Amended in Assembly April 1, 2014

California Legislature—2013–14 Regular Session

Assembly Bill No. 2421

Introduced by Assembly Member Nestande

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(Coauthor: Assembly Member Allen)

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February 21, 2014

begin delete An act relating to taxation. end delete begin insert An act to add and repeal Section 23692 of the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy. end insert

LEGISLATIVE COUNSEL’S DIGEST

AB 2421, as amended, Nestande. begin delete Corporation taxes: credit: education scholarship organizations. end delete begin insert Corporation Tax Law: credits: Foster Youth Opportunities Investment Act. end insert

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The Corporation Tax Law allows various credits against the tax imposed by that law.

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This bill, for taxable years beginning on or after January 1, 2015, and before January 1, 2020, would allow a credit against the tax imposed under that law for 50% of monetary contributions to nonprofit education scholarship organizations, as defined, to fund qualified scholarships for specified pupils to attend private schools, as defined, or for transportation costs to attend private, public, or charter schools. The bill would provide that the credit would not exceed $200,000 per taxpayer, that the credit would be awarded on a first-come, first-serve basis, and that the credit would have an aggregate cap of $50,000,000 for each calendar year. The bill would require the Franchise Tax Board and the State Department of Education to administer the credit, as specified.

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This bill would take effect immediately as a tax levy.

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The Personal Income Tax Law and the Corporation Tax Law allow various credits against the taxes imposed by those laws.

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This bill would state that it is the intent of the Legislature to enact legislation that would allow a credit against the tax imposed by the Corporation Tax Law in the amount of 50% of a charitable contribution to a nonprofit education scholarship organization that provides tuition and transportation fee assistance for students with special learning needs, foster youth, and children from low-income families, who attend public, charter, or private schools. It is the intent of the Legislature that the credit shall not exceed $200,000 per taxpayer, that the credit be awarded on a first-come, first-serve basis, and that the credit have an aggregate cap of $50,000,000.

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Vote: majority. Appropriation: no. Fiscal committee:  begin delete no end delete begin insert yes end insert . State-mandated local program: no.

The people of the State of California do enact as follows:

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begin insert SECTION 1. end insert   

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begin insert This act shall be known and may be cited as the end insert begin insert Foster Youth Opportunities Investment Act. end insert

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begin insert SEC. 2. end insert   

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The Legislature finds and declares the following:

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(a) Providing tax incentives to encourage private investments
for the common good is sound public policy.

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(b) Expanding educational opportunities and improving the
quality of, and access to, educational services within the state are
valid public purposes that the Legislature may promote using its
sovereign power to determine tax policy.

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(c) Creative tax policy can inspire greater charitable
contributions and public-private partnerships that ensure
additional resources for the education of all children in California.

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(d) Encouraging voluntary support for education, without
prejudice for or against any state-sanctioned educational
enterprise promotes the state’s interest and common good in
providing the highest quality education to all children in the state.

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(e) At a time when fiscal realities challenging California school
communities demand innovative ways to deliver vital education
services to public and private pupils in kindergarten and grades
1 to 12, inclusive, charitable giving for educational purposes
should be stimulated.

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(f) California benefits from ensuring the accessibility and
viability of strong public, as well as, private school options in
educating students, especially for those with the greatest needs:
our foster youth.

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begin insert SEC. 3. end insert   

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begin insert Section 23692 is added to the end insert begin insert Revenue and Taxation
Code end insert begin insert , to read: end insert

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begin insert 23692. end insert   

(a) For each taxable year beginning on or after
January 1, 2015, and before January 1, 2020, there shall be
allowed as a credit against the “tax,” as defined in Section 23036,
an amount equal to 50 percent of the monetary contribution
provided by a taxpayer to a nonprofit education scholarship
organization to fund qualified K-12 education scholarships for a
specified pupil to attend private school or to fund partial or full
payments of fees associated with the general costs of transportation
to attend a private, public, or charter school.

(b) For purposes of this section:

(1) “Education scholarship organization (ESO)” means a
charitable institution in this state that meets the following:

(A) Is organized and operated with the primary purpose of
providing qualified K-12 education scholarships to pupils attending
a private school in California.

(B) (i) Allocates at least 80 percent of contributions for which
a credit is claimed for qualified K-12 education scholarships for
ESOs with three or more years of audits.

(ii) Allocates at least 90 percent of contributions for which a
credit is claimed for qualified K-12 education scholarships for
ESOs with less than three years of audits.

(C) Makes qualified K-12 education scholarships available for
pupils from more than one school.

(D) Retains data on the progress of the pupils participating in
qualified K-12 education scholarships on nationally available
norm-referenced tests to evaluate the program’s efficacy.

(E) Submits to the Franchise Tax Board financial and
compliance audit reports performed by a certified public
accountant.

(F) Submits to the State Department of Education quarterly
reports on the number of qualified K-12 education scholarship
recipients and the schools that the recipients attend.

(G) Applies to participate in this credit program with the
Franchise Tax Board.

(2) “Nonprofit” means an organization that meets all of the
following requirements:

(A) Is formed as any of the following:

(i) A nonprofit public benefit corporation described in Part 2
(commencing with Section 5110) of Division 2 of Title 1 of the
Corporations Code.

(ii) A nonprofit religious corporation described in Part 4
(commencing with Section 9110) of Division 2 of Title 1 of the
Corporations Code.

(iii) Any other charitable corporation, as defined by Section
12582.1 of the Government Code.

(iv) A duly authorized foreign nonprofit corporation that has
complied with the registration requirements under Section 6910
of, and Chapter 21 (commencing with Section 2100) of Division
1 of Title 1 of, the Corporations Code.

(B) An organization exempt from federal income tax as an
organization described in Section 501(c)(3) of the Internal Revenue
Code.

(3) “Qualified K-12 education scholarship” means either of
the following:

(A) An award of tuition assistance amounting to at least 65
percent of the basic state per-pupil funding, or a private school’s
actual tuition and fees, whichever is less, that meets all of the
following requirements:

(i) An initial K-12 education scholarship shall be awarded to
a specified pupil in kindergarten through grade 12.

(ii) May be renewed at the request of the specified pupil for
each school year until graduation from high school.

(iii) Shall be portable and follow the specified pupil from one
school to another.

(iv) Shall be provided to a private school of the specified pupil’s
choosing under the following conditions:

(I) Each ESO shall establish criteria for granting scholarships
that meet the requirements of this section.

(II) The pupil receiving the assistance shall remain a specified
pupil.

(III) The specified pupil shall attend a private school.

(IV) The specified pupil shall remain enrolled and in attendance
at the private school throughout the school year unless excused
by the applicable program for illness or other good cause.

(V) The specified pupil and a parent or legal guardian of the
specified pupil shall comply with all applicable policies of the
private school.

(VI) A parent or legal guardian of the specified pupil shall
ensure that the pupil has reliable transportation to and from the
applicable program.

(B) Financial assistance for a specified pupil to partially or
fully pay for the fees associated with the general costs of
transportation to attend a private, public, or charter school.

(C) Financial assistance for a specified pupil to attend college
courses after graduation from high school provided by any public
or independent college where the specified pupil has been admitted
to attend.

(4) “Specified pupil” means a minor who has applied for a
K-12 education scholarship and is a pupil within foster care who
has been placed in a foster care system within the State of
California at any time prior to graduating high school.

(A) A specified pupil is not required to be previously enrolled
in a public school or charter school to participate.

(B) A specified pupil remains eligible for a scholarship until he
or she graduates from high school or leaves the foster care
program.

(5) “Private school” means a person, firm, association,
partnership, or corporation offering or conducting private school
instruction in the State of California on the elementary or high
school level, that meets all of the following requirements:

(A) Is accredited by the Western Association of Schools and
Colleges or an affiliated organization.

(B) Has filed a current private school affidavit with the State
Department of Education in accordance with Section 33190 of the
Education Code.

(C) Complies with applicable provisions of the Health and
Safety Code.

(D) Complies with applicable provisions of the Fair Employment
and Housing Act (Part 2.8 (commencing with Section 12900) of
Division 3 of Title 2 of the Government Code).

(E) Utilizes background checks in connection with hiring all
school employees, consistent with the standards set forth in
subdivision (a) of Section 44237 of the Education Code.

(F) Requires a specified pupil to take a nationally available
norm-referenced test.

(G) Has obtained, if it has been in operation for less than three
years, a surety bond or letter of credit in an amount equal to the
value of the education scholarship payments for one quarter.

(c) The amount of the credit shall not exceed two hundred
thousand dollars ($200,000) per taxpayer, per taxable year.

(d) The taxpayer shall receive a certification by the Franchise
Tax Board upon a determination that the contribution meets the
requirements of this section and shall apply with the Franchise
Tax Board to receive a credit.

(e) In the case where the credit allowed by this section exceeds
the “tax,” the excess may be carried over to reduce the “tax” in
the following year, and succeeding five years if necessary, until
the credit is exhausted.

(f) This credit shall be in lieu of any other credit or deduction
that the taxpayer may otherwise claim pursuant to this part with
respect to a monetary contribution described in subdivision (a).

(g) This credit shall be claimed on a timely filed original return.

(h) (1) The aggregate amount of credits allowed under this
section shall not exceed fifty million dollars ($50,000,000) for
each calendar year.

(2) The allocation of credits shall be on a first-come, first-serve
basis.

(3) The Legislature may increase the amount in paragraph (1).

(i) The Franchise Tax Board and the State Department of
Education shall administer this credit.

(1) The Franchise Tax Board shall perform all of the following:

(A) Promulgate rules and regulations as necessary or
appropriate to implement this credit.

(B) Establish application forms and procedures.

(C) Track credits claimed.

(D) Post aggregate totals of the credits claimed on the Internet
Web site of the Franchise Tax Board.

(E) Determine when the aggregate total of the credits reaches
fifty million dollars ($50,000,000) for a calender year.

(F) Certify that the contributions meet the requirements of this
section needed to receive a credit.

(2) The State Department of Education shall do the following:

(A) Adopt rules necessary to determine whether the following
meet the requirements of this section:

(i) An ESO.

(ii) A contribution.

(B) Submit a list of eligible ESOs that comply with the
requirements of this section to the Franchise Tax Board annually
by March 15.

(j) Chapter 3.5 (commencing with Section 11340) of Part 1 of
Division 3 of Title 2 of the Government Code does not apply to
the guidelines or regulations adopted pursuant to this section.

(k) This section shall remain in effect only until December 1,
2020, and as of that date is repealed.

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begin insert SEC. 4. end insert   

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This act provides for a tax levy within the meaning of
Article IV of the Constitution and shall go into immediate effect.

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SECTION 1.  

It is the intent of the Legislature to enact
legislation that would allow a credit against the tax imposed by
the Corporation Tax Law in the amount of 50 percent of a
charitable contribution to a nonprofit education scholarship
organization that provides tuition and transportation fee assistance
for students with special learning needs, foster youth, and children
from low-income families, who attend public, charter, or private
schools. It is the intent of the Legislature that the credit shall not
exceed $200,000 per taxpayer, that the credit be awarded on a
first-come, first-serve basis, and that the credit have an aggregate
cap of $50,000,000.

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