I 

108TH CONGRESS 

1ST SESSION H. R. 2347

To amend the Internal Revenue Code of 1986 to provide for a credit which 

is dependent on enactment of State qualified scholarship tax credits 

and which is allowed against the Federal income tax for charitable 

contributions to education investment organizations that provide assistance for elementary and secondary education. 

IN THE HOUSE OF REPRESENTATIVES 

JUNE 5, 2003

Mr. FRANKS of Arizona (for himself, Mr. BOEHNER, Mrs. MUSGRAVE, Mr. 

DOOLITTLE, Mr. KING of Iowa, Mr. CANTOR, Mr. FEENEY, Mr. AKIN, 

Mr. TANCREDO, Mr. JONES of North Carolina, Mr. TIBERI, Mr. GUTKNECHT, Mr. VITTER, Mr. HOEKSTRA, Mr. DEMINT, Mr. SOUDER, Mr. 

GARRETT of New Jersey, Mr. BARRETT of South Carolina, Mr. BARTLETT of Maryland, Mr. BEAUPREZ, Mr. PAUL, Mr. PITTS, Mr. RENZI, 

Mr. HAYWORTH, and Mrs. MYRICK) introduced the following bill; which 

was referred to the Committee on Ways and Means 

A BILL

To amend the Internal Revenue Code of 1986 to provide 

for a credit which is dependent on enactment of State 

qualified scholarship tax credits and which is allowed 

against the Federal income tax for charitable contributions to education investment organizations that provide 

assistance for elementary and secondary education.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,
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1 SECTION 1. SHORT TITLE. 

2 This Act may be cited as the ‘‘Children’s Hope Act 

3 of 2003’’. 

4 SEC. 2. TAX CREDIT FOR CONTRIBUTIONS TO EDUCATION 

5 INVESTMENT ORGANIZATIONS. 

6 (a) IN GENERAL.—Subpart B of part IV of sub7 chapter A of chapter 1 of the Internal Revenue Code of 

8 1986 (relating to other credits) is amended by inserting 

9 after section 30A the following new section: 

10 ‘‘SEC. 30B. CONTRIBUTIONS TO EDUCATION INVESTMENT 

11 ORGANIZATIONS. 

12 ‘‘(a) IN GENERAL.—There shall be allowed as a cred13 it against the tax imposed by this chapter for the taxable 

14 year the aggregate amount of qualified contributions for 

15 the taxable year. 

16 ‘‘(b) LIMITATION.—The amount allowed as a credit 

17 under subsection (a) for a taxable year shall not exceed 

18 $100 ($200 in the case of a joint return). 

19 ‘‘(c) QUALIFIED CONTRIBUTIONS.—For purposes of 

20 this section—

21 ‘‘(1) IN GENERAL.—The term ‘qualified con22 tribution’ means a charitable contribution (as de23 fined by section 170(c)) to an education investment 

24 organization. 

25 ‘‘(2) EDUCATION INVESTMENT ORGANIZA26 TION.—The term ‘education investment organiza-
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1 tion’ means any organization described in section 

2 170(c)(2) if—

3 ‘‘(A) normally not less than 90 percent of 

4 the annual cash contributions to such organiza5 tion are disbursed in the form of grants to stu6 dents for qualified elementary and secondary 

7 education expenses, and 

‘‘(B) not less than 1 8 ⁄2 of such disburse9 ments are to students who are eligible for free 

10 or reduced-cost lunches under the school lunch 

11 program established under the Richard B. Rus12 sell National School Lunch Act. 

13 ‘‘(3) QUALIFIED ELEMENTARY AND SECONDARY

14 EDUCATION EXPENSES.—The term ‘qualified ele15 mentary and secondary education expenses’ has the 

16 meaning given such term by section 530(b)(4), ex17 cept that ‘child’ shall be substituted for ‘beneficiary’ 

18 and ‘a child’ shall be substituted for ‘the designated 

19 beneficiary of the trust’ in clauses (i) and (iii) of 

20 subparagraph (A). 

21 ‘‘(4) STATE CREDIT MUST BE TAKEN FIRST.—

22 ‘‘(A) No credit shall be allowed to a tax23 payer under this section for a taxable year un24 less, for the taxable year, the taxpayer is al25 lowed on the taxpayer’s State tax return the 
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1 minimum State qualified scholarship tax credit 

2 (as defined in section 3 of the Children’s Hope 

3 Act of 2003). 

4 ‘‘(B) No credit shall be allowed to a tax5 payer under this section for such taxable year 

6 for any contributions that were taken into ac7 count for purposes of such State qualified 

8 scholarship tax credit. 

9 ‘‘(d) SPECIAL RULES.—

10 ‘‘(1) DENIAL OF DOUBLE BENEFIT.—No deduc11 tion shall be allowed under any provision of this 

12 chapter for any expense for which a credit is allowed 

13 under this section. 

14 ‘‘(2) TIME WHEN CONTRIBUTIONS DEEMED

15 MADE.—For purposes of this section, a taxpayer 

16 shall be deemed to have made a contribution to an 

17 education investment organization on the last day of 

18 the preceding taxable year if the contribution is 

19 made on account of such taxable year and is made 

20 not later than the time prescribed by law for filing 

21 the return for such taxable year (not including ex22 tensions thereof).’’. 

23 (b) SCHOLARSHIPS FROM EDUCATION INVESTMENT

24 ORGANIZATIONS EXCLUDED FROM INCOME.—Section 74
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1 of such Code (relating to prizes and awards) is amended 

2 by adding at the end the following new subsection: 

3 ‘‘(d) SCHOLARSHIPS FROM EDUCATION INVESTMENT

4 ORGANIZATIONS.—Gross income does not include 

5 amounts received as a scholarship from an education in6 vestment organization (as defined in section 30B(c)(2)) 

7 for qualified elementary and secondary education expenses 

8 (as defined in section 30B(c)(3)). Such scholarship shall 

9 not be taken into account for purposes of determining eli10 gibility for any Federal program.’’. 

11 (c) CLERICAL AMENDMENT.—The table of sections 

12 for such subpart B is amended by inserting after the item 

13 relating to section 30A the following new item:

‘‘Sec. 30B. Contributions to education investment organizations.’’.

14 (d) EFFECTIVE DATE.—The amendments made by 

15 this section shall apply to taxable years beginning after 

16 December 31, 2004. 

17 SEC. 3. FEDERAL SCHOLARSHIP TAX CREDIT CONDITIONED 

18 ON STATE QUALIFIED SCHOLARSHIP TAX 

19 CREDIT. 

20 (a) IN GENERAL.—For purposes of section 30B(e) 

21 of the Internal Revenue Code of 1986 (as added by section 

22 2 of this Act) a scholarship tax credit shall not be treated 

23 as a State qualified scholarship tax credit unless the re24 quirements of subsection (b) are met. 
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1 (b) REQUIREMENTS RELATING TO STATE QUALIFIED

2 SCHOLARSHIP TAX CREDIT.—

3 (1) IN GENERAL.—For purposes of subsection 

4 (a), the requirements of this subsection are met only 

5 if—

6 (A) the tax credit is for an amount of not 

7 less than $250 per taxpayer and is allowed 

8 against the State income tax (property tax for 

9 those States that don’t have income tax) for the 

10 amount of voluntary cash contributions made 

11 by the taxpayer during the taxable year to a 

12 school tuition organization described in para13 graph (2), 

14 (B) the excess of such credit over tax li15 ability may be carried forward for not more 

16 than five years, 

17 (C) if the taxpayer does not require, as a 

18 condition of the contribution, that the contribu19 tion must benefit a specific child, and 

20 (D) such credit is not allowable for direct 

21 donations to private schools. 

22 (2) SCHOOL TUITION ORGANIZATION.—For pur23 poses of paragraph (1), a school tuition organization 

24 is described in this paragraph if such organization—
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1 (A) is an organization operating in the 

2 State and is described in section 501(c)(3), and 

3 is exempt from tax under section 501(a), of the 

4 Internal Revenue Code of 1986, 

5 (B) expends at least 90 percent of its an6 nual cash contributions for educational scholar7 ships or tuition grants to children to allow them 

8 to attend any qualified school chosen at the sole 

9 discretion of their parents, and 

10 (C) disburses at least 90 percent of its an11 nual cash contributions within one year of their 

12 receipt. 

13 (3) QUALIFIED SCHOOL.—For purposes of 

14 paragraph (2), the term ‘‘qualified school’’ means 

15 any elementary school or secondary school that is lo16 cated in the State in which the taxpayer resides and 

17 does not discriminate on the basis of race, color, 

18 handicap, familial status, or national origin and that 

19 satisfies the requirements prescribed by State law 

20 for such schools as of December 31, 2004. 

21 (4) EDUCATIONAL SCHOLARSHIPS OR TUITION

22 GRANTS.—The term ‘‘educational scholarship or a 

23 tuition grant’’ means any scholarship or grant 

24 awarded for qualified elementary and secondary edu-
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1 cation expenses (as defined in section 530(b)(4) of 

2 the Internal Revenue Code of 1986). 

3 (c) STATE.—For purposes of this section, the term 

4 ‘‘State’’ means any of the several States.

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