To amend the Internal Revenue Code of 1986 to allow a credit against income tax for amounts contributed to charitable organizations which provide elementary or secondary school scholarships and for contributions of, and for, instructional materials and materials for extracurricular activities.

Summary: Education Improvement Tax Cut Act - Amends the Internal Revenue Code to allow: (1) a tax credit up to $3,000 per year for contributions to a school tuition organization which distributes at least 90 percent of its annual gross income for elementary and secondary school scholarships; and (2) a tax credit up to $3,000 per year for contributions to a school materials organization which distributes at least 90 percent of its annual gross income to elementary and secondary schools for instructional materials and equipment and for materials and equipment for extracurricular activities.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Education Improvement Tax Cut Act''.

SEC. 2. CREDIT FOR CONTRIBUTIONS TO CHARITABLE ORGANIZATIONS WHICH 
              PROVIDE ELEMENTARY OR SECONDARY SCHOOL SCHOLARSHIPS.

    (a) In General.--Subpart A of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to nonrefundable 
personal credits) is amended by inserting after section 25B the 
following new section:

``SEC. 25C. CONTRIBUTIONS TO ORGANIZATIONS PROVIDING ELEMENTARY OR 
              SECONDARY SCHOOL SCHOLARSHIPS.

    ``(a) Allowance of Credit.--In the case of an individual, there 
shall be allowed as a credit against the tax imposed by this chapter 
for the taxable year an amount equal to the qualified scholarship 
contributions of the taxpayer for the taxable year.
    ``(b) Maximum Credit.--The credit allowed by subsection (a) for any 
taxable year shall not exceed $3,000 ($1,500 in the case of a married 
individual (as determined under section 7703) filing a separate 
return).
    ``(c) Qualified Scholarship Contribution.--For purposes of this 
section--
            ``(1) In general.--The term `qualified scholarship 
        contribution' means, with respect to any taxable year, the 
        amount which would (but for subsection (d)) be allowable as a 
        deduction under section 170 for cash contributions to a school 
        tuition organization.
            ``(2) School tuition organization.--
                    ``(A) In general.--The term `school tuition 
                organization' means any organization described in 
                section 170(c)(2) if the annual disbursements of the 
                organization for elementary and secondary school 
                scholarships are normally not less than 90 percent of 
                the sum of such organization's annual gross income and 
                contributions and gifts.
                    ``(B) Elementary and secondary school 
                scholarship.--The term `elementary and secondary school 
                scholarship' means any scholarship excludable from 
                gross income under section 117 for expenses related to 
                education at or below the 12th grade.
    ``(d) Denial of Double Benefit.--No deduction shall be allowed 
under this chapter for any contribution for which a credit is allowed 
under this section.
    ``(e) Election to Have Credit not Apply.--
            ``(1) In general.--A taxpayer may elect to have this 
        section not apply for any taxable year.
            ``(2) Time for making election.--An election under 
        paragraph (1) for any taxable year may be made (or revoked) at 
        any time before the expiration of the 3-year period beginning 
        on the last date prescribed by law for filing the return for 
        such taxable year (determined without regard to extensions).
    ``(f) Cost-of-Living Adjustment.--In the case of any taxable year 
beginning in a calendar year after 2005, each dollar amount contained 
in subsection (b) shall be increased by an amount equal to--
            ``(1) such dollar amount, multiplied by
            ``(2) the cost-of-living adjustment determined under 
        section 1(f)(3) for the calendar year in which the taxable year 
        begins, by substituting `calendar year 2004' for `calendar year 
        1992' in subparagraph (B) thereof.
If any increase determined under the preceding sentence is not a 
multiple of $10, such increase shall be increased to the next highest 
multiple of $10. In the case of a married individual (as determined 
under section 7703) filing a separate return, the preceding sentence 
shall be applied by substituting `$5' for `$10' each place it appears.
    ``(g) Regulations.--The Secretary shall prescribe regulations to 
carry out this section, including regulations providing for claiming 
the credit under this section on Form 1040EZ.''.
    (b) Clerical Amendment.--The table of sections for subpart A of 
part IV of subchapter A of chapter 1 of such Code is amended by 
inserting after the item relating to section 25B the following new 
item:

``25C. Contributions to organizations providing elementary or secondary 
                            school scholarships.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2004.

SEC. 3. CREDIT FOR CONTRIBUTIONS OF AND FOR INSTRUCTIONAL MATERIALS AND 
              MATERIALS FOR EXTRACURRICULAR ACTIVITIES.

    (a) In General.--Subpart A of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to nonrefundable 
personal credits) is amended by inserting after section 25C the 
following new section:

``SEC. 25D. CONTRIBUTIONS OF AND FOR INSTRUCTIONAL MATERIALS AND 
              MATERIALS FOR EXTRACURRICULAR ACTIVITIES.

    ``(a) Allowance of Credit.--In the case of an individual, there 
shall be allowed as a credit against the tax imposed by this chapter 
for the taxable year an amount equal to the qualified school materials 
contributions of the taxpayer for the taxable year.
    ``(b) Maximum Credit.--The credit allowed by subsection (a) for any 
taxable year shall not exceed $3,000 ($1,500 in the case of a married 
individual (as determined under section 7703) filing a separate 
return).
    ``(c) Qualified School Materials Contribution.--For purposes of 
this section--
            ``(1) In general.--The term `qualified school materials 
        contribution' means, with respect to any taxable year, the 
        amount which would (but for subsection (d)) be allowable as a 
        deduction under section 170 for--
                    ``(A) any cash contribution to any elementary or 
                secondary school if such contribution is designated to 
                be used solely to acquire qualified school materials,
                    ``(B) any contribution of qualified school 
                materials to any elementary or secondary school, and
                    ``(C) any cash contribution to a school materials 
                organization.
            ``(2) Elementary or secondary school.--The term `elementary 
        or secondary school' means any organization described in 
        section 170(b)(1)(A)(ii) which provides education solely at or 
        below the 12th grade.
            ``(3) School materials organization.--
                    ``(A) In general.--The term `school materials 
                organization' means any organization described in 
                section 170(c)(2) if--
                            ``(i) the primary function of the 
                        organization is to raise funds for elementary 
                        or secondary schools, and
                            ``(ii) the annual disbursements of the 
                        organization for qualified school materials 
                        which are provided to elementary and secondary 
                        schools are normally not less than 90 percent 
                        of the sum of such organization's annual gross 
                        income and contributions and gifts.
                    ``(B) Qualified school materials.--The term 
                `qualified school materials' means--
                            ``(i) instructional materials and 
                        equipment, including library books and 
                        materials, computers, and computer software, 
                        and
                            ``(ii) materials and equipment for school-
                        sponsored extracurricular activities.
    ``(d) Denial of Double Benefit.--No deduction shall be allowed 
under this chapter for any contribution for which a credit is allowed 
under this section.
    ``(e) Election to Have Credit not Apply.--
            ``(1) In general.--A taxpayer may elect to have this 
        section not apply for any taxable year.
            ``(2) Time for making election.--An election under 
        paragraph (1) for any taxable year may be made (or revoked) at 
        any time before the expiration of the 3-year period beginning 
        on the last date prescribed by law for filing the return for 
        such taxable year (determined without regard to extensions).
    ``(f) Cost-of-Living Adjustment.--In the case of any taxable year 
beginning in a calendar year after 2005, each dollar amount contained 
in subsection (b) shall be increased by an amount equal to--
            ``(1) such dollar amount, multiplied by
            ``(2) the cost-of-living adjustment determined under 
        section 1(f)(3) for the calendar year in which the taxable year 
        begins, by substituting `calendar year 2004' for `calendar year 
        1992' in subparagraph (B) thereof.
If any increase determined under the preceding sentence is not a 
multiple of $10, such increase shall be increased to the next highest 
multiple of $10. In the case of a married individual (as determined 
under section 7703) filing a separate return, the preceding sentence 
shall be applied by substituting `$5' for `$10' each place it appears.
    ``(g) Regulations.--The Secretary shall prescribe regulations to 
carry out this section, including regulations providing for claiming 
the credit under this section on Form 1040EZ.''.
    (b) Clerical Amendment.--The table of sections for subpart A of 
part IV of subchapter A of chapter 1 of such Code is amended by 
inserting after the item relating to section 25C the following new 
item:

``Sec. 25D. Contributions of and for instructional materials and 
                            materials for extracurricular 
                            activities.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2004.