HB0105

HOUSE BILL 105

56th legislature - STATE OF NEW MEXICO - second session, 2024

INTRODUCED BY

T. Ryan Lane and James G. Townsend and Harlan Vincent and

Jared A. Hembree and Candy Spence Ezzell

AN ACT

RELATING TO PRIVATE EDUCATION; PROVIDING FOR THE AUTHORIZATION OF SCHOOL TUITION ORGANIZATIONS TO AWARD EDUCATIONAL SCHOLARSHIPS TO CERTAIN LOW-INCOME STUDENTS TO ATTEND PRIVATE SCHOOLS; CREATING THE EDUCATIONAL SCHOLARSHIP INCOME TAX CREDIT AND THE EDUCATIONAL SCHOLARSHIP CORPORATE INCOME TAX CREDIT.

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

SECTION 1. [NEW MATERIAL] SCHOOL TUITION ORGANIZATIONS--AUTHORIZATION TO AWARD EDUCATIONAL SCHOLARSHIPS TO PRIVATE SCHOOLS.--

A. The department may authorize a school tuition organization to award educational scholarships to eligible students to attend a private school in New Mexico of the students' parents' choice pursuant to this section.

B. A school tuition organization shall apply for authorization on forms and in a manner prescribed by the department. To be eligible as a school tuition organization, the organization shall:

(1) allocate at least ninety percent of the organization's annual revenue received from contributions for educational scholarships to eligible students to attend private schools in New Mexico;

(2) not limit the availability of educational scholarships to students of only one private school;

(3) not allow donors to designate student beneficiaries as a condition of any contribution to the organization or facilitate, encourage or knowingly allow the exchange of beneficiary student designations;

(4) include on the organization's website, if one exists, the percentage and total dollar amount of educational scholarships awarded during the previous fiscal year;

(5) award educational scholarships only to eligible students; and

(6) not award educational scholarships to attend a public, tribal or federal bureau of Indian education school.

C. If an individual educational scholarship exceeds the tuition of the private school that an eligible student attends, the amount in excess shall be returned to the school tuition organization that made the award. The school tuition organization may allocate the returned amount:

(1) as a multi-year award for that student; or

(2) for educational scholarships for other eligible students.

D. On or before September 30 of each year, each school tuition organization shall report electronically to the department, in a form prescribed by the department, the following information:

(1) the name, address and contact person of the school tuition organization;

(2) the names, job titles and annual salaries of the three employees who receive the highest annual salaries from the school tuition organization;

(3) the total number of contributions received during the previous fiscal year;

(4) the total dollar amount of contributions received during the previous fiscal year;

(5) the total number of eligible students awarded educational scholarships during the previous fiscal year;

(6) the total dollar amount of educational scholarships awarded during the previous fiscal year;

(7) the total dollar amount of money being held for eligible students' scholarships in future years, including the amount allocated as a multi-year award pursuant to Paragraph (1) of Subsection C of this section, with each eligible student identified;

(8) for each private school to which educational scholarships were awarded:

(a) the name and address of the private school;

(b) the number of educational scholarships awarded during the previous fiscal year; and

(9) the cost of an audit or financial review required pursuant to Subsections F and G of this section paid during the fiscal year.

E. The department shall post on its website a report of the information it receives pursuant to Subsection D of this section on or before January 1 of the calendar year following the year in which the information is received.

F. On or before September 30 of each year, a school tuition organization that received five hundred thousand dollars ($500,000) or more in contributions in the previous fiscal year shall provide for a financial audit of the organization. The audit shall be conducted in accordance with generally accepted auditing standards and shall evaluate the organization's compliance with Paragraph (1) of Subsection B of this section. The audit shall be conducted by an independent certified public accountant licensed pursuant to the 1999 Public Accountancy Act. The certified public accountant and the firm the certified public accountant is affiliated with shall be independent with respect to the organization, its officers and directors, services performed and all other independent relationships prescribed by generally accepted auditing standards.

G. On or before September 30 of each year, a school tuition organization that received less than five hundred thousand dollars ($500,000) in total donations in the previous fiscal year shall provide for a financial review of the organization. The review shall be conducted in accordance with standards for accounting and review services and shall evaluate the organization's compliance with the fiscal requirements of this section. The review shall be conducted by an independent certified public accountant licensed pursuant to the 1999 Public Accountancy Act. The certified public accountant and the firm the certified public accountant is affiliated with shall be independent with respect to the organization, its officers and directors, services performed and all other independent relationships prescribed by generally accepted auditing standards.

H. Within five days after receiving an audit or financial review, the school tuition organization shall file a signed copy of the audit or financial review with the department. The school tuition organization shall pay the fees and costs of the audit or financial review from the organization's operating budget. The fees and costs shall be excluded from the calculation of revenues spent on educational scholarships.

I. The department shall:

(1) maintain a public registry of authorized school tuition organizations;

(2) make the registry available to the public on request; and

(3) post the registry on the department's website.

J. As used in this section:

(1) "department" means the public education department;

(2) "eligible student" means a qualified student, as defined in the Public School Finance Act, who resides in New Mexico and is member of a household for which the 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 1769, as amended; provided that once a student becomes an eligible student, receives an educational scholarship and continuously attends the private school, the student shall remain an eligible student regardless of household income until the student graduates from high school or reaches twenty-one years of age, and:

(a) attended a public school in New Mexico as a full-time student for at least one full semester immediately prior to receiving an educational scholarship and enrolling in and transferring to a private school; or

(b) attended, as a full-time student, a home school in New Mexico that meets the requirements of the Public School Code for at least one full semester immediately prior to receiving an educational scholarship and enrolling in and transferring to a private school;

(3) "nonprofit organization" means an organization that has been granted exemption from the federal income tax by the United States commissioner of internal revenue as organizations described in Section 501(c)(3) of the United States Internal Revenue Code of 1986, as amended or renumbered; and

(4) "school tuition organization" means a nonprofit organization with a principal place of business in New Mexico that provides education scholarships to eligible students attending private schools in New Mexico of their parents' choice."

SECTION 2. A new section of the Income Tax Act is enacted to read:

"[NEW MATERIAL] EDUCATIONAL SCHOLARSHIP INCOME TAX CREDIT.--

A. A taxpayer who is not a dependent of another individual and who makes a contribution to a school tuition organization pursuant to Section 1 of this 2024 act may apply for, and the department may allow, a credit against the taxpayer's tax liability imposed pursuant to the Income Tax Act. The tax credit provided by this section may be referred to as the "educational scholarship income tax credit".

B. The amount of the tax credit allowed by this section shall be in an amount equal to the amount contributed to a school tuition organization in a taxable year, not to exceed seven hundred dollars ($700) for single individuals and married individuals filing separate returns and one thousand four hundred dollars ($1,400) for heads of household, surviving spouses and married individuals filing joint returns; provided that for the taxable year beginning January 1, 2025 and each taxable year thereafter, the amount of credit shall be adjusted to account for inflation. The department shall allow a tax credit only for a contribution certified pursuant to Subsection C of this section.

C. A taxpayer shall apply for certification of eligibility for the tax credit allowed by this section from the public education department on forms and in the manner prescribed by that department. The application shall include evidence of a contribution to a school tuition organization made pursuant to Section 1 of this 2024 act.

D. A taxpayer may claim the tax credit allowed by this section for the taxable year in which the taxpayer makes a contribution to a school tuition organization. To receive the tax credit, a taxpayer shall apply to the department on forms and in the manner prescribed by the department within twelve months following the calendar year in which the contribution is made. The application shall include a certification made pursuant to Subsection C of this section.

E. That portion of the credit that exceeds a taxpayer's tax liability in the taxable year in which the credit is claimed shall not be refunded to the taxpayer but may be carried forward for the following three consecutive taxable years until the amount of the tax credit is exhausted.

F. A taxpayer allowed a tax credit pursuant to this section shall report the amount of the tax credit to the department in a manner required by that department.

G. The department shall compile an annual report on the tax credit that shall include the number of taxpayers approved by the department to receive the tax credit, the aggregate amount of tax credits approved and any other information necessary to evaluate the tax credit. The department shall present the report to the revenue stabilization and tax policy committee and the legislative finance committee with an analysis of the cost of the tax credit."

SECTION 3. A new section of the Corporate Income and Franchise Tax Act is enacted to read:

"[NEW MATERIAL] EDUCATIONAL SCHOLARSHIP CORPORATE INCOME TAX CREDIT.--

A. A taxpayer that makes a contribution to a school tuition organization pursuant to Section 1 of this 2024 act may apply for, and the department may allow, a credit against the taxpayer's tax liability imposed pursuant to the Corporate Income and Franchise Tax Act. The tax credit provided by this section may be referred to as the "educational scholarship corporate income tax credit".

B. The amount of the tax credit allowed by this section shall be in an amount equal to the amount contributed to a school tuition organization in a taxable year, not to exceed one thousand four hundred dollars ($1,400); provided that for the taxable year beginning January 1, 2025 and each taxable year thereafter, the amount of credit shall be adjusted to account for inflation. The department shall allow a tax credit only for a contribution certified pursuant to Subsection C of this section.

F. A taxpayer allowed a tax credit pursuant to this section shall report the amount of the tax credit to the department in a manner required by that department.

SECTION 4. APPLICABILITY.--The provisions of Sections 2 and 3 of this act apply to taxable years beginning on or after January 1, 2024.

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