SB0048

SENATE BILL 48

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

INTRODUCED BY

Gerald Ortiz y Pino

AN ACT

RELATING TO EDUCATION SCHOLARSHIPS; AUTHORIZING TUITION SCHOLARSHIP ORGANIZATIONS TO AWARD EDUCATION SCHOLARSHIPS TO CERTAIN PRIVATE SCHOOLS; CREATING THE EDUCATION SCHOLARSHIP INCOME TAX CREDIT AND THE EDUCATION SCHOLARSHIP CORPORATE INCOME TAX CREDIT; PROVIDING A DELAYED REPEAL.

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

SECTION 1. [NEW MATERIAL] TUITION SCHOLARSHIP ORGANIZATIONS--CERTIFICATION--AUTHORIZATION TO AWARD EDUCATION SCHOLARSHIPS TO QUALIFIED SCHOOLS.--

A. The department may authorize a tuition scholarship organization to award education scholarships to qualified schools pursuant to this section; provided that:

(1) no more than the following percentages of a school district's student enrollment may be awarded an education scholarship:

(a) in school districts with a total student enrollment of less than one thousand students, nine-tenths percent of a school district's student enrollment;

(b) in school districts with a total student enrollment between one thousand and four thousand nine hundred ninety-nine students, eight-tenths percent;

(c) for school districts with a total student enrollment between five thousand and fourteen thousand nine hundred ninety-nine students, six-tenths percent;

(d) for school districts with a total student enrollment between fifteen thousand and twenty-four thousand nine hundred ninety-nine students, four-tenths percent;

(e) for school districts with a total student enrollment between twenty-five thousand and forty-nine thousand nine hundred ninety-nine students, three-tenths percent; and

(f) for school districts with a total student enrollment over fifty thousand students, two-tenths percent;

(2) no more than four hundred eligible students per school year may receive education scholarships; and

(3) the amount of an education scholarship that may be used by an eligible student shall not exceed nine thousand dollars ($9,000) for each school year.

B. An organization that seeks to be a tuition scholarship organization to provide education scholarships shall apply to the department on forms and in the manner prescribed by the department. Applications shall include documentation verifying 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 education scholarships to eligible 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;

(4) at least ninety percent of contributions received during a calendar year for which the organization issues a contribution receipt is awarded by the organization as education scholarships, and all revenue from interest or investments is expended solely on education scholarships;

(5) 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;

(6) an education scholarship awarded by the organization is portable during the school year and can be used at a 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;

(7) 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;

(8) 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 principles as specified by the department and is certified to be free of material misstatements by the certified public accountant who performed the audit; and

(9) prior to the start of a school year, the organization filed with the department a surety bond, payable to the state, in an amount equal to the greater of fifty thousand dollars ($50,000) or the aggregate amount of contributions expected to be received or is likely to be received during the school year.

C. No later than thirty days prior to the start of a school year or the start of a semester, a tuition scholarship organization shall provide to the department the names of eligible students who received education scholarships and the students' previous school district or charter school affiliations. The tuition scholarship organization shall provide verification that the eligible students have been awarded education scholarships and have enrolled in qualified schools for the school year or the semester.

D. A qualified school participating in a tuition scholarship organization's scholarship program shall certify to the organization that the school:

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

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

(3) does not discriminate in admissions on the basis of race, color or national origin;

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

(5) ensures that every school employee with unsupervised access to students has undergone a background check as described in Subsection D 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;

(7) gives enrollment preference to eligible students who were enrolled at the school in the prior year and to siblings of eligible students already admitted to or attending the school; and

(8) is a qualified school and, if the school has more applications for education 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.

E. On or before June 1 of each year, a tuition scholarship organization shall report the following information to the 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 education scholarships awarded during the calendar year ending on December 31 of the prior year; and

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

F. A tuition scholarship organization shall:

(1) provide to each person who makes a contribution that is dedicated to education scholarships a numbered and dated contribution receipt providing the amount contributed by the person;

(2) maintain a record of the contribution receipts issued for a least three years;

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

(4) on or before November 1 of each year, provide an annual report to the interim legislative finance committee, the legislative education study committee and the department that shall include the number of education scholarships provided by the tuition scholarship organization, the names of each school attended by eligible students who received education scholarships and the aggregate amount of amount of scholarships used at each school.

G. As used in this section:

(1) "contribution receipt" means a document provided to a person who makes a contribution that is dedicated to education scholarships;

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

(3) "education scholarship" means a grant of funds to an eligible student to cover all or part of the costs of that student at a qualified school;

(4) "eligible student" means a school-age person, as that term is used in the Public School Code, who:

(a) is enrolled in a state-licensed foster care program; or

(b) is a 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 receives an education scholarship, the student shall remain eligible regardless of household income until the student graduates from high school or reaches twenty-one years of age;

(5) "parent" means a guardian, custodian or other person with authority to act on behalf of an eligible student;

(6) "qualified school" means a private elementary, middle, junior high or secondary school located in New Mexico to which a parent has chosen to send an eligible student;

(7) "relative" means a person related by affinity or consanguinity to the third degree; and

(8) "tuition scholarship organization" means an organization that provides education scholarships to eligible students attending qualified schools of their parents' choice.

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

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

A. Prior to January 1, 2029, a taxpayer who is not a dependent of another individual and who receives a contribution receipt for making a contribution to a tuition scholarship 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 "education scholarship income tax credit".

B. The amount of the tax credit allowed by this section shall be in an amount equal to eighty percent of the amount contributed to a tuition scholarship organization in a taxable year. The department shall allow a tax credit only for a contribution receipt 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 aggregate amount of education scholarship income tax credits and education scholarship corporate income tax credits that may be certified as eligible in any calendar year is one million dollars ($1,000,000). Completed applications shall be considered in the order received. Applications for certification received after this limitation has been met in a calendar year shall not be approved. The application shall include a copy of the contribution receipt provided by the tuition scholarship organization that received a contribution from the taxpayer.

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 tuition scholarship 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 tax credit that exceeds a taxpayer's tax liability in the taxable year in which the tax credit is claimed may be carried forward for three consecutive taxable years.

F. Married individuals filing separate returns for a taxable year for which they could have filed a joint return may each claim only one-half of the tax credit that would have been claimed on a joint return.

G. A taxpayer may be allocated the right to claim a tax credit in proportion to the taxpayer's ownership interest if the taxpayer owns an interest in a business entity that is taxed for federal income tax purposes as a partnership or limited liability company and that business entity has met all of the requirements to be eligible for the tax credit. The total tax credit claimed by all members of the partnership or limited liability company shall not exceed the allowable tax credit pursuant to this section.

H. 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.

I. 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] EDUCATION SCHOLARSHIP CORPORATE INCOME TAX CREDIT.--

A. Prior to January 1, 2029, a taxpayer that receives a contribution receipt for making a contribution to a tuition scholarship 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 "education scholarship corporate income tax credit".

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 aggregate amount of education scholarship corporate income tax credits and education scholarship income tax credits that may be certified as eligible in any calendar year is one million dollars ($1,000,000). Completed applications shall be considered in the order received. Applications for certification received after this limitation has been met in a calendar year shall not be approved. The application shall include a copy of the contribution receipt provided by the tuition scholarship organization that received a contribution from the taxpayer.

E. That portion of tax credit that exceeds a taxpayer's tax liability in the taxable year in which the tax credit is claimed may be carried forward for three consecutive taxable years.

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 4. DELAYED REPEAL.--The provisions of this act are repealed effective January 1, 2029.

SECTION 5. 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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