Title: Coronavirus Emergency Education Grants Act
Policy area: Taxation

Summary:
Coronavirus Emergency Education Grants Act
This bill directs the Department of the Treasury to establish a program to make one-time direct payments to parents or guardians to offset the educational expenses of their children during the period of March 2020 to June 2021. It also directs Treasury to award emergency education freedom grants to states.
The bill establishes a new tax credit for contributions to an eligible scholarship-granting organization. An eligible scholarship-granting organization is an tax-exempt organization that provides scholarships to individual elementary and secondary school students who reside in the state in which the organization is recognized or are members of a federally recognized Indian tribe. The organization must allocate at least 90% of contributions to qualifying scholarships on an annual basis and provide such scholarships to eligible students and families.

[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[S. 4505 Introduced in Senate (IS)]

<DOC>






116th CONGRESS
  2d Session
                                S. 4505

    To provide one-time grants to parents and guardians for student 
 education expenses, to establish emergency education freedom grants, 
   and to provide tax credits for donations to eligible scholarship-
            granting organizations, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             August 6, 2020

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

_______________________________________________________________________

                                 A BILL


 
    To provide one-time grants to parents and guardians for student 
 education expenses, to establish emergency education freedom grants, 
   and to provide tax credits for donations to eligible scholarship-
            granting organizations, and for other purposes.

    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 ``Coronavirus Emergency Education 
Grants Act''.

SEC. 2. GRANTS TO PARENTS AND GUARDIANS FOR STUDENT EDUCATION EXPENSES.

    (a) In General.--The Secretary, in consultation with the Secretary 
of Education, shall establish a program to make one-time direct 
payments to parents or guardians to offset the educational expenses 
that such individuals incurred in educating their children during the 
period of March 2020 to June 2021.
    (b) Contents of Program.--The program carried out under subsection 
(a) shall have the following requirements:
            (1) The Secretary shall make only one payment for each 
        child. Such payment will be made to the child's legal parent or 
        guardian. Such payment shall be the lesser of $10,000 or the 
        combined actual past and future out-of-pocket educational 
        expenses incurred, or that will be incurred, by the legal 
        parent or guardian for his or her child's education during the 
        period of March 2020 to June 2021.
            (2) The Secretary shall only make a payment to a parent or 
        guardian who is a citizen of the United States or lawfully 
        residing in the United States.
            (3) The Secretary shall only make a payment to a parent or 
        guardian who is the legal parent or guardian of the child.
            (4) The Secretary, in consultation with the Secretary of 
        Education, shall establish a web portal in which the legal 
        parent or guardian of a child may apply to receive this one-
        time payment. The Secretary shall request such information as 
        is necessary to--
                    (A) establish a parent or guardian's total out-of-
                pocket costs for educating his or her child during the 
                period of March 2020 to June 2021;
                    (B) establish the parent or guardian's identity, 
                establish the parent or guardian's citizenship or 
                lawful resident status;
                    (C) establish that parent or guardian is the legal 
                parent or guardian of the child and the child's 
                identity; and
                    (D) establish and maintain the program and prevent 
                fraud, waste, or abuse of program payments and funds.
            (5) The Secretary shall only make payments to legal parents 
        and guardians that have applied through the web portal and 
        provided such information as required by the Secretary, in 
        consultation with the Secretary of Education. The web portal 
        shall be established within 60 days of the date of enactment of 
        this Act.
            (6) The Secretary shall require parents or guardians who 
        have received a payment from the program to maintain records of 
        how such individuals spent the payment. The Secretary shall 
        develop procedures to audit such records, mitigate fraud, 
        waste, and abuse within the program, and recoup program funds 
        and payments from individuals who have committed fraud, waste, 
        or abuse.
    (c) Definitions.--In this section:
            (1) Educational expenses.--The term ``educational 
        expenses''--
                    (A) means--
                            (i) tuition for elementary or secondary 
                        education;
                            (ii) elementary or secondary education 
                        curriculum and curricular materials;
                            (iii) books or other instructional 
                        materials for elementary or secondary 
                        education;
                            (iv) online elementary or secondary 
                        education educational materials and expenses 
                        incurred to access these online educational 
                        materials;
                            (v) tuition for tutoring or elementary or 
                        secondary educational classes outside of the 
                        home, including at a tutoring facility, but 
                        only if the tutor or instructor is not related 
                        to the student and--
                                    (I) is licensed as a teacher in any 
                                State;
                                    (II) has taught at an eligible 
                                educational institution as established 
                                by the Secretary; or
                                    (III) is a subject matter expert in 
                                the relevant subject as established by 
                                the Secretary;
                            (vi) fees for a nationally standardized 
                        norm-referenced achievement test, an advanced 
                        placement examination, or any examination 
                        related to admission to an institution of 
                        higher education;
                            (vii) fees for dual enrollment in an 
                        institution of higher education; and
                            (viii) educational therapies for students 
                        with disabilities provided by a licensed or 
                        accredited practitioner or provider, including 
                        occupational, behavioral, physical, and speech-
                        language therapies; and
                    (B) includes expenses for the purposes described in 
                clauses (i) through (viii) of subparagraph (A) in 
                connection with a homeschool (whether treated as a 
                homeschool or a private school for purposes of 
                applicable State law).
            (2) Secretary.--The term ``Secretary'' means the Secretary 
        of the Treasury or the Secretary's delegate.
    (d) Authorization and Appropriation.--
            (1) In general.--There are authorized to be appropriated, 
        and there are appropriated, out of any amounts in the Treasury 
        not otherwise appropriated, such sums as are necessary to 
        enable the Secretary, in consultation with the Secretary of 
        Education, to establish and carry out this program.
            (2) Emergency designation.--
                    (A) In general.--The amounts provided by this 
                section are designated as an emergency requirement 
                pursuant to section 4(g) of the Statutory Pay-As-You-Go 
                Act of 2010 (2 U.S.C. 933(g)).
                    (B) Designation in senate.--In the Senate, this 
                section is designated as an emergency requirement 
                pursuant to section 4112(a) of H. Con. Res. 71 (115th 
                Congress), the concurrent resolution on the budget for 
                fiscal year 2018.

SEC. 3. EDUCATION FREEDOM SCHOLARSHIPS AND OPPORTUNITY.

    (a) Emergency Education Freedom Grants.--
            (1) Definitions.--In this subsection:
                    (A) Definitions from the internal revenue code of 
                1986.--The definitions in section 25E(c) of the 
                Internal Revenue Code of 1986, as added by subsection 
                (b), shall apply to this subsection, except as 
                otherwise provided.
                    (B) Emergency education freedom grant funds.--The 
                term ``emergency education freedom grant funds'' means 
                the amount of funds available under paragraph (2)(A) 
                for this subsection that are not reserved under 
                paragraph (3)(A)(i).
                    (C) Secretary.--The term ``Secretary'' means the 
                Secretary of Education.
                    (D) State.--The term ``State'' means each of the 50 
                States, the District of Columbia, and the Commonwealth 
                of Puerto Rico.
            (2) Grants.--
                    (A) Program authorized.--From any amounts 
                appropriated for section 18003 of division B of the 
                CARES Act (Public Law 116-136) on or after the date of 
                enactment of this Act, the Secretary shall, 
                notwithstanding any other provision of title XVIII of 
                division B of the CARES Act, use 10 percent of such 
                amounts to carry out paragraph (3) and award emergency 
                education freedom grants to States with approved 
                applications, in order to enable the States to award 
                subgrants to eligible scholarship-granting 
                organizations under paragraph (4).
                    (B) Timing.--The Secretary shall make the 
                allotments required under this paragraph by not later 
                than 30 days after the date of enactment of this Act.
            (3) Reservation and allotments.--
                    (A) In general.--From the amounts made available 
                under paragraph (2)(A), the Secretary shall--
                            (i) reserve--
                                    (I) one-half of 1 percent for 
                                allotments for the United States Virgin 
                                Islands, Guam, American Samoa, and the 
                                Commonwealth of the Northern Mariana 
                                Islands, to be distributed among those 
                                outlying areas on the basis of their 
                                relative need, as determined by the 
                                Secretary, in accordance with the 
                                purpose of this subsection; and
                                    (II) one-half of 1 percent of such 
                                amounts for the Secretary of the 
                                Interior, acting through the Bureau of 
                                Indian Education, to be used to provide 
                                subgrants described in paragraph (4) to 
                                eligible scholarship-granting 
                                organizations that serve students 
                                attending elementary schools or 
                                secondary schools operated or funded by 
                                the Bureau of Indian Education; and
                            (ii) subject to subparagraph (B), allot 
                        each State that submits an approved application 
                        under this subsection the sum of--
                                    (I) the amount that bears the same 
                                relation to 20 percent of the emergency 
                                education freedom grant funds as the 
                                number of individuals aged 5 through 17 
                                in the State, as determined by the 
                                Secretary on the basis of the most 
                                recent satisfactory data, bears to the 
                                number of those individuals, as so 
                                determined, in all such States that 
                                submitted approved applications; and
                                    (II) an amount that bears the same 
                                relationship to 80 percent of the 
                                emergency education freedom grant funds 
                                as the number of individuals aged 5 
                                through 17 from families with incomes 
                                below the poverty line in the State, as 
                                determined by the Secretary on the 
                                basis of the most recent satisfactory 
                                data, bears to the number of those 
                                individuals, as so determined, in all 
                                such States that submitted approved 
                                applications.
                    (B) Minimum allotment.--No State shall receive an 
                allotment under this paragraph for a fiscal year that 
                is less than one-half of 1 percent of the emergency 
                education freedom grant funds available for such fiscal 
                year.
            (4) Subgrants to eligible scholarship-granting 
        organizations.--
                    (A) In general.--A State that receives an allotment 
                under this subsection shall use the allotment to award 
                subgrants, on a basis determined appropriate by the 
                State, to eligible scholarship-granting organizations 
                in the State.
                    (B) Initial timing.--
                            (i) States with existing tax credit 
                        scholarship program.--By not later than 30 days 
                        after receiving an allotment under paragraph 
                        (3)(A)(ii), a State with an existing, as of the 
                        date of application for an allotment under this 
                        subsection, tax credit scholarship program 
                        shall use not less than 50 percent of the 
                        allotment to award subgrants to eligible 
                        scholarship-granting organizations in the 
                        State.
                            (ii) States without tax credit scholarship 
                        programs.--By not later than 60 days after 
                        receiving an allotment under paragraph 
                        (3)(A)(ii), a State without a tax credit 
                        scholarship program shall use not less than 50 
                        percent of the allotment to award subgrants to 
                        eligible scholarship-granting organizations in 
                        the State.
                    (C) Uses of funds.--An eligible scholarship-
                granting organization that receives a subgrant under 
                this paragraph--
                            (i) may reserve not more than 5 percent of 
                        the subgrant funds for public outreach, student 
                        and family support activities, and 
                        administrative expenses related to the 
                        subgrant; and
                            (ii) shall use not less than 95 percent of 
                        the subgrant funds to provide qualifying 
                        scholarships for qualified expenses only to 
                        individual elementary school and secondary 
                        school students who reside in the State in 
                        which the eligible scholarship-granting 
                        organization is recognized.
            (5) Reallocation.--A State shall return to the Secretary 
        any amounts of the allotment received under this subsection 
        that the State does not award as subgrants under paragraph (4) 
        by March 30, 2021, and the Secretary shall reallocate such 
        funds to the remaining eligible States in accordance with 
        paragraph (3)(A)(ii).
            (6) Rules of construction.--The rules of construction under 
        section 25E(d) of the Internal Revenue Code of 1986, as added 
        by subsection (b), shall apply to this subsection in the same 
        manner as such rules apply to section 25E of such Code, as so 
        added.
    (b) Tax Credits for Contributions to Eligible Scholarship-Granting 
Organizations.--
            (1) Credit for individuals.--Subpart A of part IV of 
        subchapter A of chapter 1 of the Internal Revenue Code of 1986 
        is amended by adding after section 25D the following new 
        section:

``SEC. 25E. CONTRIBUTIONS TO ELIGIBLE SCHOLARSHIP-GRANTING 
              ORGANIZATIONS.

    ``(a) Allowance of Credit.--Subject to section 3(c)(3) of the 
Coronavirus Emergency Education Grants Act, 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 sum of any 
qualified contributions made by the taxpayer during the taxable year.
    ``(b) Amount of Credit.--The credit allowed under subsection (a) 
for any taxable year shall not exceed 10 percent of the taxpayer's 
adjusted gross income for the taxable year.
    ``(c) Definitions.--For purposes of this section--
            ``(1) Eligible scholarship-granting organization.--The term 
        `eligible scholarship-granting organization' means--
                    ``(A) an organization that--
                            ``(i) is described in section 501(c)(3) and 
                        exempt from taxation under section 501(a),
                            ``(ii) provides qualifying scholarships to 
                        individual elementary and secondary students 
                        who--
                                    ``(I) reside in the State in which 
                                the eligible scholarship-granting 
                                organization is recognized, or
                                    ``(II) in the case of the Bureau of 
                                Indian Education, are members of a 
                                federally recognized tribe,
                            ``(iii) a State identifies to the Secretary 
                        as an eligible scholarship-granting 
                        organization under section 3(c)(3)(E)(ii) of 
                        the Coronavirus Emergency Education Grants Act,
                            ``(iv) allocates at least 90 percent of 
                        qualified contributions to qualifying 
                        scholarships on an annual basis, and
                            ``(v) provides qualifying scholarships to--
                                    ``(I) more than 1 eligible student,
                                    ``(II) more than 1 eligible family, 
                                and
                                    ``(III) different eligible students 
                                attending more than 1 education 
                                provider, or
                    ``(B) an organization that--
                            ``(i) is described in section 501(c)(3) and 
                        exempt from taxation under section 501(a), and
                            ``(ii) pursuant to State law, was able, as 
                        of January 1, 2021, to receive contributions 
                        that are eligible for a State tax credit if 
                        such contributions are used by the organization 
                        to provide scholarships to individual 
                        elementary and secondary students, including 
                        scholarships for attending private schools.
            ``(2) Qualified contribution.--The term `qualified 
        contribution' means a contribution of cash to any eligible 
        scholarship-granting organization.
            ``(3) Qualified expense.--The term `qualified expense' 
        means any educational expense that is--
                    ``(A) for an individual student's elementary or 
                secondary education, as recognized by the State, or
                    ``(B) for the secondary education component of an 
                individual elementary or secondary student's career and 
                technical education, as defined by section 3(5) of the 
                Carl D. Perkins Career and Technical Education Act of 
                2006 (20 U.S.C. 2302(5)).
            ``(4) Qualifying scholarship.--The term `qualifying 
        scholarship' means a scholarship granted by an eligible 
        scholarship-granting organization to an individual elementary 
        or secondary student for a qualified expense.
            ``(5) State.--The term `State' means each of the 50 States, 
        the District of Columbia, the Commonwealth of Puerto Rico, the 
        outlying areas (as defined in section 1121(c) of the Elementary 
        and Secondary Education Act of 1965 (20 U.S.C. 6331(c)), and 
        the Department of the Interior (acting through the Bureau of 
        Indian Education)).
    ``(d) Rules of Construction.--
            ``(1) In general.--A qualifying scholarship awarded to a 
        student from the proceeds of a qualified contribution under 
        this section shall not be considered assistance to the school 
        or other educational provider that enrolls, or provides 
        educational services to, the student or the student's parents.
            ``(2) Exclusion from income.--Gross income shall not 
        include any amount received by an individual as a qualifying 
        scholarship and such amount shall not be taken into account as 
        income or resources for purposes of determining the eligibility 
        of such individual or any other individual for benefits or 
        assistance, or the amount or extent of such benefits or 
        assistance, under any Federal program or under any State or 
        local program financed in whole or in part with Federal funds.
            ``(3) Prohibition of control over nonpublic education 
        providers.--
                    ``(A)(i) Nothing in this section shall be construed 
                to permit, allow, encourage, or authorize any Federal 
                control over any aspect of any private, religious, or 
                home education provider, whether or not a home 
                education provider is treated as a private school or 
                home school under State law.
                    ``(ii) This section shall not be construed to 
                exclude private, religious, or home education providers 
                from participation in programs or services under this 
                section.
                    ``(B) Nothing in this section shall be construed to 
                permit, allow, encourage, or authorize an entity 
                submitting a list of eligible scholarship-granting 
                organizations on behalf of a State pursuant to section 
                3(c)(3)(E) of the Coronavirus Emergency Education 
                Grants Act to mandate, direct, or control any aspect of 
                a private or home education provider, regardless of 
                whether or not a home education provider is treated as 
                a private school under State law.
                    ``(C) No participating State or entity acting on 
                behalf of a State pursuant to section 3(c)(3)(E) of the 
                Coronavirus Emergency Education Grants Act shall 
                exclude, discriminate against, or otherwise 
                disadvantage any education provider with respect to 
                programs or services under this section based in whole 
                or in part on the provider's religious character or 
                affiliation, including religiously based or mission-
                based policies or practices.
            ``(4) Parental rights to use scholarships.--No 
        participating State or entity acting on behalf of a State 
        pursuant to section 3(c)(3)(E) of the Coronavirus Emergency 
        Education Grants Act shall disfavor or discourage the use of 
        qualifying scholarships for the purchase of elementary and 
        secondary education services, including those services provided 
        by private or nonprofit entities, such as faith-based 
        providers.
            ``(5) State and local authority.--Nothing in this section 
        shall be construed to modify a State or local government's 
        authority and responsibility to fund education.
    ``(e) Denial of Double Benefit.--The Secretary shall prescribe such 
regulations or other guidance to ensure that the sum of the tax 
benefits provided by Federal, State, or local law for a qualified 
contribution receiving a Federal tax credit in any taxable year does 
not exceed the sum of the qualified contributions made by the taxpayer 
for the taxable year.
    ``(f) Carryforward of Credit.--If a tax credit allowed under this 
section is not fully used within the applicable taxable year because of 
insufficient tax liability on the part of the taxpayer, the unused 
amount may be carried forward for a period not to exceed 5 years.
    ``(g) Election.--This section shall apply to a taxpayer for a 
taxable year only if the taxpayer elects to have this section apply for 
such taxable year.
    ``(h) Alternative Minimum Tax.--For purposes of calculating the 
alternative minimum tax under section 55, a taxpayer may use any credit 
received for a qualified contribution under this section.''.
            (2) Clerical amendment.--The table of sections for subpart 
        A of part IV of subchapter A of chapter 1 of the Internal 
        Revenue Code of 1986 is amended by inserting after the item 
        relating to section 25D the following new item:

``Sec. 25E. Contributions to eligible scholarship-granting 
                            organizations.''.
            (3) Credit for corporations.--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. 45U. CONTRIBUTIONS TO ELIGIBLE SCHOLARSHIP-GRANTING 
              ORGANIZATIONS.

    ``(a) Allowance of Credit.--Subject to section 3(c)(3) of the 
Coronavirus Emergency Education Grants Act, for purposes of section 38, 
in the case of a domestic corporation, there shall be allowed as a 
credit against the tax imposed by this chapter for the taxable year an 
amount equal to the sum of any qualified contributions (as defined in 
section 25E(c)(2)) made by such corporation taxpayer during the taxable 
year.
    ``(b) Amount of Credit.--The credit allowed under subsection (a) 
for any taxable year shall not exceed 5 percent of the taxable income 
(as defined in section 170(b)(2)(D)) of the domestic corporation for 
such taxable year.
    ``(c) Additional Provisions.--For purposes of this section, any 
qualified contributions made by a domestic corporation shall be subject 
to the provisions of section 25E (including subsection (d) of such 
section), to the extent applicable.
    ``(d) Election.--This section shall apply to a taxpayer for a 
taxable year only if the taxpayer elects to have this section apply for 
such taxable year.''.
            (4) Credit part of general business credit.--Section 38(b) 
        is amended--
                    (A) by striking ``plus'' at the end of paragraph 
                (32);
                    (B) by striking the period at the end of paragraph 
                (33) and inserting ``, plus''; and
                    (C) by adding at the end the following new 
                paragraph:
            ``(34) the credit for qualified contributions determined 
        under section 45U(a).''.
            (5) Clerical amendment.--The table of sections for subpart 
        D of part IV of subchapter A of chapter 1 is amended by adding 
        at the end the following new item:

``Sec. 45U. Contributions to eligible scholarship-granting 
                            organizations.''.
            (6) Effective date.--The amendments made by this subsection 
        shall apply to taxable years beginning after December 31, 2020.
    (c) Education Freedom Scholarships Web Portal and Administration.--
            (1) In general.--The Secretary of the Treasury shall, in 
        coordination with the Secretary of Education, establish, host, 
        and maintain a web portal that--
                    (A) lists all eligible scholarship-granting 
                organizations;
                    (B) enables a taxpayer to make a qualifying 
                contribution to 1 or more eligible scholarship-granting 
                organizations and to immediately obtain both a pre-
                approval of a tax credit for that contribution and a 
                receipt for tax filings;
                    (C) provides information about the tax benefits 
                under sections 25E and 45U of the Internal Revenue Code 
                of 1986; and
                    (D) enables a State to submit and update 
                information about its programs and its eligible 
                scholarship-granting organizations for informational 
                purposes only, including information on--
                            (i) student eligibility;
                            (ii) allowable educational expenses;
                            (iii) the types of allowable education 
                        providers;
                            (iv) the percentage of funds an 
                        organization may use for program 
                        administration; and
                            (v) the percentage of total contributions 
                        the organization awards in a calendar year.
            (2) Nonportal contributions.--A taxpayer may opt to make a 
        contribution directly to an eligible scholarship-granting 
        organization, instead of through the web portal described in 
        paragraph (1), provided that the taxpayer, or the eligible 
        scholarship-granting organization on behalf of the taxpayer, 
        applies for, and receives, pre-approval for a tax credit from 
        the Secretary of the Treasury in coordination with the 
        Secretary of Education.
            (3) National and state limitations on credits.--
                    (A) National limitation.--For each fiscal year, the 
                total amount of qualifying contributions for which a 
                credit is allowed under sections 25E and 45U of the 
                Internal Revenue Code of 1986 shall not exceed 
                $5,000,000,000.
                    (B) Allocation of limitation.--
                            (i) Initial allocations.--For each calendar 
                        year, with respect to the limitation under 
                        subparagraph (A), the Secretary of the 
                        Treasury, in consultation with the Secretary of 
                        Education, shall--
                                    (I) allocate to each State an 
                                amount equal to the sum of the 
                                qualifying contributions made in the 
                                State in the previous year; and
                                    (II) from any amounts remaining 
                                following allocations made under 
                                subclause (I), allocate to each 
                                participating State an amount equal to 
                                the sum of--
                                            (aa) an amount that bears 
                                        the same relationship to 20 
                                        percent of such remaining 
                                        amount as the number of 
                                        individuals aged 5 through 17 
                                        in the State, as determined by 
                                        the Secretary of Education on 
                                        the basis of the most recent 
                                        satisfactory data, bears to the 
                                        number of those individuals in 
                                        all such States, as so 
                                        determined; and
                                            (bb) an amount that bears 
                                        the same relationship to 80 
                                        percent of such remaining 
                                        amount as the number of 
                                        individuals aged 5 through 17 
                                        from families with incomes 
                                        below the poverty line in the 
                                        State, as determined by the 
                                        Secretary of Education, on the 
                                        basis of the most recent 
                                        satisfactory data, bears to the 
                                        number of those individuals in 
                                        all such States, as so 
                                        determined.
                            (ii) Minimum allocation.--Notwithstanding 
                        clause (i), no State receiving an allocation 
                        under this subsection may receive less than 
                        one-half of 1 percent of the amount allocated 
                        for a fiscal year.
                            (iii) Alternative allocation.--
                                    (I) In general.--Not later than the 
                                end of the fifth year of the program or 
                                1 year after the end of the first 
                                fiscal year for which the total amount 
                                of credits claimed under section 25E 
                                and section 45U of the Internal Revenue 
                                Code of 1986 is $2,500,000,000 or more, 
                                whichever comes first, the Secretary of 
                                the Treasury, in consultation with the 
                                Secretary of Education, shall, by 
                                regulation, provide for an alternative 
                                allocation method that shall take 
                                effect beginning with the first fiscal 
                                year after such regulation takes 
                                effect.
                                    (II) Alternative allocation 
                                method.--The alternative allocation 
                                method shall be expressed as a formula 
                                based on a combination of the following 
                                data for each State, as reported by the 
                                State to the Secretary of the Treasury:
                                            (aa) The relative 
                                        percentage of students in the 
                                        State who receive an elementary 
                                        or secondary scholarship 
                                        through a State program that is 
                                        financed through State tax-
                                        credited donations or 
                                        appropriations and that permits 
                                        the elementary or secondary 
                                        scholarship to be used to 
                                        attend a private school.
                                            (bb) The total amount of 
                                        all elementary and secondary 
                                        scholarships awarded through a 
                                        State program that is financed 
                                        through State tax-credited 
                                        donations or appropriations 
                                        compared to the total amount of 
                                        current State and local 
                                        expenditures for free public 
                                        education in the State.
                                    (III) Allocation formula.--For any 
                                fiscal year to which subclause (I) 
                                applies, the Secretary of the Treasury, 
                                in consultation with the Secretary of 
                                Education, shall--
                                            (aa) for each State, 
                                        allocate an amount equal to the 
                                        sum of the qualifying 
                                        contributions made in the State 
                                        in the previous year;
                                            (bb) allocate \2/3\ of the 
                                        remaining amount (after 
                                        application of item (aa)) of 
                                        the national limitation for 
                                        that year using the alternative 
                                        allocation method under 
                                        subclause (II); and
                                            (cc) allocate \1/3\ of the 
                                        remaining amount (after 
                                        application of item (aa) and 
                                        (bb)) in accordance with clause 
                                        (i)(II).
                                    (IV) Ineligibility.--For any fiscal 
                                year to which subclause (I) applies, a 
                                State that does not provide the 
                                Secretary of the Treasury with 
                                information described in subclause (II) 
                                is not eligible to receive an 
                                allocation through the alternative 
                                allocation method under such subclause.
                    (C) Allowable partnerships.--A State may choose to 
                administer the allocation it receives under 
                subparagraph (B) in partnership with 1 or more States, 
                provided that the eligible scholarship-granting 
                organizations in each partner State serve students who 
                reside in all States in the partnership.
                    (D) Total allocation.--A State's allocation, for 
                any fiscal year, is the sum of the amount determined 
                for such State under clauses (i) and (ii) of 
                subparagraph (B), except as provided in subparagraph 
                (B)(iii).
                    (E) Allocation and adjustments.--
                            (i) Initial allocation to states.--Not 
                        later than November 1 of the year preceding a 
                        year for which there is a national limitation 
                        on credits under subparagraph (A) (referred to 
                        in this subsection as the ``applicable year''), 
                        or as early as practicable with respect to the 
                        first year, the Secretary of the Treasury shall 
                        announce the State allocations under 
                        subparagraph (B) for the applicable year.
                            (ii) List of eligible scholarship-granting 
                        organizations.--
                                    (I) In general.--Not later than 
                                January 1 of each applicable year, or 
                                as early as practicable with respect to 
                                the first year, each State shall 
                                provide the Secretary of the Treasury a 
                                list of eligible scholarship-granting 
                                organizations, including a 
                                certification that the entity 
                                submitting the list on behalf of the 
                                State has the authority to perform this 
                                function.
                                    (II) Rule of construction.--Neither 
                                this subsection nor any other Federal 
                                law shall be construed as limiting the 
                                entities that may submit the list on 
                                behalf of a State.
                            (iii) Reallocation of unclaimed credits.--
                        The Secretary of the Treasury shall reallocate 
                        a State's allocation to other States, in 
                        accordance with subparagraph (B), if the 
                        State--
                                    (I) chooses not to identify 
                                scholarship-granting organizations 
                                under clause (ii) in any applicable 
                                year; or
                                    (II) does not have an existing 
                                eligible scholarship-granting 
                                organization.
                            (iv) Reallocation.--On or after April 1 of 
                        any applicable year, the Secretary of the 
                        Treasury may reallocate, to 1 or more other 
                        States that have eligible scholarship-granting 
                        organizations in the States, without regard to 
                        subparagraph (B), the allocation of a State for 
                        which the State's allocation has not been 
                        claimed.
            (4) Definitions.--Any term used in this subsection which is 
        also used in section 25E of the Internal Revenue Code of 1986 
        shall have the same meaning as when used in such section.
                                 <all>