I 

109TH CONGRESS 

2D SESSION H. R. 4834 

To amend the Internal Revenue Code of 1986 to allow a business tax credit 

for contributions to education scholarship organizations. 

IN THE HOUSE OF REPRESENTATIVES 

MARCH 1, 2006 

Mr. ENGLISH of Pennsylvania (for himself and Mr. PICKERING) 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 allow a 

business tax credit for contributions to education scholarship 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 ‘‘Businesses Supporting 

5 Education Act of 2006’’. 

6 SEC. 2. TAX CREDIT FOR CONTRIBUTIONS TO EDUCATION 

7 SCHOLARSHIP ORGANIZATIONS. 

8 (a) IN GENERAL.—Subpart D of part IV of sub9 chapter A of chapter 1 of the Internal Revenue Code of 
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1 1986 (relating to business related credits) is amended by 

2 adding at the end the following new section: 

3 ‘‘SEC. 45N. CONTRIBUTIONS TO EDUCATION SCHOLARSHIP 

4 ORGANIZATIONS. 

5 ‘‘(a) GENERAL RULE.—For purposes of section 38, 

6 in the case of a corporation, partnership, or trade or busi7 ness carried on as a sole proprietorship, the education 

8 scholarship credit determined under this section for the 

9 taxable year is the aggregate amount of qualified contribu10 tions for the taxable year. 

11 ‘‘(b) LIMITATION.— 

12 ‘‘(1) DOLLAR LIMITATION.—The amount of the 

13 credit determined under this section for any taxable 

14 year shall not exceed $100,000. 

15 ‘‘(2) APPLICATION TO PARTNERSHIPS AND S

16 CORPORATIONS.—In the case of a partnership, the 

17 limitations of paragraph (1) shall apply with respect 

18 to the partnership and with respect to each partner. 

19 A similar rule shall apply in the case of an S cor20 poration and its shareholders. 

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

22 this section— 

23 ‘‘(1) IN GENERAL.—The term ‘qualified con24 tribution’ means a charitable contribution (as de-
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1 fined by section 170(c)) to an education scholarship 

2 organization. 

3 ‘‘(2) EDUCATION SCHOLARSHIP ORGANIZA4 TION.—The term ‘education scholarship organiza5 tion’ means any organization which is described in 

6 section 170(c)(2) and exempt from tax under section 

7 501(a) and whose exclusive purpose is to provide 

8 scholarships for the qualified elementary and sec9 ondary education expenses of eligible students. 

10 ‘‘(3) ELIGIBLE STUDENT.—The term ‘eligible 

11 student’ means an individual— 

12 ‘‘(A) who is enrolled in an elementary or 

13 secondary school (within the meaning of section 

14 530(b)(4)(B)), 

15 ‘‘(B) who is a member of a household with 

16 a total annual household income which does not 

17 exceed 250 percent of the Federal poverty 

18 guidelines (as determined by the Secretary of 

19 Health and Human Services), and 

20 ‘‘(C) with respect to whom the taxpayer is 

21 entitled to a deduction for the taxable year 

22 under section 151. 

23 ‘‘(4) QUALIFIED ELEMENTARY AND SECONDARY

24 EDUCATION EXPENSES.—The term ‘qualified ele25 mentary and secondary education expenses’ has the 
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1 meaning given such term by section 530(b)(4), ex2 cept that ‘child’ shall be substituted for ‘beneficiary’ 

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

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

5 subparagraph (A) thereof. 

6 ‘‘(5) SCHOLARSHIP.—The term ‘scholarship’ 

7 does not include any payment to fulfill or fund any 

8 obligation or project of any school or school system 

9 to provide a free, appropriate public education. 

10 ‘‘(d) DENIAL OF DOUBLE BENEFIT.—No deduction 

11 shall be allowed under any provision of this chapter for 

12 any expense for which a credit is allowed under this sec13 tion. 

14 ‘‘(e) ELECTION.—This section shall apply to a tax15 payer for a taxable year only if such taxpayer elects to 

16 have this section apply for such taxable year.’’. 

17 (b) EXCISE TAX ON FAILURE OF EDUCATION

18 SCHOLARSHIP ORGANIZATIONS TO MAKE DISTRIBU19 TIONS.— 

20 (1) IN GENERAL.—Chapter 42 of such Code 

21 (relating to private foundations and certain other 

22 tax-exempt organizations) is amended by adding at 

23 the end the following new subchapter: 
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1 ‘‘Subchapter F—Education Scholarship 

2 Organizations 

‘‘Sec. 4966. Tax on failure to distribute receipts. 

3 ‘‘SEC. 4966. TAX ON FAILURE TO DISTRIBUTE RECEIPTS. 

4 ‘‘(a) TAX IMPOSED.—There is hereby imposed a tax 

5 on the failure of an education scholarship organization to 

6 make required distributions before the distribution dead7 line. 

8 ‘‘(b) AMOUNT OF TAX.—The tax imposed by sub9 section (a) shall be equal to 15 percent of the excess (if 

10 any) of— 

11 ‘‘(1) the required distribution amount with re12 spect to a taxable year, over 

13 ‘‘(2) the amount of receipts of the education 

14 scholarship organization for such taxable year which 

15 are distributed before the distribution deadline with 

16 respect to such receipts. 

17 ‘‘(c) DEFINITIONS.—For purposes of this section— 

18 ‘‘(1) REQUIRED DISTRIBUTION AMOUNT.—The 

19 required distribution amount with respect to a tax20 able year is the amount equal to 90 percent of the 

21 total receipts of the education scholarship organiza22 tion for such taxable year. 
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1 ‘‘(2) DISTRIBUTIONS.—Distributions include 

2 amounts which are formally committed but not dis3 tributed. 

4 ‘‘(3) DISTRIBUTION DEADLINE.—The distribu5 tion deadline with respect to receipts for a taxable 

6 year is the first day of the second taxable year fol7 lowing the taxable year in which such receipts are 

8 received by the education scholarship organization. 

9 ‘‘(d) REASONABLE CAUSE EXCEPTION.—The tax im10 posed by subsection (a) shall not apply with respect to any 

11 failure to make required distributions before the distribu12 tion deadline which is not willful and is due to reasonable 

13 cause.’’. 

14 (2) ABATEMENT OF TAX.— 

15 (A) GENERAL RULE.—Subsection (b) of 

16 section 4962 of such Code (defining qualified 

17 first tier tax) is amended by striking ‘‘or D’’ 

18 and inserting ‘‘D, or F’’. 

19 (B) FIRST TIER TAX.—Subsection (a) of 

20 section 4963 of such Code (defining first tier 

21 tax) is amended by inserting ‘‘4966,’’ after 

22 ‘‘4958,’’. 

23 (C) TAXABLE EVENT.—Subsection (c) of 

24 section 4963 of such Code (defining taxable 
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1 event) is amended by inserting ‘‘4966,’’ after 

2 ‘‘4958,’’. 

3 (3) CORRECTION PERIOD.—Subparagraph (A) 

4 of section 4963(e)(2) of such Code (relating to spe5 cial rules for when taxable event occurs) is amended 

6 by inserting ‘‘or 4966’’ after ‘‘4942’’. 

7 (4) CONFORMING AMENDMENT.—The table of 

8 subchapters for chapter 42 of such Code is amended 

9 by adding at the end the following new item: 

‘‘SUBCHAPTER F. EDUCATION SCHOLARSHIP ORGANIZATIONS’’. 

10 (c) CREDIT TO BE PART OF GENERAL BUSINESS

11 CREDIT.—Subsection (b) of section 38 of such Code (re12 lating to general business credit) is amended by striking 

13 ‘‘plus’’ at the end of paragraph (29), by striking the period 

14 at the end of paragraph (30) and inserting ‘‘, plus’’ , and 

15 by adding at the end the following new paragraph: 

16 ‘‘(31) the education scholarship credit section 

17 45N(a).’’. 

18 (d) CLERICAL AMENDMENT.—The table of sections 

19 for subpart D of part IV of subchapter A of chapter 1 

20 of such Code is amended by inserting after the item relat21 ing to section 45M the following new item: 

‘‘Sec. 45M. Contributions to education scholarship organizations.’’. 
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1 (e) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply to taxable years beginning after 

3 December 31, 2005. 

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