxpayer.

I. Any amount of the special needs student scholarship income tax credit allowed by the department that exceeds fifty percent of the income tax liability of the taxpayer in the taxable year in which the credit is first claimed may be carried forward for three consecutive taxable years.

J. The department shall compile a report annually for the revenue stabilization and tax policy committee that sets forth the number of taxpayers approved to receive special needs student scholarship income tax credits, the aggregate amount of credits approved and the average and median amounts of credits approved. The department shall determine every three years beginning in 2013 whether the special needs student scholarship income tax credit is performing the purpose for which it was created.

K. A taxpayer that claims a special needs student scholarship income tax credit pursuant to the Income Tax Act shall not also claim a special needs student scholarship corporate income tax credit pursuant to the Corporate Income and Franchise Tax Act or any other similar tax credit for the same contribution to a tuition scholarship organization. The special needs student scholarship income tax credit shall be applied to the taxpayer's tax liability before application of any other tax credit claimed for the taxable year by the taxpayer.

L. Acceptance of the special needs student scholarship income tax credit is authorization to the department to disclose the amount of the tax credit claimed by the taxpayer as needed to report fully as required by this section to the revenue stabilization and tax policy committee of the legislature.

M. As used in this section:

(1) "contribution receipt" means the document developed by the department and issued pursuant to the Special Needs Student Scholarship Act by a tuition scholarship organization to a contributor;

(2) "parent" means a guardian, custodian or other person with authority to act on behalf of a child;

(3) "special needs student" means a student who has or is eligible to have an individual education plan as defined in Section 1401 of the Individuals with Disabilities Education Act or a plan created pursuant to Section 504 of the federal Rehabilitation Act of 1973 or who is living in foster care; and

(4) "tuition scholarship organization" means an organization that provides educational scholarships to students attending qualified schools of their parents' choice and that meets the requirements of the Special Needs Student Scholarship Act."

SECTION 7. A new section of the Corporate Income and Franchise Tax Act is enacted to read:

"[NEW MATERIAL] SPECIAL NEEDS STUDENT SCHOLARSHIP CORPORATE INCOME TAX CREDIT.--

A. A taxpayer that files a New Mexico corporate income tax return may claim, and the department may approve, a credit against the corporate income tax liability of the taxpayer for a contribution made to a tuition scholarship organization. The credit may be approved in an amount equal to ninety percent of the total contributions made by the taxpayer to a tuition scholarship organization for which contribution receipts have been provided by that organization during the taxable year but shall not exceed fifty percent of the taxpayer's corporate income tax liability for the taxable year. The credit provided in this section may be referred to as the "special needs student scholarship corporate income tax credit".

B. The purpose of the special needs student scholarship corporate income tax credit is to encourage corporations to contribute money to tuition scholarship organizations that provide scholarships for special needs students to attend public or nonpublic schools that are chosen by the students' parents.

C. To ensure that the department receives the information needed to allow a special needs student scholarship corporate income tax credit, the department shall develop a contribution receipt that requests all of the information needed by the department to determine if a credit is due. The contribution receipts shall be sequentially numbered, and a charge, not to exceed fifty cents ($.50) per numbered copy, may be charged by the department to the tuition scholarship organization.

E. The department shall require a taxpayer claiming the special needs scholarship corporate income tax credit to submit the numbered copy of the certification document from the tuition scholarship organization to which the taxpayer contributed money with the taxpayer's application for the credit provided by this section.

F. The special needs student scholarship corporate income tax credit shall not be allowed for a contribution that is included for the taxable year in the taxpayer's itemized deductions, as defined in Section 63 of the Internal Revenue Code.

G. Any amount of the special needs student scholarship corporate income tax credit allowed by the department that exceeds fifty percent of the corporate income tax liability of the taxpayer in the taxable year in which the credit is first claimed may be carried forward for three consecutive taxable years.

H. The department shall compile a report annually for the revenue stabilization and tax policy committee that sets forth the number of taxpayers approved to receive special needs student scholarship corporate income tax credits, the aggregate amount of credits approved and the average and median amounts of credits approved. The department shall determine every three years beginning in 2013 whether the special needs student scholarship corporate income tax credit is performing the purpose for which it was created.

I. A taxpayer that claims a special needs student scholarship corporate income tax credit pursuant to the Corporate Income and Franchise Tax Act shall not also claim a special needs student scholarship income tax credit pursuant to the Income Tax Act or any other similar tax credit for the same contribution to a tuition scholarship organization. The special needs student scholarship corporate income tax credit shall be applied to the taxpayer's tax liability before application of any other tax credit claimed for the taxable year by the taxpayer.

J. Acceptance of the special needs student scholarship corporate income tax credit is authorization to the department to disclose the amount of the tax credit claimed by the taxpayer as needed to report fully as required by this section to the revenue stabilization and tax policy committee of the legislature.

K. As used in this section:

(1) "contribution receipt" means the document issued pursuant to the Special Needs Student Scholarship Act by a tuition scholarship organization to a contributor;

(2) "parent" means a guardian, custodian or other person with authority to act on behalf of a child;

(4) "tuition scholarship organization" means an organization that provides educational scholarships to students attending qualified schools of their parents' choice pursuant to the Special Needs Student Scholarship Act."

SECTION 8. Section 22-8-12.1 NMSA 1978 (being Laws 1978, Chapter 128, Section 5, as amended) is amended to read:

"22-8-12.1. MEMBERSHIP PROJECTIONS AND BUDGET

REQUESTS.--

A. Each local school board or governing body of a state-chartered charter school shall submit annually, on or before October 15, to the department:

(1) an estimate for the succeeding fiscal year of:

(a) the membership of qualified students to be enrolled in the basic program;

(b) the full-time-equivalent membership of students to be enrolled in approved early childhood education programs; and

(c) the membership of students to be enrolled in approved special education programs, adjusted for deductions due to student participation in the scholarship programs of the Special Needs Student Scholarship Act;

(2) all other information necessary to calculate program costs; and

(3) any other information related to the financial needs of the school district or state-chartered charter school as may be requested by the department.

B. All information requested pursuant to Subsection A of this section shall be submitted on forms prescribed and furnished by the department and shall comply with the department's rules and procedures.

C. The department shall:

(1) review the financial needs of each school district or state-chartered charter school for the succeeding fiscal year; and

(2) submit annually, on or before November 30, to the secretary of finance and administration the recommendations of the department for:

(a) amendments to the public school finance formula;

(b) appropriations for the succeeding fiscal year to the public school fund for inclusion in the executive budget document; and

SECTION 9. APPLICABILITY.--The provisions of Sections 6 and 7 of this act apply to taxable years beginning on or after January 1, 2012 but before January 1, 2016.

SECTION 10. EFFECTIVE DATE.--

A. The effective date of the provisions of Sections 1 through 5 and 8 of this act is July 1, 2011.

B. The effective date of the provisions of Sections 6 and 7 of this act is January 1, 2012.

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