as of January 1 of the determination year, that can fairly 
be read to mean that the policy of the State is to not ac-
cept grant funds under the K–12 education grant pro-
grams, and thereby to not be bound by the requirements 
of those programs, for that opt-out year. 
(c) NOTIFICATION.—Upon making a determination 
under subsection (a), the Secretary of the Treasury shall 
transmit that determination to the Secretary of Education 
and to Congress. 
SEC. 102. AMOUNTS CREDITABLE TO STATES. 
(a) IN GENERAL.—For purposes of determinations 
relating to the refundable opt-out State education credit 
under section 36D of the Internal Revenue Code of 1986, 
as early as practicable for a calendar year, the Secretary 
of Education shall, for each State, determine the amount 
creditable to that State for that calendar year and make 
available that determination. 
(b) AMOUNT CREDITABLE.—The Secretary shall de-
termine the amount creditable to a State for a calendar 
year as follows: 
(1) If the State was not an opt-out State for 
the preceding calendar year, the amount creditable 
for the calendar year shall be equal to the aggregate 
K–12 funding (as determined under subsection (d)) 
for that State for that preceding calendar year. 
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(2) If the State was an opt-out State for the 
preceding calendar year, the amount creditable for 
the calendar year shall be equal to— 
(A) the extrapolated amount (as deter-
mined under subsection (c)) for that preceding 
calendar year, plus 
(B) the amount that results when the 
amount creditable for that preceding calendar 
year is subtracted from the extrapolated 
amount (as determined under subsection (c)) 
for that preceding calendar year. 
(c) EXTRAPOLATED AMOUNT.— 
(1) IN GENERAL.—The Secretary of Education 
shall determine the extrapolated amount for a State 
for a calendar year. The determination shall be 
based on— 
(A) the amount of grant funds that would 
have been received other than on a competitive 
basis, as direct grants, subgrants, or otherwise, 
under the K–12 education grant programs, by 
the State or any public educational entity in the 
State for that calendar year, had it elected not 
to be an opt-out State for that calendar year; 
plus 
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(B) the average annual amount of all grant 
funds that would have been received on a com-
petitive basis, as direct grants, subgrants, or 
otherwise, under the K–12 education grant pro-
grams, by the State or any public educational 
entity in the State for that calendar year and 
the four preceding calendar years, had it elected 
not to be an opt-out State for those calendar 
years. 
(2) REGULATIONS.—The Secretary shall pre-
scribe regulations for making determinations re-
quired by this subsection. The initial regulations 
shall be prescribed not later than 6 months after the 
date of the enactment of this Act. 
(d) AGGREGATE K–12 FUNDING.—The aggregate K– 
12 funding for a State for a calendar year shall be equal 
to— 
(1) the amount of all grant funds received other 
than on a competitive basis, as direct grants, sub-
grants, or otherwise, under the K–12 education 
grant programs, by the State or any public edu-
cational entity in the State for that calendar year; 
plus 
(2) the average annual amount of all grant 
funds received on a competitive basis, as direct 
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grants, subgrants, or otherwise, under the K–12 
education grant programs, by the State or any pub-
lic educational entity in the State for that calendar 
year and the four preceding calendar years. 
SEC. 103. OPT-OUT STATES NOT ELIGIBLE TO RECEIVE 
GRANTS UNDER K–12 EDUCATION GRANT 
PROGRAMS. 
(a) IN GENERAL.—When a State is an opt-out State 
for a calendar year, neither the State nor any public edu-
cational entity in the State is eligible to receive, as direct 
grants, subgrants, or otherwise, any funds under any of 
the K–12 education grant programs for that calendar 
year. 
(b) REALLOCATION.—Any funds under a K–12 edu-
cation grant program that are not allocated to a State or 
public educational entity in the State by reason of sub-
section (a) shall be returned to the Treasury. 
SEC. 104. REQUIREMENTS OF K–12 EDUCATION GRANT PRO-
GRAMS DO NOT APPLY TO OPT-OUT STATES. 
When a State is an opt-out State for a calendar year, 
neither the State nor any public educational entity in the 
State is subject to any statutory or regulatory requirement 
of a K–12 education grant program for that calendar year. 
SEC. 105. DEFINITIONS. 
In this title: 
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(1) The term ‘‘K–12 education grant program’’ 
means any grant program carried out under any 
title of the Elementary and Secondary Education 
Act of 1965, except for the following: 
(A) INDIAN, NATIVE HAWAIIAN, AND ALAS-
KA NATIVE EDUCATION.—Title VII (20 U.S.C. 
7401 et seq.). 
(B) IMPACT AID.—Title VIII (20 U.S.C. 
7701 et seq.). 
(2) The term ‘‘public educational entity’’ 
means, with respect to a State, the State educational 
agency, any local educational agency in the State, or 
any public elementary or secondary school in the 
State. 
TITLE II—CREDIT TO 
TAXPAYERS IN OPT-OUT STATE 
SEC. 201. REFUNDABLE OPT-OUT STATE EDUCATION CRED-
IT. 
(a) IN GENERAL.—Subpart C of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of 
1986 (relating to refundable credits) is amended by insert-
ing after section 36B the following new section: 
‘‘SEC. 36C. OPT-OUT STATE EDUCATION CREDIT. 
‘‘(a) GENERAL RULE.—In the case of an eligible indi-
vidual, there shall be allowed as a credit against the tax 
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imposed by this chapter for the taxable year the opt-out 
State education amount. 
‘‘(b) OPT-OUT STATE EDUCATION AMOUNT.—For 
purposes of this section— 
‘‘(1) IN
GENERAL.—The term ‘opt-out State 
education amount’ means, with respect to a taxpayer 
for a taxable year beginning in an opt-out year, the 
amount equal to— 
‘‘(A) the amount creditable under section 
102 of the Local Education Authority Returns 
Now Act to an opt-out State (determined under 
section 101 of such Act), multiplied by— 
‘‘(B) a fraction— 
‘‘(i) the numerator of which is the 
taxpayer’s household tax burden from such 
State for the opt-out year, and 
‘‘(ii) the denominator of which is the 
total tax revenue of such State for the opt- 
out year. 
‘‘(2) HOUSEHOLD TAX BURDEN.—The house-
hold tax burden from a State for an opt-out year is 
the sum of— 
‘‘(A) the State real property taxes, 
‘‘(B) the State personal property taxes, 
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‘‘(C) the State income, war profits, and ex-
cess profits taxes, plus 
‘‘(D) the State general sales taxes, 
for the calendar year in which the second preceding 
taxable year ends and within which paid or accrued 
by the taxpayer. For purposes of this section, terms 
used in the preceding sentence which are also used 
in section 164 shall have the respective meanings 
given such terms by section 164. 
‘‘(3) TOTAL TAX REVENUE.—The total tax rev-
enue of a State for an opt-out year is the amount 
determined by the Secretary to be the aggregate tax 
revenue of such State for the calendar year in which 
the second preceding taxable year ends. 
‘‘(c) ELIGIBLE INDIVIDUAL.—For purposes of this 
section— 
‘‘(1) IN
GENERAL.—The term ‘eligible indi-
vidual’ means an individual whose principal place of 
abode (within the meaning of section 121) was in 
the opt-out State for the entire taxable year. 
‘‘(2) DEPENDENTS.—The term ‘eligible indi-
vidual’ does not include any individual if a deduction 
under section 151 with respect to such individual is 
allowed to another taxpayer for a taxable year begin-
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ning in the calendar year in which such individual’s 
taxable year begins. 
‘‘(d) OPT-OUT
YEAR.—The term ‘opt-out year’ 
means a calendar year for which the Secretary determines 
a State to be an opt-out State under section 101 of the 
Local Education Authority Returns Now Act. 
‘‘(e) AMOUNT OF CREDIT SHALL BE DETERMINED 
UNDER TABLES.— 
‘‘(1) IN
GENERAL.—The credit under sub-
section (a) shall be determined under tables pre-
scribed by the Secretary. 
‘‘(2) REQUIREMENTS FOR TABLES.—The tables 
prescribed under paragraph (1) shall— 
‘‘(A) reflect the provisions of this section, 
and 
‘‘(B) take into account filing status, State 
of residence, and adjusted gross income.’’. 
(b) CONFORMING AMENDMENTS.— 
(1) Paragraph (2) of section 1324(b) of title 
31, United States Code, is amended by inserting 
‘‘36C,’’ after ‘‘36B,’’. 
(2) The table of sections for subpart C of part 
IV of subchapter A of chapter 1 of the Internal Rev-
enue Code of 1986 is amended by inserting after the 
item relating to section 36B the following new item: 
‘‘Sec. 36C. Opt-out State education credit.’’. 
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(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
the date of the enactment of this Act. 
Æ 
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