An Act To Create a Scholarship Granting Organization Tax Credit
Maine Legislature, Session 124, LD 1284
Committee: Taxation
Sponsors: SHERMAN, WESTON, BROWNE, CUSHING, EDGECOMB, HAMPER, JOY, LEWIN, NUTTING
Amends: 36 MRSA §5219-D

Legislative Document 
No. 1284 
S.P.465 
In Senate, 
31,2009 
An Act To Create a Scholarship Granting Organization Tax Credit 
Reference to the Committee on Taxation suggested and ordered printed . 
Presented by Senator SHERMAN of Aroostook. 
Cosponsored by Senator WESTON of Waldo and 
. 9t8(J~ 
JOY J. O'BRIEN 
'Secretary of the Senate 
Representatives: BROWNE ofVassalb6ro, CUSHING of Hampden, EDGECOMB of Caribou, 
HAMPER of Oxford, JOY of Crystal, LEWIN of Eliot, NUTTING of Oakland. 
Printed on recycled pnpcr 
Be it enacted by the People of the State of Maine as follows: 
Sec. 1. 20-A MRS A §5815 is enacted to read: 
§5815. Scholarship granting organization reporting 
--~----kscholarshlp granting onianization,-as defiriedii1 Titre-30, sectloii 52r9~Dn,usiiig 
voluntary cash contributions provided pursuant to Title 36, section 5219-DD shall report 
armually by August 1 st to the Department of Administrative and Financial Services, 
. Bureau of Revenue Services, in a form prescribed by the bureau: 
1. 
Name. 
The name, address and contact name of the scholarship granting 
organization; 
2. Number of contributions. The total number of contributions received during the 
previous calendar year; 
3. Amount of contributions. The total dollar amount of contributions received 
during the previous calendar year; 
4. 
Number of children. 
The total number of children awarded educational 
scholarships during the previous calendar year; 
5. 
Amount and type of scholarships. The total dollar amount of educational 
scholarships awarded during the previous calendar year, the total number and dollar 
amount of educational scholarships awarded during the previous school year to students 
qualifying for the. federal free and reduced price lunch program pursuant to 42 United 
States Code, Section 1758(b) and the percentage of fIrst-time educational scholarship 
recipients who were enrolled in a public school during the previous school year; and 
, 6. School information.· For each school to which educational scholarships were 
awarded: 
A. The name and address of the school; 
B. The number of educational scholarships awarded during the previous calendar 
year; and 
. 
C. The total dollar amount of educational scholarships awarded during the previous 
calendar year. 
Sec. 2. 36 MRSA §5219-DD is enacted to read: 
§5219-DD. Scholarship granting organization credit 
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. 1. Definitions. As used in this section, unless the context otherwise indicates, the 
, following terms have the following meanings. 
A. "Educational scholarship" means a grant to a student to pay for part or all of the 
tuition and fees at a qualifIed school, including transportation to a qualifIed school 
outside of the school district in which that student resides. 
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B. "Eligible student" means a student who: 
(1) Is a dependent in a household in which the annual household income the year 
immediately prior to receiving an educational scholarship is no more tha~ 250% 
of the income guidelines developed annually used to qualify for a free and 
reduced price lunch under the free and- reduced price lunch program pursuant to 
United States Code, Section 1758(b); 
(2) Is enrolled in a qualified school, was eligible to attend a public school the 
preceding semester or is starting school for the first time in this State; and 
(3) Is a resident of this State while receiving an education~l scholarship. 
A student who meets the requirements of subparagraph (1) and who receives an 
educational scholarship remains an eligible student regardless of household income 
until the student is -graduated from secondary school or· attairis 21 years of age, 
whichever occurs first. For purposes of this paragraph, "household income" has the 
same meaning as in section 6201, subsection 7. -
C. "Low-income eligible student" means an eligible student who is a dependent in a 
household in which, based on the annual household income, the eligible student 
would qualify for a free or reduced price lunch under the federal free and reduced 
price lunch program pursuant to 42 United States Code, Section 1758(b). 
D. 
"Private school" means an academy, seminary, institute or other private 
corporation or body fonned for educational purposes covering kindergarten to grade 
or any portion thereof that: 
. 
(1) Is located in this State; and 
(2) Satisfies the requirements prescribed by the laws of this State for private 
schools. 
E. "Qualified school" means a private school or a public school as defined in Title 
20-A, section 1, subsection 24. 
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F. "Scholarship granting organization" means a charitable organization in this State 
pursuant to Section 501(c)(3) of the Code that provides educational scholarships to 
eligible students. 
2. 
Duties of -scholarship granting organization. 
A scholarship granting 
organization, in addition to the requirements of Title 20-A, section 5815, shall: 
A. Allocate at least 90% of its annual revenue from contributions for educational 
scholarships and 100% of its income from interest or investments of that -revenue for 
educational scholarships; 
B. Provide educational scholarships to a percentage of low-income eligible students 
equal to or greater than the percentage of low-income eligible students in the county 
in which the scholarship granting organization expends the maj ority of its revenue on 
educational scholarships; 
C. Ensure that at least 50% of first-time~ecipienis of educational scholarships were-
not continuously enrolled in a private- school during the year prior to receiving an 
educational scholarship for the first time; 
D. Provide educational scholarships to eligible students without limiting availability 
of those scholarships to students of a specific qualified school; 
E. Demonstrate its financial accountability to the bureau by submitting an annual 
financial information report for the scholarship granting organization that complies 
with uniform financial accounting standards established by the bureau. The annual 
financial report must be completed by a certified public accountant and certified by 
the assessor as free of material misstatements; and 
F. Demonstrate its financial viability, ifthe scholarship granting organization expects . 
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to receive donations 0[$50,000 or more during the usual school year, by filing with 
the bureau prior to the start of the usual school year: 
(1) A surety bond payable to the State in an amount equal to the aggregate 
amount of contributions expected to be received during the usual school year; or 
(2) 
Financial information that demonstrates the financial viability of the 
scholarship granting organization. 
3. Amount. 
A taxpayer is allowed a credit in the amount· of voluntary cash 
contributions made by the taxpayer during the taxable year to a scholarship granting 
organization up to a maximum amount of 50% of the tax otherwise due under this Part. 
4. Conditions. The credit allowed under subsection 3 is subject to the conditions 
under this subsection. 
A. A married couple that files separate returns for a taxable year· in which each 
spouse could have filed a joint return may each claim only 1/2 of the tax creditthat 
would have been allowed for a joint return. 
B. Any part of the voluntary cash contribution that is used to reduce the taxpayer's 
Maine tax liability except as provided in this section is ineligible for the credit 
provided pursuant to this section. 
C. The tax credit is not allowed for an educational scholarship provided to an eligible 
student who is attending a school that employs a paid staff or board member, -or an 
immediate family member of that paid staff or board member, who is an immediate 
family member of a member of the scholarship granting organization. 
For purposes of this paragraph, "immediate family member" means a person's spouse, 
parent, grandparent, child, grandchild, sister, brother, stepparent, step grandparent, 
stepchild, step grandchild, stepsister, _ stepbrother, mother-in-law, father-in-law, 
brother-in-law, sister-in-law, son-in-law, daughter-;in-Iaw, guardian, former guardian 
or domestic partner. 
D. 
The scholarship granting organization must meet. the reporting requirements 
specified in Title 20-A, section 5815. 
5. Limitation; carry-forward. The credit under this section may not reduce the tax 
otherwise due under this Part to less than 50% of that tax. A taxpayer entitled to a credit 
. under this section for any taxable year may carry over and apply to the tax liability for 
anyone or more of the next succeeding J taxable years the portion, as reduced from year 
to year, of any unused credits. 
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6. Review or audit by bureau; penalties. If the bureau has a reasonable belief that 
a scholarship granting organization· has failed to comply with ~he requirements of 
subsection 20r Title 20-A, section 5815, the bureau may conduct a financial review or an 
audit of that scholarship granting organization. 
If the bureau determines that the 
scholarship granting organization has intentionally and substantially failed to comply 
with the requirements of subsection 2 or Title 20:.A, section 5815; the bureau may bar the 
scholarship granting organization from participating in the credit. . Upon- taking such 
action, the bureau shall notify affected students as soon as practicable .. 
7. Rulemaking. The bureau shall adopt routine technical rules pursuant to Title 5, 
chapter 375, subchapter 2-A to implement the provisions of this section, including: 
A. A method to monitor payments by scholarship granting organizations to qualified 
schools and eligible students; and 
B. A standardized receipt for use by a scholarship granting organization to provide 
proof of contribution by a taxpayer for use by that taxpayer in claiming the credit 
under this section. 
Sec. 3. Application. This Act applies to tax years beginning on or after January 1, 
2009. 
SUMMARY 
This bill establishes a scholarship granting organization credit to provide a tax credit 
to individuals and corporations who donate to scholarship granting organizations. 
Scholarship granting organizations are defined as organizations that provide grants or 
scholarships to public or private school students in kindergarten to grade 12 who are from 
households that qualify for the federal free and reduced price lunch program. 
The maximum amount of the credit is the amount of voluntary cash contributions 
made to a scholarship granting organization up to a maximum of 50% of the tax owed. 
Scholarship granting organizations that receIve such contributions are subject to reporting 
requirements. The credit is not available for contributions made to a scholarship granting 
organization if a member of that organization is an immediate family member of a paid 
staff member or board member of the public or private school.