Educational Opportunities Act of 2023

Subjects: Taxation, Charitable contributions, Elementary and secondary education, Income tax credits, Sales and excise taxes, Social work, volunteer service, charitable organizations, Student aid and college costs

Summary:  <p><b>Educational Opportunities Act </b><strong>of 2023</strong></p> <p>This bill allows individual taxpayers a tax credit for charitable contributions to a scholarship granting organization. The bill allows a maximum credit amount of $4,500 ($2,250 for a married individual filing a separate return). A <i>scholarship granting organization</i> is a tax-exempt entity whose exclusive purpose is to provide scholarships for the tuition and other education expenses of elementary and secondary school students from low-income households (i.e., household income not exceeding 250% of federal poverty guidelines).</p> <p>The bill allows corporate taxpayers a tax credit, up to $100,000, for contributions to a scholarship granting organization. It also imposes a penalty on scholarship granting organizations that fail to distribute at least 90% of their total receipts for elementary and secondary school expenses in a taxable year.</p>

<html><body><pre>[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[S. 301 Introduced in Senate (IS)]

&lt;DOC&gt;






118th CONGRESS
  1st Session
                                 S. 301

 To amend the Internal Revenue Code of 1986 to allow a credit against 
     tax for qualified elementary and secondary education tuition.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            February 7, 2023

   Mr. Rubio introduced the following bill; which was read twice and 
                  referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
 To amend the Internal Revenue Code of 1986 to allow a credit against 
     tax for qualified elementary and secondary education tuition.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Educational Opportunities Act of 
2023''.

SEC. 2. TAX CREDIT FOR CONTRIBUTIONS TO SCHOLARSHIP GRANTING 
              ORGANIZATIONS.

    (a) Credit for Individuals.--
            (1) In general.--Subpart A of part IV of subchapter A of 
        chapter 1 of the Internal Revenue Code of 1986 is amended by 
        inserting after section 25E the following new section:

``SEC. 25F. CONTRIBUTIONS FOR QUALIFIED ELEMENTARY AND SECONDARY 
              EDUCATION TUITION.

    ``(a) Allowance of Credit.--In the case of an individual, there 
shall be allowed as a credit against the tax imposed by this chapter 
for the taxable year an amount equal to the amount of qualified 
contributions made by the taxpayer during the taxable year.
    ``(b) Dollar Limitation.--The amount allowed as a credit under 
subsection (a) with respect to any taxpayer shall not exceed--
            ``(1) $2,250, in the case of a married individual filing a 
        separate return, and
            ``(2) $4,500, in any other case.
    ``(c) Qualified Contributions; Other Definitions.--For purposes of 
this section--
            ``(1) Qualified contribution.--The term `qualified 
        contribution' means a charitable contribution (as defined by 
        section 170(c)) to a scholarship granting organization.
            ``(2) Scholarship granting organization.--The term 
        `scholarship granting organization' means any organization--
                    ``(A) which is described in section 501(c)(3) and 
                exempt from tax under section 501(a),
                    ``(B) whose exclusive purpose is to provide 
                scholarships for the qualified elementary and secondary 
                education expenses of eligible students, and
                    ``(C) which meets the requirements of subsection 
                (d).
            ``(3) Eligible student.--The term `eligible student' means 
        an individual--
                    ``(A) who is enrolled in a school (within the 
                meaning of section 530(b)(3)(B), after the application 
                of paragraph (4)(B)), and
                    ``(B) who is a member of a household with a total 
                annual household income which does not exceed 250 
                percent of the Federal poverty guidelines (as 
                determined by the Secretary of Health and Human 
                Services).
            ``(4) Qualified elementary and secondary education 
        expenses.--The term `qualified elementary and secondary 
        education expenses' has the meaning given such term by section 
        530(b)(3), except that--
                    ``(A) `child' shall be substituted for 
                `beneficiary' and `a child' shall be substituted for 
                `the designated beneficiary of the trust' in clauses 
                (i) and (iii) of subparagraph (A) thereof, and
                    ``(B) in applying such paragraph, the term `school' 
                shall only include schools which--
                            ``(i) charge tuition for attendance,
                            ``(ii) comply with all applicable State 
                        laws, including laws relating to unlawful 
                        discrimination, health and safety requirements, 
                        and criminal background checks of employees, 
                        and
                            ``(iii) agree to provide annual reports as 
                        described in subsection (e) to the scholarship 
                        granting organization and to the parents or 
                        guardians of eligible students receiving a 
                        scholarship from the scholarship granting 
                        organization.
            ``(5) Scholarship.--The term `scholarship' does not include 
        any payment to fulfill or fund any obligation or project of any 
        school or school system to provide a free, appropriate public 
        education.
    ``(d) Requirements for Scholarship Granting Organizations.--An 
organization meets the requirements of this section if--
            ``(1) such organization does not provide grants to eligible 
        students for any expenses other than qualified elementary and 
        secondary education expenses,
            ``(2) such organization provides grants to--
                    ``(A) more than 1 student, and
                    ``(B) students attending more than 1 school,
            ``(3) such organization does not earmark or set aside 
        contributions for scholarships on behalf of any particular 
        student or to any specific school or group of schools,
            ``(4) such organization takes appropriate steps to verify 
        the annual household income and family size of eligible 
        students to which it provides grants,
            ``(5) such organization obtains annual audits from an 
        independent certified public accountant and submits such audits 
        to the Secretary,
            ``(6) no employee of such organization has violated any law 
        relating to the audit described in paragraph (4), and
            ``(7) such organization--
                    ``(A) requires any eligible student who receives a 
                scholarship--
                            ``(i) to participate in the evaluation 
                        conducted by the Institute of Education Science 
                        under section 2(d) of the Educational 
                        Opportunities Act of 2023, and
                            ``(ii) to permit such organization to share 
                        assessment information and other data regarding 
                        the student with the Institute in accordance 
                        with subparagraph (B), and
                    ``(B) provides the reports described in subsection 
                (e)(1)(C) and such other information as necessary to 
                the Director of the Institute of Education Science for 
                the purposes of identifying eligible students receiving 
                a scholarship from such organization and conducting the 
                evaluations and reports required under section 2(d) of 
                the Educational Opportunities Act of 2023.
        For purposes of paragraph (5), the term `independent certified 
        public accountant' means, with respect to an organization, a 
        certified public accountant which is not a related person 
        (within the meaning of section 465(b)(3)(C)) with respect to 
        such organization or any employee of such organization.
    ``(e) Eligible School Reporting Requirement.--
            ``(1) In general.--The reports described in this subsection 
        include--
                    ``(A) a report to the parents on the student's 
                academic achievement, including a comparison with the 
                aggregate academic achievement of other students in the 
                same grade or level at the school who receive a 
                scholarship from a scholarship granting organization, 
                if available, and
                    ``(B) a report to each scholarship granting 
                organization that provides scholarships to students at 
                the school, including--
                            ``(i) the test results, in the aggregate 
                        and disaggregated by race or ethnicity and 
                        grade level, of the students receiving such 
                        scholarships who are in grades 3 through 12 on 
                        a grade-appropriate nationally norm-referenced 
                        standardized test, or a grade-appropriate 
                        State-recognized assessment, and
                            ``(ii) any additional data requested by the 
                        Director of the Institute of Education Sciences 
                        in accordance with section 2(d)(B) of the 
                        Educational Opportunities Act of 2023.
            ``(2) No personally identifiable information.--In preparing 
        and submitting the report described in paragraph (1)(B), a 
        school shall not include any personally identifiable 
        information regarding a student.
    ``(f) Denial of Double Benefit.--No deduction shall be allowed 
under any provision of this chapter for any expense for which a credit 
is allowed under this section.
    ``(g) Election.--This section shall apply to a taxpayer for a 
taxable year only if such taxpayer elects to have this section apply 
for such taxable year.''.
            (2) Clerical amendment.--The table of sections for subpart 
        A of part IV of subchapter A of chapter 1 of such Code is 
        amended by inserting after the item relating to section 25E the 
        following new item:

``Sec. 25F. Contributions for qualified elementary and secondary 
                            education tuition.''.
    (b) Credit for Corporations.--
            (1) In general.--Subpart D of part IV of subchapter A of 
        chapter 1 of the Internal Revenue Code of 1986 is amended by 
        adding at the end the following new section:

``SEC. 45AA. CONTRIBUTIONS TO SCHOLARSHIP GRANTING ORGANIZATIONS.

    ``(a) General Rule.--For purposes of section 38, in the case of a 
corporation, the education scholarship credit determined under this 
section for the taxable year is the aggregate amount of qualified 
contributions for the taxable year.
    ``(b) Limitation.--The amount of the credit determined under this 
section for any taxable year shall not exceed $100,000.
    ``(c) Qualified Contributions.--For purposes of this section, the 
term `qualified contribution' has the meaning given such term under 
section 25F.
    ``(d) Denial of Double Benefit.--No deduction shall be allowed 
under any provision of this chapter for any expense for which a credit 
is allowed under this section.
    ``(e) Election.--This section shall apply to a taxpayer for a 
taxable year only if such taxpayer elects to have this section apply 
for such taxable year.''.
            (2) Conforming amendments.--
                    (A) Section 38(b) of such Code is amended by 
                striking ``plus'' at the end of paragraph (39), by 
                striking the period at the end of paragraph (40) and 
                inserting ``, plus'', and by adding at the end the 
                following new paragraph:
            ``(41) the education scholarship credit determined under 
        section 45AA(a).''.
                    (B) The table of sections for subpart D of part IV 
                of subchapter A of chapter 1 of such Code is amended by 
                adding at the end the following new item:

``Sec. 45AA. Contributions to scholarship granting organizations.''.
    (c) Excise Tax on Failure of Scholarship Granting Organizations to 
Make Distributions.--
            (1) In general.--Chapter 42 of the Internal Revenue Code of 
        1986 is amended by adding at the end the following new 
        subchapter:

           ``Subchapter I--Scholarship Granting Organizations

``Sec. 4969. Tax on failure to distribute receipts.

``SEC. 4969. TAX ON FAILURE TO DISTRIBUTE RECEIPTS.

    ``(a) Tax Imposed.--There is hereby imposed a tax on the failure of 
an scholarship granting organization (as defined in section 25F(c)(2)) 
to make distributions in any taxable year in an amount equal to or in 
excess of the required distribution amount before the distribution 
deadline.
    ``(b) Amount of Tax.--The tax imposed by subsection (a) shall be 
equal to 15 percent of the excess (if any) of--
            ``(1) the required distribution amount with respect to the 
        taxable year, over
            ``(2) the amount of receipts of the scholarship granting 
        organization for such taxable year which are distributed before 
        the distribution deadline with respect to such receipts.
    ``(c) Definitions.--For purposes of this section--
            ``(1) Required distribution amount.--The required 
        distribution amount with respect to a taxable year is an amount 
        equal to 90 percent of the total receipts of the scholarship 
        granting organization for such taxable year.
            ``(2) Distributions.--The term `distribution' includes 
        amounts which are formally committed but not distributed.
            ``(3) Distribution deadline.--The distribution deadline 
        with respect to receipts for a taxable year is the first day of 
        the second taxable year following the taxable year in which 
        such receipts are received by the scholarship granting 
        organization.
    ``(d) Reasonable Cause Exception.--The tax imposed by subsection 
(a) shall not apply with respect to any failure to make required 
distributions before the distribution deadline which is not willful and 
is due to reasonable cause.''.
            (2) Abatement of tax.--
                    (A) General rule.--Subsection (b) of section 4962 
                of such Code is amended by striking ``or G'' and 
                inserting ``G, or I''.
                    (B) First tier tax.--Subsection (a) of section 4963 
                of such Code is amended by inserting ``4969,'' after 
                ``4967,''.
                    (C) Taxable event.--Subsection (c) of section 4963 
                of such Code is amended by inserting ``4969,'' after 
                ``4967,''.
            (3) Correction period.--Subparagraph (A) of section 
        4963(e)(2) of such Code is amended by inserting ``or 4969'' 
        after ``4942''.
            (4) Conforming amendment.--The table of subchapters for 
        chapter 42 of such Code is amended by adding at the end the 
        following new item:

         ``subchapter i--scholarship granting organizations''.

    (d) Evaluations.--
            (1) Definitions.--In this section--
                    (A) the terms ``eligible student'', ``qualified 
                elementary and secondary education expenses'', and 
                ``scholarship granting organization'' have the meanings 
                given such terms in section 25F(c) of the Internal 
                Revenue Code of 1986, as added by this Act;
                    (B) the term ``Director'' means the Director of the 
                Institute of Education Sciences; and
                    (C) the term ``participating student'' means an 
                eligible student who receives a scholarship for 
                qualified elementary and secondary education expenses 
                from a scholarship granting organization.
            (2) Evaluations.--
                    (A) In general.--By not later than April 1 of the 
                year following the year of the date of enactment of 
                this Act, and by April 1 of each subsequent year, the 
                Director shall conduct an annual evaluation to 
                determine the effectiveness of scholarships provided by 
                scholarship granting organizations to eligible students 
                in improving the academic achievement and success of 
                the eligible students.
                    (B) Contents of the evaluation.--In conducting the 
                evaluation required under this subsection, the Director 
                shall--
                            (i) request, from each scholarship granting 
                        organization, the reports provided to the 
                        scholarship granting organization by the 
                        schools accepting participating students, in 
                        accordance with section 25F(e)(1)(B);
                            (ii) using the reports described in clause 
                        (i), assess the academic achievement of all 
                        participating students in grades 3 through 12, 
                        based on the nationally norm-referenced 
                        standardized test or State-recognized 
                        assessment used by each school;
                            (iii) evaluate the school retention rates, 
                        secondary school graduation rates, and 
                        institution of higher education admission rates 
                        of participating students;
                            (iv) evaluate the success of the tax 
                        credits allowed under section 25F and 45AA of 
                        the Internal Revenue Code of 1986, as added by 
                        this Act, in expanding school choice options 
                        for parents of participating students, 
                        increasing the satisfaction of such parents and 
                        students, and increasing parental involvement 
                        of such parents in the education of their 
                        students; and
                            (v) evaluate such other issues with respect 
                        to the education of participating students as 
                        the Director considers appropriate for 
                        inclusion in the evaluation.
            (3) Reports.--By not later than April 1 of the year after 
        the year of the first evaluation under paragraph (2), and by 
        April 1 of each subsequent year, the Director shall submit to 
        the Committee on Finance and the Committee on Health, 
        Education, Labor, and Pensions of the Senate, and the Committee 
        on Ways and Means and the Committee on Education and the 
        Workforce of the House of Representatives, an annual report on 
        scholarships provided by scholarship granting organizations 
        that incorporates the results of the most recent evaluation 
        described in paragraph (2).
            (4) Prohibition.--No personally identifiable information 
        shall be disclosed in the data, evaluations, and reports 
        required under this subsection.
            (5) Public availability.--The Director shall make all 
        evaluations, reports, and underlying data gathered pursuant to 
        this subsection available to the public, upon request and in a 
        timely manner following submission of the applicable report or 
        evaluation under this subsection, subject to paragraph (4).
    (e) Effective Date.--The amendments made by subsections (a), (b), 
and (c) shall apply to taxable years beginning after December 31, 2022.
                                 &lt;all&gt;
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