I 

112TH CONGRESS 

1ST SESSION H. R. 3176 

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 

OCTOBER 13, 2011 

Mr. GARRETT (for himself, Mr. PAUL, Mr. LAMBORN, Mr. JONES, Mr. WESTMORELAND, Mrs. MYRICK, Mr. WALSH of Illinois, Mr. FLORES, Mr. 

PITTS, Mr. HUELSKAMP, Mr. RIBBLE, Mr. SOUTHERLAND, Mr. FRANKS

of Arizona, Mrs. BLACKBURN, Mrs. LUMMIS, Mr. PEARCE, Mr. KINGSTON, and Mr. ROSS of Florida) 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 Treasury as to which States are optout 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 TREASURY 

10 AS TO WHICH STATES ARE OPT-OUT STATES. 

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

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

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

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

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

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

17 (b) DETERMINATION.—The Secretary of the Treas18 ury shall determine that a State is an opt-out State for 


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

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

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

4 be read to mean that the policy of the State is to not ac5 cept grant funds under the K–12 education grant pro6 grams, and thereby to not be bound by the requirements 

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

8 (c) NOTIFICATION.—Upon making a determination 

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

10 transmit that determination to the Secretary of Education 

11 and to Congress. 

12 SEC. 102. AMOUNTS CREDITABLE TO STATES. 

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

14 relating to the refundable opt-out State education credit 

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

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

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

18 creditable to that State for that calendar year and make 

19 available that determination. 

20 (b) AMOUNT CREDITABLE.—The Secretary shall de21 termine the amount creditable to a State for a calendar 

22 year as follows: 

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

24 the preceding calendar year, the amount creditable 

25 for the calendar year shall be equal to the aggregate 


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

2 for that State for that preceding calendar year. 

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

4 preceding calendar year, the amount creditable for 

5 the calendar year shall be equal to— 

6 (A) the extrapolated amount (as deter7 mined under subsection (c)) for that preceding 

8 calendar year, plus 

9 (B) the amount that results when the 

10 amount creditable for that preceding calendar 

11 year is subtracted from the extrapolated 

12 amount (as determined under subsection (c)) 

13 for that preceding calendar year. 

14 (c) EXTRAPOLATED AMOUNT.— 

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

16 shall determine the extrapolated amount for a State 

17 for a calendar year. The determination shall be 

18 based on— 

19 (A) the amount of grant funds that would 

20 have been received other than on a competitive 

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

22 under the K–12 education grant programs, by 

23 the State or any public educational entity in the 

24 State for that calendar year, had it elected not 


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

2 plus 

3 (B) the average annual amount of all grant 

4 funds that would have been received on a com5 petitive basis, as direct grants, subgrants, or 

6 otherwise, under the K–12 education grant pro7 grams, by the State or any public educational 

8 entity in the State for that calendar year and 

9 the four preceding calendar years, had it elected 

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

11 years. 

12 (2) REGULATIONS.—The Secretary shall pre13 scribe regulations for making determinations re14 quired by this subsection. The initial regulations 

15 shall be prescribed not later than 6 months after the 

16 date of the enactment of this Act. 

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

18 12 funding for a State for a calendar year shall be equal 

19 to— 

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

21 than on a competitive basis, as direct grants, sub22 grants, or otherwise, under the K–12 education 

23 grant programs, by the State or any public edu24 cational entity in the State for that calendar year; 

25 plus 


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1 (2) the average annual amount of all grant 

2 funds received on a competitive basis, as direct 

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

4 education grant programs, by the State or any pub5 lic educational entity in the State for that calendar 

6 year and the four preceding calendar years. 

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

8 GRANTS UNDER K–12 EDUCATION GRANT 

9 PROGRAMS. 

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

11 for a calendar year, neither the State nor any public edu12 cational entity in the State is eligible to receive, as direct 

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

14 the K–12 education grant programs for that calendar 

15 year. 

16 (b) REALLOCATION.—Any funds under a K–12 edu17 cation grant program that are not allocated to a State or 

18 public educational entity in the State by reason of sub19 section (a) shall be returned to the Treasury. 

20 SEC. 104. REQUIREMENTS OF K–12 EDUCATION GRANT PRO21 GRAMS DO NOT APPLY TO OPT-OUT STATES. 

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

23 neither the State nor any public educational entity in the 

24 State is subject to any statutory or regulatory requirement 

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


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1 SEC. 105. DEFINITIONS. 

2 In this title: 

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

4 means any grant program carried out under any 

5 title of the Elementary and Secondary Education 

6 Act of 1965, except for the following: 

7 (A) INDIAN, NATIVE HAWAIIAN, AND ALAS8 KA NATIVE EDUCATION.—Title VII (20 U.S.C. 

9 7401 et seq.). 

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

11 7701 et seq.). 

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

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

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

15 any public elementary or secondary school in the 

16 State. 

17 TITLE II—CREDIT TO 

18 TAXPAYERS IN OPT-OUT STATE 

19 SEC. 201. REFUNDABLE OPT-OUT STATE EDUCATION CRED20 IT. 

21 (a) IN GENERAL.—Subpart C of part IV of sub22 chapter A of chapter 1 of the Internal Revenue Code of 

23 1986 (relating to refundable credits) is amended by insert24 ing after section 36C the following new section: 


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1 ‘‘SEC. 36D. OPT-OUT STATE EDUCATION CREDIT. 

2 ‘‘(a) GENERAL RULE.—In the case of an eligible indi3 vidual, there shall be allowed as a credit against the tax 

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

5 State education amount. 

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

7 purposes of this section— 

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

9 education amount’ means, with respect to a taxpayer 

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

11 amount equal to— 

12 ‘‘(A) the amount creditable under section 

13 102 of the Local Education Authority Returns 

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

15 section 101 of such Act), multiplied by— 

16 ‘‘(B) a fraction— 

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

18 taxpayer’s household tax burden from such 

19 State for the opt-out year, and 

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

21 total tax revenue of such State for the opt22 out year. 

23 ‘‘(2) HOUSEHOLD TAX BURDEN.—The house24 hold tax burden from a State for an opt-out year is 

25 the sum of— 

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


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

2 ‘‘(C) the State income, war profits, and ex3 cess profits taxes, plus 

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

5 for the calendar year in which the second preceding 

6 taxable year ends and within which paid or accrued 

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

8 used in the preceding sentence which are also used 

9 in section 164 shall have the respective meanings 

10 given such terms by section 164. 

11 ‘‘(3) TOTAL TAX REVENUE.—The total tax rev12 enue of a State for an opt-out year is the amount 

13 determined by the Secretary to be the aggregate tax 

14 revenue of such State for the calendar year in which 

15 the second preceding taxable year ends. 

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

17 section— 

18 ‘‘(1) IN GENERAL.—The term ‘eligible indi19 vidual’ means an individual whose principal place of 

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

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

22 ‘‘(2) DEPENDENTS.—The term ‘eligible indi23 vidual’ does not include any individual if a deduction 

24 under section 151 with respect to such individual is 

25 allowed to another taxpayer for a taxable year beginVerDate Mar 15 2010 04:12 Oct 14, 2011 Jkt 099200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H3176.IH H3176

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1 ning in the calendar year in which such individual’s 

2 taxable year begins. 

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

4 means a calendar year for which the Secretary determines 

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

6 Local Education Authority Returns Now Act. 

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

8 UNDER TABLES.— 

9 ‘‘(1) IN GENERAL.—The credit under sub10 section (a) shall be determined under tables pre11 scribed by the Secretary. 

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

13 prescribed under paragraph (1) shall— 

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

15 and 

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

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

18 (b) CONFORMING AMENDMENTS.— 

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

20 31, United States Code, is amended by inserting 

21 ‘‘36D,’’ after ‘‘36C,’’. 

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

23 IV of subchapter A of chapter 1 of the Internal Rev24 enue Code of 1986 is amended by inserting after the 

25 item relating to section 36C the following new item: 

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


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

2 this section shall apply to taxable years beginning after 

3 the date of the enactment of this Act. 

Æ 


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