To establish the Supportive Communities Helping Offer Opportunities for Learning Program and to allow an income tax credit for contributions to qualified scholarship granting organizations.

Summary: Supportive Communities Helping Offer Opportunities for Learning Act of 2005 - SCHOOL ACT of 2005 - Directs the Secretary of Education to establish the Supportive Communities Helping Offer Opportunities for Learning (SCHOOL) Program.

Allows educational scholarships under the SCHOOL Program to be grants to eligible low-income elementary or secondary school students to cover all or part of: (1) private or religious school tuition and fees; (2) the cost of transportation to a public school; or (3) any other school or educational program expenses as the Secretary may determine.

Authorizes the Secretary to certify scholarship granting organizations participating in the SCHOOL Program if they meet specified requirements.

Amends the Internal Revenue Code to allow an income tax credit for individuals and corporations for their contributions to qualified scholarship granting organizations certified as SCHOOL Program participants.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Supportive Communities Helping Offer 
Opportunities for Learning Act of 2005'' or as the ``SCHOOL Act of 
2005''.

SEC. 2. ESTABLISHMENT OF SUPPORTIVE COMMUNITIES HELPING OFFER 
              OPPORTUNITIES FOR LEARNING PROGRAM.

    (a) In General.--The Secretary of Education shall establish a 
program to be known as the ``Supportive Communities Helping Offer 
Opportunities for Learning Program'' or as the ``SCHOOL Program''.
    (b) Certification of Scholarship Granting Organizations.--
            (1) In general.--The Secretary of Education may certify an 
        organization as a scholarship granting organization 
        participating in the SCHOOL Program if such organization meets 
        all of the following requirements:
                    (A) Notifies the Secretary of its intent to provide 
                educational scholarships for eligible students 
                attending qualified schools.
                    (B) Demonstrates to the Secretary that it is 
                described in section 501(c)(3) of the Internal Revenue 
                Code of 1986 and exempt from tax under section 501(a) 
                of such Code.
                    (C) Provides a receipt to taxpayers for 
                contributions made to the organization.
                    (D) Ensures that at least 90 percent of its annual 
                receipts are spent on educational scholarships, and 
                that all receipts from interest or investments is spent 
                on educational scholarships.
                    (E) Spends each year a portion of its expenditures 
                on scholarships for low-income eligible students equal 
                to the percentage of low-income eligible students in 
                the county where the organization expends the majority 
                of its scholarships.
                    (F) Ensures that at least 30 percent of first time 
                recipients of educational scholarships were not 
                continuously enrolled in a private elementary or 
                secondary school during the previous year.
                    (G) Distributes periodic scholarship payments as 
                checks made out to a student's parent or guardian and 
                mailed to the qualified school where the student is 
                enrolled.
                    (H) Cooperates with the Secretary in conducting 
                criminal background checks on all of its employees and 
                board members and excluding from employment or 
                governance any individual that might reasonably pose a 
                risk to the appropriate use of contributed funds.
                    (I) Ensures that scholarships are portable during 
                the school year and can be used at any qualified school 
                that accepts the student according to a parent's 
                wishes.
                    (J) Ensures that if a student moves to a new 
                qualified school during a school year, the scholarship 
                amount may be prorated.
                    (K) Demonstrates its financial accountability by--
                            (i) submitting a financial information 
                        report for the organization that complies with 
                        uniform financial accounting standards 
                        established by the Secretary and that has been 
                        conducted by a certified public accountant; and
                            (ii) having an auditor certify that the 
                        report is free of material misstatements.
                    (L) Demonstrates its financial viability, if the 
                organization is to receive donations of $50,000 or more 
                during any school year (as determined by the 
                Secretary), by--
                            (i) filing with the Secretary prior to the 
                        start of the school year a surety bond payable 
                        to the Federal Government in an amount equal to 
                        the aggregate amount of contributions expected 
                        to be received during the school year; or
                            (ii) filing with the Secretary prior to the 
                        start of the school year financial information 
                        that demonstrates the financial viability of 
                        the organization.
                    (M) Ensures that qualified schools that accept its 
                scholarship students will--
                            (i) comply with all health and safety laws 
                        or codes that apply to the school;
                            (ii) hold a valid occupancy permit if 
                        required by their municipality;
                            (iii) certify that they will not 
                        discriminate in admissions on the basis of 
                        race, color, national origin, religion or 
                        disability; and
                            (iv) provide academic accountability to 
                        parents of the students in the program by 
                        regularly reporting to the parent on the 
                        student's progress.
                    (N) Does not provide educational scholarships for 
                students to attend any school with paid staff or board 
                members, or relatives thereof, in common with the 
                organization.
                    (O) Publicly reports to the Secretary by June 1 of 
                each year the following information prepared by a 
                certified public accountant for the previous calendar 
                year--
                            (i) the name and address of the 
                        organization;
                            (ii) the total number and total dollar 
                        amount of contributions received during the 
                        previous calendar year;
                            (iii) the total number and total dollar 
                        amount of educational scholarships awarded 
                        during the previous calendar year;
                            (iv) the total number and total dollar 
                        amount of educational scholarships awarded 
                        during the previous year to low-income eligible 
                        students; and
                            (v) the percentage of first time recipients 
                        of educational scholarships who were 
                        continuously enrolled in a public elementary or 
                        secondary school during the previous year.
            (2) Definitions.--For purposes of this subsection--
                    (A) Educational scholarships.--The term 
                ``educational scholarships'' means grants for eligible 
                students to cover all or part of--
                            (i) in the case of a private or religious 
                        school which charges tuition or fees, the 
                        tuition and fees of such school,
                            (ii) in the case of a public school, the 
                        cost of transportation to such school, and
                            (iii) in the case of any other school or 
                        program, such expenses as the Secretary of 
                        Education may provide.
                    (B) Qualified school.--The term ``qualified 
                school'' means any public, private, religious, or other 
                school or program which provides elementary or 
                secondary education (as determined under State law).
                    (C) Eligible student.--The term ``eligible 
                student'' means any student who--
                            (i) has not--
                                    (I) attained age 21, or
                                    (II) been graduated from high 
                                school, and
                            (ii) as of the time that such student first 
                        receives assistance under the SCHOOL Program, 
                        is a member of a household whose total annual 
                        income during the year before receipt of such 
                        assistance does not exceed an amount equal to 
                        2.5 times the highest amount of income which 
                        qualifies for a reduced price lunch under 
                        section 9(b)(1) of the Richard B. Russell 
                        National School Lunch Act.
                    (D) Low-income eligible student.--The term ``low-
                income eligible student'' means a student who meets the 
                requirements of paragraph (3)(A) and who qualifies for 
                a free or reduced price lunch under section 9(b)(1) of 
                the Richard B. Russell National School Lunch Act.
                    (E) Parent.--The term ``parent'' includes a 
                guardian, custodian, or other person with authority to 
                act on behalf of the child.
    (c) Duties of the Secretary of Education.--The Secretary of 
Education shall--
            (1) adopt such rules and procedures as are necessary or 
        appropriate to implement the SCHOOL Program; and
            (2) provide a standardized format for certified 
        organizations to report the information described in subsection 
        (b)(1)(O).

SEC. 3. EDUCATIONAL IMPROVEMENT CONTRIBUTIONS CREDIT.

    (a) In General.--Subpart B of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to other credits) is 
amended by adding at the end the following new section:

``SEC. 30B. EDUCATIONAL IMPROVEMENT CONTRIBUTIONS CREDIT.

    ``(a) In General.--There shall be allowed as a credit against the 
tax imposed by this chapter for the taxable year an amount equal to the 
aggregate amount of the qualified contributions made by the taxpayer to 
qualified scholarship granting organizations during the taxable year.
    ``(b) Limitation.--
            ``(1) Individuals.--In the case of an individual, the 
        amount of the credit determined under this section for any 
        taxable year shall not exceed $3,000 ($6,000 in the case of a 
        joint return).
            ``(2) Corporations.--In the case of a corporation, the 
        amount of the credit determined under this section for any 
        taxable year shall not exceed the lesser of--
                    ``(A) 5 percent of the taxpayer's regular tax 
                liability for the taxable year, or
                    ``(B) $20,000.
    ``(c) Qualified Scholarship Granting Organization.--For purposes of 
this section, the term `qualified scholarship granting organization' 
means any organization which--
            ``(1) is described in section 501(c)(3) and exempt from tax 
        under section 501(a), and
            ``(2) has in effect a certification from the Secretary of 
        Education that such organization is a scholarship granting 
        organization participating in the SCHOOL Program (within the 
        meaning of section 2 of the SCHOOL Act of 2005).
    ``(d) Qualified Contributions.--For purposes of this section, the 
term `qualified contribution' means any cash contribution which the 
taxpayer elects (at such time and in such form and manner as the 
Secretary may prescribe) to treat as a qualified contribution.
    ``(e) Coordination With Other Credits; Carryover of Unused 
Credit.--
            ``(1) In general.--If the credit allowable under subsection 
        (a) for a taxable year exceeds the limitation imposed by 
        paragraph (2) for such taxable year, such excess shall be 
        carried over to the succeeding taxable year and added to the 
        credit allowable under subsection (a) for such succeeding 
        taxable year. No credit may be carried forward under this 
        subsection to any taxable year following the third taxable year 
        after the taxable year in which the credit arose. For purposes 
        of the preceding sentence, credits shall be treated as used on 
        a first-in first-out basis.
            ``(2) Application with other credits.--The credit allowed 
        by subsection (a) for any taxable year shall not exceed the 
        excess (if any) of--
                    ``(A) the regular tax liability for the taxable 
                year reduced by the sum of the credits allowed by this 
                part (other than this section), over
                    ``(B) the tentative minimum tax for the taxable 
                year.
    ``(f) Special Rules.--
            ``(1) Substantiation.--No credit shall be allowed under 
        subsection (a) with respect to any contribution to a qualified 
        scholarship granting organization unless the taxpayer attaches 
        to the taxpayer's return for the taxable year a receipt from 
        such organization which meets such requirements as the 
        Secretary may establish.
            ``(2) Controlled groups.--Rules similar to the rules of 
        paragraphs (1) and (2) of section 41(f) shall apply for 
        purposes of this section.
            ``(3) Denial of double benefit.--No deduction or credit 
        shall be allowed under this subtitle for any contribution which 
        is taken into account under this section.
    ``(g) Regulations.--The Secretary may prescribe such regulations as 
may be necessary or appropriate to carry out the purposes of this 
section.''.
    (b) Coordination With Limitations on Charitable Deductions.--
Subsection (c) of section 170 of such Code is amended by adding at the 
end the following: ``Such term shall not include any contribution taken 
into account under section 30B.''
    (c) Clerical Amendment.--The table of sections for subpart B of 
part IV of subchapter A of chapter 1 of such Code is amended by adding 
at the end the following new item:

``Sec. 30B. Educational improvement contributions credit.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to contributions made during taxable years beginning after the 
date of the enactment of this Act.