Amended in Assembly August 4, 2014

Amended in Assembly June 17, 2014

Amended in Assembly April 22, 2014

Amended in Assembly April 1, 2014

California Legislature—2013–14 Regular Session

Assembly Bill No. 2421

Introduced by Assembly Member Nestande

(Coauthors: 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 the taxes 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 the taxes imposed under that law for 50% of monetary contributions to qualified K-College education scholarship organizations, as defined, to fund qualified K-College education scholarships, as defined. 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-served basis, and that the credit would have an aggregate cap of $10,000,000 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’s
education system 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 and college
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, begin insert not to exceed
two hundred thousand dollars ($200,000), end insert an amount equal to 50
percent of begin delete the end delete begin insert an approved end insert monetary contribution made by a
taxpayer during the taxable begin delete year, not to exceed two hundred
thousand dollars ($200,000) end delete begin insert year end insert to a qualified K-College
education scholarship organization to fund qualified K-College
education begin delete scholarships. end delete begin insert scholarships in accordance with this
section. end insert

(b) For purposes of this section:

begin insert

(1) “Credit certificate” means the certificate issued by the State
Department of Education pursuant to subdivision (c).

end insert begin delete

(1)

end delete

begin insert (2) end insert  “Qualified K-College education scholarship organization”
or “ESO” means an organization in this state that begin insert the State
Department of Education has determined end insert meets the following
requirements:

(A) Is organized and operated with a purpose of providing
qualified K-College education scholarships to specified pupils
attending a public, charter, or private school in California.

(B) (i) If 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
K-College education scholarships .

(ii) If 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 K-College education
scholarships .

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

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

(E) Submits to the begin delete Franchise Tax Board end delete begin insert State Department of
Education end insert 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-College education scholarship
recipients and the schools that the recipients attend.

(G) Applies to participate in this credit program with the State
Department of Education.

(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) 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.

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

begin delete

(2)

end delete

begin insert (3) end insert  “Qualified education-related expenses” means expenses paid
or incurred for the purchase of books, services, and other materials
that support academic success, including computers, software,
tutoring, and other academic support.

begin delete

(3)

end delete

begin insert (4) end insert  “Qualified K-College education scholarship” means any of
the following:

(A) Financial assistance for a specified pupil to partially or fully
pay for the fees associated with the general costs of transportation
to attend a public, charter, or private school or to attend
school-related activities and other educationally beneficial
programs.

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

(C) Financial assistance for a specified pupil attending a public,
charter, or private school for qualified education-related expenses,
not provided by the McKinney-Vento Homeless Assistance Act
of 1987 (Public Law 100-77).

begin delete

(4)

end delete

begin insert (5) end insert  “Specified pupil” means an individual who has applied for
a K-College education scholarship and who is either within foster
care, has been placed in a foster care system within the State of
California, or has been placed with a relative caretaker through
child protective services at any time prior to graduating high
school, 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 or the McKinney-Vento Homeless Assistance
Act of 1987 (Public Law 100-77). A specified pupil is not required
to be previously enrolled in a public school or charter school to
participate.

begin delete

(5)

end delete

begin insert (6) end insert  (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:

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

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

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

(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).

(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.

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

(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.

(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.

begin delete

(c) The taxpayer shall receive a certification by the State
Department of Education upon a determination that the contribution
meets the requirements of this section.

end delete begin insert

(c) In a form and manner prescribed by the State Department
of Education, a taxpayer seeking a credit under this section for a
monetary contribution to a qualified K-College education
scholarship organization shall request approval to make a specified
contribution and tax credit amount from the State Department of
Education. After receiving approval to make a contribution, the
taxpayer may make the approved contribution. The State
Department of Education and the qualified K-College education
scholarship shall verify the amount and date of the contribution
and issue a tax credit certificate to the taxpayer reflecting the
approved amount of the tax credit, and notify the Franchise Tax
Board of the contribution and approved credit amount. A taxpayer
shall make a contribution within 30 calendar days of the date the
contribution has been approved by the State Department of
Education in order to claim the credit. The taxpayer shall provide
a copy of the credit certificate upon request to the Franchise Tax
Board.

end insert

(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.

(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).

begin delete

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

end delete begin insert

(f) The credit allowed under this section shall be claimed on a
timely filed original return and only with respect to contributions
where the taxpayer has received a tax credit certificate from the
State Department of Education.

end insert begin insert

(g) The State Department of Education may prescribe rules,
guidelines, or procedures appropriate to carry out the purposes
of this section, including any guidelines regarding the limitation
on total credits allowable under this section.

end insert begin delete

(g)

end delete

begin insert (h) end insert  (1) The aggregate amount of credits allowed under this
section shall not exceed ten million dollars ($10,000,000) for each
calendar year.

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

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

begin delete

(h)

end delete

begin insert (i) end insert  The begin delete Franchise Tax Board and the end delete State Department of
Education shall begin delete administer this credit. end delete begin insert do all of the following: end insert

begin insert

(1) Establish application forms and procedures to determine
eligibility of an entity as a qualified K-College educational
scholarship organization, including the following:

end insert begin insert

(A) Accept and evaluate applications received that an applicant
meets the requirements of a qualified K-College education
scholarship organization. The State Department of Education may
suspend or revoke an organization’s qualified K-College education
scholarship organization status if the State Department of
Education finds that the organization no longer meets the
requirements of this section.

end insert begin insert

(B) Determine and designate organizations that meet the
requirements of a qualified K-College education scholarship
organization.

end insert begin insert

(C) Maintain and post a listing of qualified K-College education
scholarship organizations on the State Department of Education’s
Internet Web site. The list shall be published annually by March
1.

end insert begin insert

(2) On or after January 1, 2015, and before January 1, 2020,
allocate tax credits to taxpayers that make an approved monetary
contribution.

end insert begin insert

(A) Establish a procedure for taxpayers to file with the State
Department of Education a written application, on a form jointly
prescribed by the State Department of Education and the Franchise
Tax Board for the approval of a monetary contribution in
accordance with this section. The application shall include, but
not be limited to, the following information:

end insert begin insert

(i) The name and taxpayer identification number of the donor.

end insert begin insert

(ii) The name and taxpayer identification number of the qualified
K-College education scholarship organization.

end insert begin insert

(iii) The proposed amount of monetary contribution.

end insert begin insert

(B) Establish criteria, consistent with the requirements of this
section, for allocating tax credits.

end insert begin insert

(C) (i) Process and approve, or reject, all requests for approval
of a monetary contribution on a first-come-first-served basis, based
on the date the request for approval is received by the State
Department of Education.

end insert begin insert

(ii) If requests for approval of a monetary contribution are
received from two or more taxpayers on the same day, and the
amount of credits of those requests exceeds the amount of credits
available for allocation, the remaining available credits shall be
allocated among those taxpayers on a pro rata basis.

end insert begin insert

(D) Subject to the annual cap established as provided in
subdivision (h), allocate credits under this section.

end insert begin insert

(3) Certify and issue tax credit certificates to taxpayers for
approved monetary contributions made.

end insert begin insert

(A) Establish a verification procedure for the amount of
monetary contributions made to qualified K-College education
scholarship organizations.

end insert begin insert

(B) Establish audit requirements that shall be satisfied before
a credit certificate may be issued by the State Department of
Education.

end insert begin insert

(4) Track aggregate amount of tax credits allocated to taxpayers.

end insert begin insert

(5) Provide the Franchise Tax Board with a list of taxpayers
and the tax credit amounts allocated to each qualified taxpayer
by the State Department of Education. The list shall include the
names and taxpayer identification numbers, including taxpayer
identification numbers of each partner or shareholder, as
applicable, of the qualified taxpayer.

end insert begin delete

(1)

end delete

begin insert (j) end insert  The Franchise Tax Board shall perform all of the following:

begin delete

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

(B) Track credits claimed.

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

(D) Determine when the aggregate total of the credits reaches
ten million dollars ($10,000,000) for a calender year.

(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.

end delete begin insert

(1) Assist the State Department of Education in creating a form
for taxpayers to submit requesting approval of a monetary
contribution to a qualified K-College education scholarship
organization for the credit under this section and a certificate to
be provided to taxpayers of the approved tax credit amount.

end insert begin insert

(2) Establish a procedure to verify that the amount of tax credit
claimed on a tax return has been approved and certified by the
State Department of Education.

end insert begin delete

(i)

end delete

begin insert (k) end insert  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.

begin delete

(j)

end delete

begin insert (l) end insert  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.