I
107TH CONGRESS
2D SESSION
H. R. 5192
To amend the Internal Revenue Code of 1986 to allow a credit for
contributions for the benefit of elementary and secondary schools.
IN THE HOUSE OF REPRESENTATIVES
JULY 23, 2002
Mr. SCHAFFER (for himself, Mr. HOEKSTRA, Mr. SHOWS, Mr. LIPINSKI, Mr.
CAMP, Mr. LEWIS of Kentucky, Mr. MCINNIS, Mr. KINGSTON, Mr.
DEMINT, Mr. SHADEGG, Mr. TANCREDO, Mr. CANTOR, Mr. SMITH of
Michigan, Mr. TIBERI, Mr. PITTS, Ms. HART, Mr. GUTKNECHT, Mr.
PAUL, Mr. BARR of Georgia, Mr. AKIN, Mr. KERNS, Mr. TERRY, Mr.
SENSENBRENNER, Mr. BURTON of Indiana, Mr. SOUDER, and Mr. PICK-
ERING) 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
credit for contributions for the benefit of elementary
and secondary schools.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Education Freedom
Act’’.
SEC. 2. CREDIT FOR CONTRIBUTIONS FOR THE BENEFIT OF
ELEMENTARY AND SECONDARY SCHOOLS.
(a) IN GENERAL.—Subpart B of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of
1986 is amended by adding at the end the following new
section:
‘‘SEC. 30B. CREDIT FOR CONTRIBUTIONS FOR THE BENEFIT
OF ELEMENTARY AND SECONDARY SCHOOLS.
‘‘(a) ALLOWANCE OF CREDIT.—There shall be al-
lowed as a credit against the tax imposed by this chapter
for the taxable year an amount equal to 50 percent of the
qualified charitable contributions of the taxpayer for the
taxable year.
‘‘(b) LIMITATIONS.—
‘‘(1) INDIVIDUALS, ETC.—In the case of a tax-
payer other than a corporation, the credit allowed by
subsection (a) for any taxable year shall not exceed
$250 ($500 in the case of a joint return).
‘‘(2) CORPORATIONS.—In the case of a corpora-
tion, the credit allowed by subsection (a) shall not
exceed $50,000.
‘‘(3) LIMITATION IN CASE OF STATE CREDIT.—
Subject to subsection (d)(2), in the case of a tax-
payer which claims a credit on a State income tax
return for any qualified charitable contribution, the
amount of credit under this section shall be the less-
er of—
‘‘(A) the amount which, when added to the
amount of the State income tax credit, equals
the total amount of the taxpayer’s qualified
charitable contributions, or
‘‘(B) the limitation amount that applies
under paragraph (1) or (2).
‘‘(c) QUALIFIED CHARITABLE CONTRIBUTION.—For
purposes of this section—
‘‘(1) IN GENERAL.—The term ‘qualified chari-
table contribution’ means, with respect to any tax-
able year, the aggregate amount allowable as a de-
duction under section 170 (determined without re-
gard to subsection (d)(1)) for cash contributions—
‘‘(A) to an education investment organiza-
tion, or
‘‘(B) to a public, private, or religious
school providing education at the elementary or
secondary level.
‘‘(2) 
EDUCATION
INVESTMENT
ORGANIZA-
TION.—For purposes of this section—
‘‘(A) IN GENERAL.—The term ‘education
investment organization’ means any organiza-
tion described in section 170(c)(2) if the annual
disbursements of the organization in the form
of grants for qualified elementary and sec-
ondary education expenses are normally not less
than 90 percent of the sum of such organiza-
tion’s annual gross income and contributions
and gifts.
‘‘(B) QUALIFIED ELEMENTARY AND SEC-
ONDARY
EDUCATION
EXPENSES.—The term
‘qualified elementary and secondary education
expenses’ has the meaning given such term by
section 530(b)(4), except that ‘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 subpara-
graph (A).
‘‘(d) SPECIAL RULES.—
‘‘(1) DENIAL OF DOUBLE BENEFIT.—No deduc-
tion shall be allowed under this chapter for any con-
tribution for which credit is allowed under this sec-
tion.
‘‘(2) APPLICATION
WITH
OTHER
CREDITS.—
The credit allowed by subsection (a) for any taxable
year shall not exceed the excess of—
‘‘(A) the sum of the regular tax liability
(as defined in section 26(b)) plus the tax im-
posed by section 55, over
‘‘(B) the sum of the credits allowable
under this part (other than sections 21, 22, 24,
25A, 25B, subpart C, and this section) and
under section 1397E.
‘‘(3) CONTROLLED GROUPS.—All persons who
are treated as one employer under subsection (a) or
(b) of section 52 shall be treated as 1 taxpayer for
purposes of this section.
‘‘(e) ELECTION TO HAVE CREDIT NOT APPLY.—A
taxpayer may elect to have this section not apply for any
taxable year.’’.
(b) CLERICAL AMENDMENT.—The table of sections
for subpart B of part IV of subchapter A of chapter 1
of such Code is amended by adding at the end the fol-
lowing new item:
‘‘Sec. 30B. Credit for contributions for the benefit of elementary
and secondary schools.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2002.
SEC. 3. EXCLUSION FROM GROSS INCOME OF GRANTS
FROM EDUCATION INVESTMENT ORGANIZA-
TIONS.
(a) IN GENERAL.—Part III of subchapter B of chap-
ter 1 of the Internal Revenue Code of 1986 (relating to
items specifically excluded from gross income) is amended
by inserting after section 117 the following new section:
‘‘SEC. 117A. GRANTS FROM EDUCATION INVESTMENT ORGA-
NIZATIONS.
‘‘(a) GENERAL RULE.—Gross income does not in-
clude any amount received as a grant for qualified elemen-
tary and secondary education expenses from an education
investment organization.
‘‘(b) DEFINITIONS.—For purposes of this section, the
terms ‘qualified elementary and secondary education ex-
penses’ and ‘education investment organization’ have the
meanings provided by section 30B.’’.
(b) CLERICAL AMENDMENT.—The table of sections
for part III of subchapter B of chapter 1 of such Code
is amended by inserting after the item relating to section
117 the following:
‘‘Sec. 117A. Grants from education investment organizations.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to amounts received in taxable
years beginning after December 31, 2002.
SEC. 4. REVISION OF DEFINITION OF SCHOOL FOR PUR-
POSES OF QUALIFIED ELEMENTARY AND
SECONDARY EDUCATION EXPENSES.
(a) IN GENERAL.—Paragraph (4) of section 530(b)
of the Internal Revenue Code of 1986 (defining qualified
elementary 
and 
secondary 
education 
expenses) 
is
amended—
(1) in clauses (i) and (ii) of subparagraph (A),
by striking ‘‘public, private, or religious’’, and
(2) in subparagraph (B), by inserting after
‘‘any school’’ the following: ‘‘, including a public,
private, religious, or home school,’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2002.
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