BILL NUMBER: AB 2421 AMENDED BILL TEXT AMENDED IN ASSEMBLY APRIL 22, 2014 AMENDED IN ASSEMBLY APRIL 1, 2014 INTRODUCED BY Assembly Member Nestande (Coauthor:Assembly MemberAllenCoauthors: Assembly Members Allen, Maienschein, and Olsen ) ( Coauthor: Senator Cannella ) FEBRUARY 21, 2014 An act to add and repeal Section 23692 of the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy. LEGISLATIVE COUNSEL'S DIGEST AB 2421, as amended, Nestande. Corporation Tax Law: credits: Homeless and Foster Youth Opportunities Investment Act. The Corporation Tax Law allows various credits against thetaxtaxes imposed by that law. This bill, for taxable years beginning on or after January 1, 2015, and before January 1, 2020, would allow a credit against thetaxtaxes imposed under that law for 50% of monetary contributions tononprofitqualified education scholarship organizations, as defined, to fund qualified college or K-12 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. This bill would take effect immediately as a tax levy. Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. This act shall be known and may be cited as the Homeless and Foster Youth Opportunities Investment Act. SEC. 2. The Legislature finds and declares the following: (a) Providing tax incentives to encourage private investments for the common good is sound public policy. (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. (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. (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. (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, and in college, charitable giving for educational purposes should be stimulated. (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 homeless and foster youth. SEC. 3. Section 23692 is added to the Revenue and Taxation Code, to read: 23692. (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 contributionprovidedmade by a taxpayer during the taxable year, not to exceed two hundred thousand dollars ($200,000) to anonprofitqualified education scholarship organization to fund qualified college or 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"Qualified education scholarshiporganization (ESO)"organization" or "ESO " meansa charitable institutionan organization in this state that meets the following requirements : (A) Is organized and operated withthe primarya purpose of providing qualified college or K-12 education scholarships to pupils attending a public or private school in California. (B) (i)AllocatesIf the organization has three or more years of audited financial statements, distributes to specified pupils at least 80 percent of contributions for which a credit is claimed for qualified college or K-12 education scholarshipsfor ESOs with three or more years of audits. (ii)AllocatesIf the organization has fewer than three years of audited financial statements, distributes at least 90 percent of contributions for which a credit is claimed for qualified college or K-12 education scholarshipsfor ESOs with less than three years of audits. (C) Makes qualified college or K-12 education scholarships available for specified pupils from more than one school. (D) Retains data on the progress of the specified pupils participating in qualified college or 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 college or K-12 education scholarship recipients and the schools that the recipients attend. (G) Applies to participate in this credit program with theFranchise Tax BoardState Department of Education .(2) "Nonprofit" means an organization that meets all of the following requirements:(A)(H) 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)(iii) 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(I) Is exempt from federal income tax as an organization described in Section 501(c)(3) of the Internal Revenue Code.(3)(2) "Qualified college or K-12 education scholarship" meanseitherany 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 college or K-12 education scholarship shall be awarded to a specified pupil in kindergarten through grade 12 or in college . (ii) May be renewed at the request of the specified pupil for each school year until graduation from high school or college . (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 or to attend school-related activities and other educationally beneficial programs . (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. (D) Financial assistance for a specified pupil to purchase books and other materials to support academic success, including, but not limited to, computers and software, tutoring, and other academic support.(4)(3) "Specified pupil" meansa minoran individual who has applied for a college or K-12 education scholarship and who isa pupileither within foster carewhoor has been placed in a foster care system within the State of California at any time prior to graduating highschool.(A)Aschool, or who was at any time prior to graduating high school, or is currently a homeless youth as defined in Section 11139.3 of the Government Code. 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)(4) (A) "Private school" means a person, firm, association, partnership, limited liability company, 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)(i) Is accredited by the Western Association of Schools and Colleges or an affiliated organization.(B)(ii) Has filed a current private school affidavit with the State Department of Education in accordance with Section 33190 of the Education Code.(C)(iii) Complies with applicable provisions of the Health and Safety Code.(D)(iv) Complies with applicable provisions of the California Fair Employment and Housing Act (Part 2.8 (commencing with Section 12900) of Division 3 of Title 2 of the Government Code).(E)(v) 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)(vi) Requires a specified pupil to take a nationally available norm-referenced test.(G)(vii) 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.(B) "Private school" also means an institution that meets the definition of a "qualifying institution" in paragraph (1) of subdivision (l) of Section 69432.7 of the Education Code. (C) "Private school" does not include a program of instruction offered by a tutor or a nonaccredited private school to a pupil who is exempt from compulsory full-time education under Article 3 (commencing with Section 48220) of Chapter 2 of Part 27 of Division 4 of Title 2 of the Education Code.(d)(c) The taxpayer shall receive a certification by theFranchise Tax BoardState Department of Education upon a determination that the contribution meets the requirements of thissection and shall apply with the Franchise Tax Board to receive a credit.section.(e)(d) 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)(e) 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)(f) This credit shall be claimed on a timely filed original return.(h)(g) (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)(h) 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)PromulgateAdopt rules and regulations as necessary or appropriate to implement this credit.(B) Establish application forms and procedures.(C)(B) Track credits claimed.(D)(C) Post aggregate totals of the credits claimed on the Internet Web site of the Franchise Tax Board.(E)(D) 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 and regulations 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. (C) Establish application forms and procedures. (D) Certify that the contributions meet the requirements of this section.(j)(i) 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)(j) This section shall remain in effect only until December 1, 2020, and as of that date is repealed. SEC. 4. This act provides for a tax levy within the meaning of Article IV of the Constitution and shall go into immediate effect.