I 

113TH CONGRESS 

1ST SESSION H. R. 2394 

To allow a State to opt out of K–12 education grant programs and the 

requirements of those programs, to amend the Internal Revenue Code 

of 1986 to provide a credit to taxpayers in such a State, and for 

other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

JUNE 17, 2013 

Mr. GARRETT (for himself, Mr. BISHOP of Utah, Mr. SOUTHERLAND, Mr. 

PEARCE, Mr. HUELSKAMP, Mr. KING of Iowa, Mr. HUIZENGA of Michigan, Mr. MULVANEY, Mr. LAMALFA, Mr. PITTENGER, Mr. FRANKS of 

Arizona, Mr. CHABOT, Mr. POSEY, Mr. GOHMERT, Mrs. BLACKBURN, 

Mr. MULLIN, Mr. CAMPBELL, Mr. BROUN of Georgia, and Mr. JONES) 

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 allow a State to opt out of K–12 education grant programs and the requirements of those programs, to amend 

the Internal Revenue Code of 1986 to provide a credit 

to taxpayers in such a State, and for other purposes. 

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; TABLE OF CONTENTS. 

2 (a) SHORT TITLE.—This Act may be cited as the 

3 ‘‘Local Education Authority Returns Now Act’’. 

4 (b) TABLE OF CONTENTS.—The table of contents for 

5 this Act is as follows: 

Sec. 1. Short title; table of contents. 

TITLE I—ABILITY OF STATES TO OPT OUT OF K–12 EDUCATION 

GRANT PROGRAMS 

Sec. 101. Determinations by Secretary of the Treasury as to which States are 

opt-out States. 

Sec. 102. Amounts creditable to States. 

Sec. 103. Opt-out States not eligible to receive grants under K–12 education 

grant programs. 

Sec. 104. Requirements of K–12 education grant programs do not apply to optout States. 

Sec. 105. Definitions. 

TITLE II—CREDIT TO TAXPAYERS IN OPT-OUT STATE 

Sec. 201. Refundable opt-out State education credit. 

6 TITLE I—ABILITY OF STATES TO 

7 OPT OUT OF K–12 EDUCATION 

8 GRANT PROGRAMS 

9 SEC. 101. DETERMINATIONS BY SECRETARY OF THE TREAS10 URY AS TO WHICH STATES ARE OPT-OUT 

11 STATES. 

12 (a) DEADLINE.—Not later than February 1 of each 

13 calendar year (hereinafter in this title referred to as the 

14 ‘‘determination year’’), the Secretary of the Treasury shall 

15 determine which States, if any, are opt-out States for the 

16 calendar year (hereinafter in this title referred to as the 

17 ‘‘opt-out year’’) that follows the determination year. 

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1 (b) DETERMINATION.—The Secretary of the Treas2 ury shall determine that a State is an opt-out State for 

3 an opt-out year under subsection (a) if, and only if, there 

4 is transmitted to the Secretary a copy of a law, in effect 

5 as of January 1 of the determination year, that can fairly 

6 be read to mean that the policy of the State is to not ac7 cept grant funds under the K–12 education grant pro8 grams, and thereby to not be bound by the requirements 

9 of those programs, for that opt-out year. 

10 (c) NOTIFICATION.—Upon making a determination 

11 under subsection (a), the Secretary of the Treasury shall 

12 transmit that determination to the Secretary of Education 

13 and to Congress. 

14 SEC. 102. AMOUNTS CREDITABLE TO STATES. 

15 (a) IN GENERAL.—For purposes of determinations 

16 relating to the refundable opt-out State education credit 

17 under section 36D of the Internal Revenue Code of 1986, 

18 as early as practicable for a calendar year, the Secretary 

19 of Education shall, for each State, determine the amount 

20 creditable to that State for that calendar year and make 

21 available that determination. 

22 (b) AMOUNT CREDITABLE.—The Secretary shall de23 termine the amount creditable to a State for a calendar 

24 year as follows: 

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1 (1) If the State was not an opt-out State for 

2 the preceding calendar year, the amount creditable 

3 for the calendar year shall be equal to the aggregate 

4 K–12 funding (as determined under subsection (d)) 

5 for that State for that preceding calendar year. 

6 (2) If the State was an opt-out State for the 

7 preceding calendar year, the amount creditable for 

8 the calendar year shall be equal to— 

9 (A) the extrapolated amount (as deter10 mined under subsection (c)) for that preceding 

11 calendar year, plus 

12 (B) the amount that results when the 

13 amount creditable for that preceding calendar 

14 year is subtracted from the extrapolated 

15 amount (as determined under subsection (c)) 

16 for that preceding calendar year. 

17 (c) EXTRAPOLATED AMOUNT.— 

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

19 shall determine the extrapolated amount for a State 

20 for a calendar year. The determination shall be 

21 based on— 

22 (A) the amount of grant funds that would 

23 have been received other than on a competitive 

24 basis, as direct grants, subgrants, or otherwise, 

25 under the K–12 education grant programs, by 

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1 the State or any public educational entity in the 

2 State for that calendar year, had it elected not 

3 to be an opt-out State for that calendar year; 

4 plus 

5 (B) the average annual amount of all grant 

6 funds that would have been received on a com7 petitive basis, as direct grants, subgrants, or 

8 otherwise, under the K–12 education grant pro9 grams, by the State or any public educational 

10 entity in the State for that calendar year and 

11 the four preceding calendar years, had it elected 

12 not to be an opt-out State for those calendar 

13 years. 

14 (2) REGULATIONS.—The Secretary shall pre15 scribe regulations for making determinations re16 quired by this subsection. The initial regulations 

17 shall be prescribed not later than 6 months after the 

18 date of the enactment of this Act. 

19 (d) AGGREGATE K–12 FUNDING.—The aggregate K– 

20 12 funding for a State for a calendar year shall be equal 

21 to— 

22 (1) the amount of all grant funds received other 

23 than on a competitive basis, as direct grants, sub24 grants, or otherwise, under the K–12 education 

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1 cational entity in the State for that calendar year; 

2 plus 

3 (2) the average annual amount of all grant 

4 funds received on a competitive basis, as direct 

5 grants, subgrants, or otherwise, under the K–12 

6 education grant programs, by the State or any pub7 lic educational entity in the State for that calendar 

8 year and the four preceding calendar years. 

9 SEC. 103. OPT-OUT STATES NOT ELIGIBLE TO RECEIVE 

10 GRANTS UNDER K–12 EDUCATION GRANT 

11 PROGRAMS. 

12 (a) IN GENERAL.—When a State is an opt-out State 

13 for a calendar year, neither the State nor any public edu14 cational entity in the State is eligible to receive, as direct 

15 grants, subgrants, or otherwise, any funds under any of 

16 the K–12 education grant programs for that calendar 

17 year. 

18 (b) REALLOCATION.—Any funds under a K–12 edu19 cation grant program that are not allocated to a State or 

20 public educational entity in the State by reason of sub21 section (a) shall be returned to the Treasury. 

22 SEC. 104. REQUIREMENTS OF K–12 EDUCATION GRANT PRO23 GRAMS DO NOT APPLY TO OPT-OUT STATES. 

24 When a State is an opt-out State for a calendar year, 

25 neither the State nor any public educational entity in the 

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1 State is subject to any statutory or regulatory requirement 

2 of a K–12 education grant program for that calendar year. 

3 SEC. 105. DEFINITIONS. 

4 In this title: 

5 (1) The term ‘‘K–12 education grant program’’ 

6 means any grant program carried out under any 

7 title of the Elementary and Secondary Education 

8 Act of 1965, except for the following: 

9 (A) INDIAN, NATIVE HAWAIIAN, AND ALAS10 KA NATIVE EDUCATION.—Title VII (20 U.S.C. 

11 7401 et seq.). 

12 (B) IMPACT AID.—Title VIII (20 U.S.C. 

13 7701 et seq.). 

14 (2) The term ‘‘public educational entity’’ 

15 means, with respect to a State, the State educational 

16 agency, any local educational agency in the State, or 

17 any public elementary or secondary school in the 

18 State. 

19 TITLE II—CREDIT TO 

20 TAXPAYERS IN OPT-OUT STATE 

21 SEC. 201. REFUNDABLE OPT-OUT STATE EDUCATION CRED22 IT. 

23 (a) IN GENERAL.—Subpart C of part IV of sub24 chapter A of chapter 1 of the Internal Revenue Code of 

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1 1986 (relating to refundable credits) is amended by insert2 ing after section 36B the following new section: 

3 ‘‘SEC. 36C. OPT-OUT STATE EDUCATION CREDIT. 

4 ‘‘(a) GENERAL RULE.—In the case of an eligible indi5 vidual, there shall be allowed as a credit against the tax 

6 imposed by this chapter for the taxable year the opt-out 

7 State education amount. 

8 ‘‘(b) OPT-OUT STATE EDUCATION AMOUNT.—For 

9 purposes of this section— 

10 ‘‘(1) IN GENERAL.—The term ‘opt-out State 

11 education amount’ means, with respect to a taxpayer 

12 for a taxable year beginning in an opt-out year, the 

13 amount equal to— 

14 ‘‘(A) the amount creditable under section 

15 102 of the Local Education Authority Returns 

16 Now Act to an opt-out State (determined under 

17 section 101 of such Act), multiplied by— 

18 ‘‘(B) a fraction— 

19 ‘‘(i) the numerator of which is the 

20 taxpayer’s household tax burden from such 

21 State for the opt-out year, and 

22 ‘‘(ii) the denominator of which is the 

23 total tax revenue of such State for the opt24 out year. 

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1 ‘‘(2) HOUSEHOLD TAX BURDEN.—The house2 hold tax burden from a State for an opt-out year is 

3 the sum of— 

4 ‘‘(A) the State real property taxes, 

5 ‘‘(B) the State personal property taxes, 

6 ‘‘(C) the State income, war profits, and ex7 cess profits taxes, plus 

8 ‘‘(D) the State general sales taxes, 

9 for the calendar year in which the second preceding 

10 taxable year ends and within which paid or accrued 

11 by the taxpayer. For purposes of this section, terms 

12 used in the preceding sentence which are also used 

13 in section 164 shall have the respective meanings 

14 given such terms by section 164. 

15 ‘‘(3) TOTAL TAX REVENUE.—The total tax rev16 enue of a State for an opt-out year is the amount 

17 determined by the Secretary to be the aggregate tax 

18 revenue of such State for the calendar year in which 

19 the second preceding taxable year ends. 

20 ‘‘(c) ELIGIBLE INDIVIDUAL.—For purposes of this 

21 section— 

22 ‘‘(1) IN GENERAL.—The term ‘eligible indi23 vidual’ means an individual whose principal place of 

24 abode (within the meaning of section 121) was in 

25 the opt-out State for the entire taxable year. 

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1 ‘‘(2) DEPENDENTS.—The term ‘eligible indi2 vidual’ does not include any individual if a deduction 

3 under section 151 with respect to such individual is 

4 allowed to another taxpayer for a taxable year begin5 ning in the calendar year in which such individual’s 

6 taxable year begins. 

7 ‘‘(d) OPT-OUT YEAR.—The term ‘opt-out year’ 

8 means a calendar year for which the Secretary determines 

9 a State to be an opt-out State under section 101 of the 

10 Local Education Authority Returns Now Act. 

11 ‘‘(e) AMOUNT OF CREDIT SHALL BE DETERMINED

12 UNDER TABLES.— 

13 ‘‘(1) IN GENERAL.—The credit under sub14 section (a) shall be determined under tables pre15 scribed by the Secretary. 

16 ‘‘(2) REQUIREMENTS FOR TABLES.—The tables 

17 prescribed under paragraph (1) shall— 

18 ‘‘(A) reflect the provisions of this section, 

19 and 

20 ‘‘(B) take into account filing status, State 

21 of residence, and adjusted gross income.’’. 

22 (b) CONFORMING AMENDMENTS.— 

23 (1) Paragraph (2) of section 1324(b) of title 

24 31, United States Code, is amended by inserting 

25 ‘‘36C,’’ after ‘‘36B,’’. 

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1 (2) The table of sections for subpart C of part 

2 IV of subchapter A of chapter 1 of the Internal Rev3 enue Code of 1986 is amended by inserting after the 

4 item relating to section 36B the following new item: 

‘‘Sec. 36C. Opt-out State education credit.’’. 

5 (c) EFFECTIVE DATE.—The amendments made by 

6 this section shall apply to taxable years beginning after 

7 the date of the enactment of this Act. 

Æ 

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