tion’ means any organization described in section 
170(c)(2) if— 
‘‘(A) normally not less than 90 percent of 
the annual cash contributions to such organiza-
tion are disbursed in the form of grants to stu-
dents for qualified elementary and secondary 
education expenses, and 
‘‘(B) not less than 1⁄2 of such disburse-
ments are to students who are eligible for free 
or reduced-cost lunches under the school lunch 
program established under the Richard B. Rus-
sell National School Lunch Act. 
‘‘(3) QUALIFIED ELEMENTARY AND SECONDARY 
EDUCATION
EXPENSES.—The term ‘qualified ele-
mentary and secondary education expenses’ has the 
meaning given such term by section 530(b)(3), ex-
cept 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 
subparagraph (A). 
‘‘(4) STATE CREDIT MUST BE TAKEN FIRST.— 
‘‘(A) No credit shall be allowed to a tax-
payer under this section for a taxable year un-
less, for the taxable year, the taxpayer is al-
lowed on the taxpayer’s State tax return the 
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minimum State qualified scholarship tax credit 
(as defined in section 3 of the Children’s Hope 
Act of 2009). 
‘‘(B) No credit shall be allowed to a tax-
payer under this section for such taxable year 
for any contributions that were taken into ac-
count for purposes of such State qualified 
scholarship tax credit. 
‘‘(d) SPECIAL RULES.— 
‘‘(1) DENIAL OF DOUBLE BENEFIT.—No deduc-
tion shall be allowed under any provision of this 
chapter for any expense for which a credit is allowed 
under this section. 
‘‘(2) TIME
WHEN
CONTRIBUTIONS
DEEMED 
MADE.—For purposes of this section, a taxpayer 
shall be deemed to have made a contribution to an 
education investment organization on the last day of 
the preceding taxable year if the contribution is 
made on account of such taxable year and is made 
not later than the time prescribed by law for filing 
the return for such taxable year (not including ex-
tensions thereof).’’. 
(b) SCHOLARSHIPS FROM EDUCATION INVESTMENT 
ORGANIZATIONS EXCLUDED FROM INCOME.—Section 74 
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of such Code (relating to prizes and awards) is amended 
by adding at the end the following new subsection: 
‘‘(d) SCHOLARSHIPS FROM EDUCATION INVESTMENT 
ORGANIZATIONS.—Gross 
income 
does 
not 
include 
amounts received as a scholarship from an education in-
vestment organization (as defined in section 30E(c)(2)) 
for qualified elementary and secondary education expenses 
(as defined in section 30E(c)(3)). Such scholarship shall 
not be taken into account for purposes of determining eli-
gibility for any Federal program.’’. 
(c) CLERICAL AMENDMENT.—The table of sections 
for such subpart B is amended by inserting after the item 
relating to section 30D the following new item: 
‘‘Sec. 30E. Contributions to education investment organizations.’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2008. 
SEC. 3. FEDERAL SCHOLARSHIP TAX CREDIT CONDITIONED 
ON STATE QUALIFIED SCHOLARSHIP TAX 
CREDIT. 
(a) IN GENERAL.—For purposes of section 30E(c)(4) 
of the Internal Revenue Code of 1986 (as added by section 
2 of this Act) a scholarship tax credit shall not be treated 
as a State qualified scholarship tax credit unless the re-
quirements of subsection (b) are met. 
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(b) REQUIREMENTS RELATING TO STATE QUALIFIED 
SCHOLARSHIP TAX CREDIT.— 
(1) IN GENERAL.—For purposes of subsection 
(a), the requirements of this subsection are met only 
if— 
(A) the tax credit is for an amount of not 
less than $250 per taxpayer and is allowed 
against the State income tax (property tax for 
those States that don’t have income tax) for the 
amount of voluntary cash contributions made 
by the taxpayer during the taxable year to a 
school tuition organization described in para-
graph (2), 
(B) the excess of such credit over tax li-
ability may be carried forward for not more 
than five years, 
(C) if the taxpayer does not require, as a 
condition of the contribution, that the contribu-
tion must benefit a specific child, and 
(D) such credit is not allowable for direct 
donations to private schools. 
(2) SCHOOL TUITION ORGANIZATION.—For pur-
poses of paragraph (1), a school tuition organization 
is described in this paragraph if such organization— 
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(A) is an organization operating in the 
State and is described in section 501(c)(3), and 
is exempt from tax under section 501(a), of the 
Internal Revenue Code of 1986, 
(B) expends at least 90 percent of its an-
nual cash contributions for educational scholar-
ships or tuition grants to children to allow them 
to attend any qualified school chosen at the sole 
discretion of their parents, and 
(C) disburses at least 90 percent of its an-
nual cash contributions within one year of their 
receipt. 
(3) QUALIFIED
SCHOOL.—For purposes of 
paragraph (2), the term ‘‘qualified school’’ means 
any elementary school or secondary school that is lo-
cated in the State in which the taxpayer resides and 
does not discriminate on the basis of race, color, 
handicap, familial status, or national origin and that 
satisfies the requirements prescribed by State law 
for such schools as of December 31, 2008. 
(4) EDUCATIONAL SCHOLARSHIPS OR TUITION 
GRANTS.—The term ‘‘educational scholarship or a 
tuition grant’’ means any scholarship or grant 
awarded for qualified elementary and secondary edu-
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