I 

109TH CONGRESS 

1ST SESSION H. R. 2426 

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. 

IN THE HOUSE OF REPRESENTATIVES 

MAY 18, 2005 

Mr. GREEN of Wisconsin (for himself, Mr. PETRI, Ms. HART, Mr. JINDAL, 

Mr. MILLER of Florida, Mr. HOSTETTLER, Mr. FEENEY, and Mr. 

SOUDER) introduced the following bill; which was referred to the Committee on Ways and Means, and in addition to the Committee on Education and the Workforce, for a period to be subsequently determined by 

the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned 

A BILL 

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. 

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

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Supportive Commu5 nities Helping Offer Opportunities for Learning Act of 

6 2005’’ or as the ‘‘SCHOOL Act of 2005’’. 
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1 SEC. 2. ESTABLISHMENT OF SUPPORTIVE COMMUNITIES 

2 HELPING OFFER OPPORTUNITIES FOR 

3 LEARNING PROGRAM. 

4 (a) IN GENERAL.—The Secretary of Education shall 

5 establish a program to be known as the ‘‘Supportive Com6 munities Helping Offer Opportunities for Learning Pro7 gram’’ or as the ‘‘SCHOOL Program’’. 

8 (b) CERTIFICATION OF SCHOLARSHIP GRANTING OR9 GANIZATIONS.— 

10 (1) IN GENERAL.—The Secretary of Education 

11 may certify an organization as a scholarship grant12 ing organization participating in the SCHOOL Pro13 gram if such organization meets all of the following 

14 requirements: 

15 (A) Notifies the Secretary of its intent to 

16 provide educational scholarships for eligible stu17 dents attending qualified schools. 

18 (B) Demonstrates to the Secretary that it 

19 is described in section 501(c)(3) of the Internal 

20 Revenue Code of 1986 and exempt from tax 

21 under section 501(a) of such Code. 

22 (C) Provides a receipt to taxpayers for 

23 contributions made to the organization. 

24 (D) Ensures that at least 90 percent of its 

25 annual receipts are spent on educational schol26 arships, and that all receipts from interest or 
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1 investments is spent on educational scholar2 ships. 

3 (E) Spends each year a portion of its ex4 penditures on scholarships for low-income eligi5 ble students equal to the percentage of low-in6 come eligible students in the county where the 

7 organization expends the majority of its schol8 arships. 

9 (F) Ensures that at least 30 percent of 

10 first time recipients of educational scholarships 

11 were not continuously enrolled in a private ele12 mentary or secondary school during the pre13 vious year. 

14 (G) Distributes periodic scholarship pay15 ments as checks made out to a student’s parent 

16 or guardian and mailed to the qualified school 

17 where the student is enrolled. 

18 (H) Cooperates with the Secretary in con19 ducting criminal background checks on all of its 

20 employees and board members and excluding 

21 from employment or governance any individual 

22 that might reasonably pose a risk to the appro23 priate use of contributed funds. 

24 (I) Ensures that scholarships are portable 

25 during the school year and can be used at any 
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1 qualified school that accepts the student accord2 ing to a parent’s wishes. 

3 (J) Ensures that if a student moves to a 

4 new qualified school during a school year, the 

5 scholarship amount may be prorated. 

6 (K) Demonstrates its financial account7 ability by— 

8 (i) submitting a financial information 

9 report for the organization that complies 

10 with uniform financial accounting stand11 ards established by the Secretary and that 

12 has been conducted by a certified public 

13 accountant; and 

14 (ii) having an auditor certify that the 

15 report is free of material misstatements. 

16 (L) Demonstrates its financial viability, if 

17 the organization is to receive donations of 

18 $50,000 or more during any school year (as de19 termined by the Secretary), by— 

20 (i) filing with the Secretary prior to 

21 the start of the school year a surety bond 

22 payable to the Federal Government in an 

23 amount equal to the aggregate amount of 

24 contributions expected to be received dur25 ing the school year; or 
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1 (ii) filing with the Secretary prior to 

2 the start of the school year financial infor3 mation that demonstrates the financial via4 bility of the organization. 

5 (M) Ensures that qualified schools that ac6 cept its scholarship students will— 

7 (i) comply with all health and safety 

8 laws or codes that apply to the school; 

9 (ii) hold a valid occupancy permit if 

10 required by their municipality; 

11 (iii) certify that they will not discrimi12 nate in admissions on the basis of race, 

13 color, national origin, religion or disability; 

14 and 

15 (iv) provide academic accountability to 

16 parents of the students in the program by 

17 regularly reporting to the parent on the 

18 student’s progress. 

19 (N) Does not provide educational scholar20 ships for students to attend any school with 

21 paid staff or board members, or relatives there22 of, in common with the organization. 

23 (O) Publicly reports to the Secretary by 

24 June 1 of each year the following information 
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1 prepared by a certified public accountant for 

2 the previous calendar year— 

3 (i) the name and address of the orga4 nization; 

5 (ii) the total number and total dollar 

6 amount of contributions received during 

7 the previous calendar year; 

8 (iii) the total number and total dollar 

9 amount of educational scholarships award10 ed during the previous calendar year; 

11 (iv) the total number and total dollar 

12 amount of educational scholarships award13 ed during the previous year to low-income 

14 eligible students; and 

15 (v) the percentage of first time recipi16 ents of educational scholarships who were 

17 continuously enrolled in a public elemen18 tary or secondary school during the pre19 vious year. 

20 (2) DEFINITIONS.—For purposes of this sub21 section— 

22 (A) EDUCATIONAL SCHOLARSHIPS.—The 

23 term ‘‘educational scholarships’’ means grants 

24 for eligible students to cover all or part of— 
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1 (i) in the case of a private or religious 

2 school which charges tuition or fees, the 

3 tuition and fees of such school, 

4 (ii) in the case of a public school, the 

5 cost of transportation to such school, and 

6 (iii) in the case of any other school or 

7 program, such expenses as the Secretary of 

8 Education may provide. 

9 (B) QUALIFIED SCHOOL.—The term 

10 ‘‘qualified school’’ means any public, private, 

11 religious, or other school or program which pro12 vides elementary or secondary education (as de13 termined under State law). 

14 (C) ELIGIBLE STUDENT.—The term ‘‘eligi15 ble student’’ means any student who— 

16 (i) has not— 

17 (I) attained age 21, or 

18 (II) been graduated from high 

19 school, and 

20 (ii) as of the time that such student 

21 first receives assistance under the 

22 SCHOOL Program, is a member of a 

23 household whose total annual income dur24 ing the year before receipt of such assist25 ance does not exceed an amount equal to 
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1 2.5 times the highest amount of income 

2 which qualifies for a reduced price lunch 

3 under section 9(b)(1) of the Richard B. 

4 Russell National School Lunch Act. 

5 (D) LOW-INCOME ELIGIBLE STUDENT.— 

6 The term ‘‘low-income eligible student’’ means 

7 a student who meets the requirements of para8 graph (3)(A) and who qualifies for a free or re9 duced price lunch under section 9(b)(1) of the 

10 Richard B. Russell National School Lunch Act. 

11 (E) PARENT.—The term ‘‘parent’’ includes 

12 a guardian, custodian, or other person with au13 thority to act on behalf of the child. 

14 (c) DUTIES OF THE SECRETARY OF EDUCATION.— 

15 The Secretary of Education shall— 

16 (1) adopt such rules and procedures as are nec17 essary or appropriate to implement the SCHOOL 

18 Program; and 

19 (2) provide a standardized format for certified 

20 organizations to report the information described in 

21 subsection (b)(1)(O). 

22 SEC. 3. EDUCATIONAL IMPROVEMENT CONTRIBUTIONS 

23 CREDIT. 

24 (a) IN GENERAL.—Subpart B of part IV of sub25 chapter A of chapter 1 of the Internal Revenue Code of 
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1 1986 (relating to other credits) is amended by adding at 

2 the end the following new section: 

3 ‘‘SEC. 30B. EDUCATIONAL IMPROVEMENT CONTRIBUTIONS 

4 CREDIT. 

5 ‘‘(a) IN GENERAL.—There shall be allowed as a cred6 it against the tax imposed by this chapter for the taxable 

7 year an amount equal to the aggregate amount of the 

8 qualified contributions made by the taxpayer to qualified 

9 scholarship granting organizations during the taxable 

10 year. 

11 ‘‘(b) LIMITATION.— 

12 ‘‘(1) INDIVIDUALS.—In the case of an indi13 vidual, the amount of the credit determined under 

14 this section for any taxable year shall not exceed 

15 $3,000 ($6,000 in the case of a joint return). 

16 ‘‘(2) CORPORATIONS.—In the case of a corpora17 tion, the amount of the credit determined under this 

18 section for any taxable year shall not exceed the 

19 lesser of— 

20 ‘‘(A) 5 percent of the taxpayer’s regular 

21 tax liability for the taxable year, or 

22 ‘‘(B) $20,000. 

23 ‘‘(c) QUALIFIED SCHOLARSHIP GRANTING ORGANI24 ZATION.—For purposes of this section, the term ‘qualified 
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1 scholarship granting organization’ means any organization 

2 which— 

3 ‘‘(1) is described in section 501(c)(3) and ex4 empt from tax under section 501(a), and 

5 ‘‘(2) has in effect a certification from the Sec6 retary of Education that such organization is a 

7 scholarship granting organization participating in 

8 the SCHOOL Program (within the meaning of sec9 tion 2 of the SCHOOL Act of 2005). 

10 ‘‘(d) QUALIFIED CONTRIBUTIONS.—For purposes of 

11 this section, the term ‘qualified contribution’ means any 

12 cash contribution which the taxpayer elects (at such time 

13 and in such form and manner as the Secretary may pre14 scribe) to treat as a qualified contribution. 

15 ‘‘(e) COORDINATION WITH OTHER CREDITS; CARRY16 OVER OF UNUSED CREDIT.— 

17 ‘‘(1) IN GENERAL.—If the credit allowable 

18 under subsection (a) for a taxable year exceeds the 

19 limitation imposed by paragraph (2) for such taxable 

20 year, such excess shall be carried over to the suc21 ceeding taxable year and added to the credit allow22 able under subsection (a) for such succeeding tax23 able year. No credit may be carried forward under 

24 this subsection to any taxable year following the 

25 third taxable year after the taxable year in which the 
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1 credit arose. For purposes of the preceding sentence, 

2 credits shall be treated as used on a first-in first-out 

3 basis. 

4 ‘‘(2) APPLICATION WITH OTHER CREDITS.— 

5 The credit allowed by subsection (a) for any taxable 

6 year shall not exceed the excess (if any) of— 

7 ‘‘(A) the regular tax liability for the tax8 able year reduced by the sum of the credits al9 lowed by this part (other than this section), 

10 over 

11 ‘‘(B) the tentative minimum tax for the 

12 taxable year. 

13 ‘‘(f) SPECIAL RULES.— 

14 ‘‘(1) SUBSTANTIATION.—No credit shall be al15 lowed under subsection (a) with respect to any con16 tribution to a qualified scholarship granting organi17 zation unless the taxpayer attaches to the taxpayer’s 

18 return for the taxable year a receipt from such orga19 nization which meets such requirements as the Sec20 retary may establish. 

21 ‘‘(2) CONTROLLED GROUPS.—Rules similar to 

22 the rules of paragraphs (1) and (2) of section 41(f) 

23 shall apply for purposes of this section. 

24 ‘‘(3) DENIAL OF DOUBLE BENEFIT.—No deduc25 tion or credit shall be allowed under this subtitle for 
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1 any contribution which is taken into account under 

2 this section. 

3 ‘‘(g) REGULATIONS.—The Secretary may prescribe 

4 such regulations as may be necessary or appropriate to 

5 carry out the purposes of this section.’’. 

6 (b) COORDINATION WITH LIMITATIONS ON CHARI7 TABLE DEDUCTIONS.—Subsection (c) of section 170 of 

8 such Code is amended by adding at the end the following: 

9 ‘‘Such term shall not include any contribution taken into 

10 account under section 30B.’’ 

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

12 for subpart B of part IV of subchapter A of chapter 1 

13 of such Code is amended by adding at the end the fol14 lowing new item: 

‘‘Sec. 30B. Educational improvement contributions credit.’’. 

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

16 this section shall apply to contributions made during tax17 able years beginning after the date of the enactment of 

18 this Act. 

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