HF 388

as introduced - 90th Legislature (2017 - 2018) Posted on 01/30/2017 03:51pm

A bill for an act
relating to taxation; income; providing a credit for donations to fund prekindergarten
educational programs; requiring districts to accept scholarships funded by donations;
requiring a report; amending Minnesota Statutes 2016, sections 124D.13,
subdivision 6; 124D.15, subdivision 12; 290.0131, by adding a subdivision;
290.0133, by adding a subdivision; proposing coding for new law in Minnesota
Statutes, chapter 290.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2016, section 124D.13, subdivision 6, is amended to read:

Subd. 6.

Participants' fees.

A district must establish a reasonable sliding fee scale new text begin and
accept education scholarships funded by contributions that qualify for the tax credit in
section 290.0682, new text end but it shall waive the fee for a participant new text begin who is new text end unable to pay.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 2.

Minnesota Statutes 2016, section 124D.15, subdivision 12, is amended to read:

Subd. 12.

Program fees.

A district must adopt a sliding fee schedule based on a family's
income new text begin and accept education scholarships funded by contributions that qualify for the tax
credit in section 290.0682, new text end but must waive a fee for a participant unable to pay. School
districts must use school readiness aid for eligible children. Children who do not meet the
eligibility requirements in subdivision 15 may participate on a fee-for-service basis.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 3.

Minnesota Statutes 2016, section 290.0131, is amended by adding a subdivision
to read:

new text begin Subd. 14. new text end

new text begin Equity and opportunity donations to qualified foundations. new text end

new text begin The amount
of the deduction under section 170 of the Internal Revenue Code that represents contributions
to a qualified foundation under section 290.0682 is an addition.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2016.
new text end

Sec. 4.

Minnesota Statutes 2016, section 290.0133, is amended by adding a subdivision
to read:

new text begin Subd. 15. new text end

new text begin Equity and opportunity donations to qualified foundations. new text end

new text begin The amount
of the deduction under section 170 of the Internal Revenue Code that represents contributions
to a qualified foundation under section 290.0682 is an addition.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2016.
new text end

Sec. 5.

new text begin [290.0682] EQUITY AND OPPORTUNITY IN EDUCATION TAX CREDIT.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin (a) For purposes of this section, the terms in this subdivision
have the meanings given.
new text end

new text begin (b) "Eligible child" means a child who:
new text end

new text begin (1) either:
new text end

new text begin (i) is a member of a family that meets the income eligibility requirements for early
learning scholarships in section 124D.165, subdivision 2, paragraph (a), clause (2), without
regard to the age of the child; or
new text end

new text begin (ii) previously received a qualified scholarship under this section;
new text end

new text begin (2) resides in Minnesota; and
new text end

new text begin (3) either:
new text end

new text begin (i) attended a public, nonpublic, or charter school in the semester preceding initial receipt
of a qualified scholarship;
new text end

new text begin (ii) is starting school in Minnesota for the first time; or
new text end

new text begin (iii) has neither entered elementary school nor reached seven years of age.
new text end

new text begin (c) "Equity and opportunity donation" means a donation to a qualified foundation that
awards qualified scholarships.
new text end

new text begin (d) "Nonmetropolitan counties" means all Minnesota counties not included in the
seven-county metropolitan area.
new text end

new text begin (e) "Qualified foundation" means a nonprofit organization granted an exemption from
the federal income tax under section 501(c)(3) of the Internal Revenue Code, a public school
under section 120A.22, subdivision 4, or a nonpublic school under section 120A.22,
subdivision 4, that is accredited by an accrediting agency, recognized according to section
123B.445, or recognized by the commissioner of education as complying with the
requirements of the equity and opportunity in education tax credit. The nonprofit organization
or school must:
new text end

new text begin (1) not restrict the availability of scholarships to students of one qualified prekindergarten
educational program or one qualified school;
new text end

new text begin (2) not charge a fee of any kind to children under consideration for a scholarship; and
new text end

new text begin (3) require qualified prekindergarten educational programs and qualified schools receiving
payment of tuition through a scholarship funded by contributions qualifying for the tax
credit under this section to sign an agreement that they will not use different admissions
standards for a student with a scholarship from a qualified foundation.
new text end

new text begin (f) "Qualified prekindergarten educational program" means a program that participates
in a quality rating system such as the quality rating and improvement system under section
124D.142, and is one of the following:
new text end

new text begin (1) a prekindergarten program established by a school district or a charter school under
chapter 124D;
new text end

new text begin (2) a preschool, nursery school, or early childhood development program licensed by
the Department of Human Services and eligible for the provider rate differential for
accreditation under section 119B.13, subdivision 3a;
new text end

new text begin (3) a Montessori program affiliated with or accredited by the American Montessori
Society or American Montessori International;
new text end

new text begin (4) a child care program provided by a family day care provider holding a current early
childhood development credential approved by the commissioner of human services;
new text end

new text begin (5) an early childhood family education program under section 124D.13; or
new text end

new text begin (6) a school readiness program under section 124D.15.
new text end

new text begin (g) "Qualified scholarship" means a payment from a qualified foundation to or on behalf
of the parent or guardian of an eligible child for payment of the cost of participation in a
qualified prekindergarten educational program or of attendance at a qualified school.
new text end

new text begin (h) "Qualified school" means a school operated in Minnesota that is either:
new text end

new text begin (1) a nonpublic elementary or secondary school in Minnesota wherein a resident may
legally fulfill the state's compulsory attendance laws, that is not operated for profit, and that
adheres to the provisions of United States Code, title 42, section 1981; or
new text end

new text begin (2) a charter elementary or secondary school in Minnesota that has at least 30 percent
of its students who qualify for a reduced-price meal under the National School Lunch
Program.
new text end

new text begin (i) "Seven-county metropolitan area" means Anoka, Carver, Dakota, Hennepin, Ramsey,
Scott, and Washington Counties.
new text end

new text begin Subd. 2. new text end

new text begin Credit allowed; limitation; carryover. new text end

new text begin (a) An individual or corporate taxpayer
to whom the commissioner has issued a credit certificate is allowed a credit against the tax
due under this chapter equal to 80 percent of the amount donated to a qualified foundation
during the taxable year. The credit may not be claimed for contributions designated for the
use of a specific student.
new text end

new text begin (b) The maximum annual credit allowed is:
new text end

new text begin (1) $20,000 for married joint filers for a one-year donation of $25,000;
new text end

new text begin (2) $10,000 for other individual filers for a one-year donation of $12,500; and
new text end

new text begin (3) $100,000 for corporate filers for a one-year donation of $125,000.
new text end

new text begin (c) A taxpayer must provide a copy of the receipt provided by the qualified foundation
when claiming the credit for the donation.
new text end

new text begin (d) The credit is limited to the liability for tax under this chapter, including the tax
imposed by sections 290.0921 and 290.0922.
new text end

new text begin (e) If the amount of the credit under this subdivision for any taxable year exceeds the
limitations under paragraph (d), the excess is a credit carryover to each of the five succeeding
taxable years. The entire amount of the excess unused credit for the taxable year must be
carried first to the earliest of the taxable years to which the credit may be carried. The
amount of the unused credit that may be added under this paragraph may not exceed the
taxpayer's liability for tax, less the credit for the taxable year. No credit may be carried to
a taxable year more than five years after the taxable year in which the credit was earned.
new text end

new text begin Subd. 3. new text end

new text begin Application for credit certificate. new text end

new text begin (a) A taxpayer must apply to the
commissioner for an equity and opportunity in education tax credit certificate. Tax credit
certificates under this section must be made available on a first-come, first-served basis
until the maximum statewide credit amount has been reached. The maximum statewide
credit amounts are:
new text end

new text begin (1) $10,000,000 per taxable year for contributions for use by qualified foundations to
provide qualified scholarships to students who live in the seven-county metropolitan area;
and
new text end

new text begin (2) $10,000,000 per taxable year for contributions for use by qualified foundations to
provide qualified scholarships to students who live in nonmetropolitan counties.
new text end

new text begin (b) The commissioner must not issue a tax credit certificate for an amount greater than
the limits under subdivision 2.
new text end

new text begin Subd. 4. new text end

new text begin Responsibilities of qualified foundations. new text end

new text begin (a) Each qualified foundation that
receives donations directly from taxpayers under this section must:
new text end

new text begin (1) notify the commissioner of the qualified foundation's intent to participate in this
program;
new text end

new text begin (2) demonstrate to the commissioner that the qualified foundation, if it is a nonprofit
organization, has been granted an exemption from the federal income tax as an organization
described in section 501(c)(3) of the Internal Revenue Code;
new text end

new text begin (3) provide a receipt or verification on a form prescribed by the commissioner to taxpayers
for donations and commitments made to the qualified foundation;
new text end

new text begin (4) conduct criminal background checks on all the qualified foundation's employees and
board members and exclude from employment or governance any individuals who might
reasonably pose a risk to the appropriate use of contributed funds;
new text end

new text begin (5) demonstrate the qualified foundation's financial accountability by submitting an
audited financial statement prepared by a certified public accountant firm licensed under
chapter 326A using the Statements on Auditing Standards issued by the Audit Standards
Board of the American Institute of Certified Public Accountants;
new text end

new text begin (6) demonstrate the qualified foundation's financial viability, if it receives donations of
$150,000 or more during the school year, by filing financial information with the
commissioner before September 1 of each year that demonstrates the financial viability of
the qualified foundation;
new text end

new text begin (7) consistent with paragraph (c), use amounts received as donations to provide qualified
scholarships within one calendar year of the calendar year in which it receives the donation;
and
new text end

new text begin (8) ensure that qualified prekindergarten educational programs and qualified schools
that enroll children who have received qualified scholarships:
new text end

new text begin (i) comply with all health and safety laws or codes;
new text end

new text begin (ii) hold a valid occupancy permit if required by the municipality;
new text end

new text begin (iii) certify that the qualified prekindergarten educational program or qualified school
does not discriminate in admissions on the basis of race, color, national origin, religion, or
disability and adheres to the provisions of chapter 363A and the Civil Rights Act of 1964;
and
new text end

new text begin (iv) provide accountability to parents of children in the program or school by regularly
reporting to the parents on the child's progress.
new text end

new text begin (b) A qualified foundation that receives donations directly from taxpayers under this
program must report to the commissioner by June 1 of each year the following information
prepared by a certified public accountant regarding the qualified foundation's grants in the
previous calendar year:
new text end

new text begin (1) the total number and total dollar amount of donations from taxpayers received during
the previous calendar year;
new text end

new text begin (2) the total number and total dollar amount of qualified scholarships awarded during
the previous calendar year; and
new text end

new text begin (3) the dollar amount of donations used for administrative expenses, as provided by
paragraph (c).
new text end

new text begin (c) A qualified foundation may use up to five percent of the amounts received as donations
for reasonable administrative expenses.
new text end

new text begin (d) If the commissioner decides to bar a qualified foundation from the program for failure
to comply with the requirements in paragraph (a), the qualified foundation must notify
taxpayers who have donated to the qualified foundation in writing within 30 days.
new text end

new text begin Subd. 5. new text end

new text begin Responsibilities of commissioner. new text end

new text begin (a) The commissioner must prescribe a
standardized format for a receipt to be issued by a qualified foundation to a taxpayer to
indicate the value of a donation received.
new text end

new text begin (b) The commissioner must prescribe a standardized format for qualified foundations
to report the information required under subdivision 4.
new text end

new text begin (c) The commissioner must post on the department's Web site the names and addresses
of qualified foundations and regularly update the names and addresses of any qualified
foundations that have been barred from participating in the program.
new text end

new text begin (d) The commissioner may conduct either a financial review or audit of a qualified
foundation upon finding evidence of fraud or intentional misreporting.
new text end

new text begin (e) The commissioner may bar a qualified foundation from participating in the program
if the commissioner establishes that the qualified foundation has intentionally and
substantially failed to comply with the requirements in subdivision 4. If the commissioner
determines that a qualified foundation should be barred from the program, the commissioner
must notify the qualified foundation within 60 days of that determination.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after December
31, 2016.
new text end

Sec. 6. new text begin EVALUATION OF EQUITY AND OPPORTUNITY IN EDUCATION TAX
CREDIT PROGRAM.
new text end

new text begin (a) No later than December 31, 2018, the commissioner of revenue, after consulting
with the commissioner of education, shall contract with a qualified outside entity or individual
to evaluate the effects of the equity and opportunity in education tax credit. The program
evaluation must be completed by January 2020 and must be provided to the chairs and
ranking minority members of the senate and the house of representatives legislative
committees having jurisdiction over taxes and prekindergarten education in compliance
with Minnesota Statutes, sections 3.195 and 3.197. The program evaluation must include,
in addition to any other matters the commissioner considers relevant to evaluating the
effectiveness of the credit, analysis of:
new text end

new text begin (1) the level of parental and family satisfaction with the program; and
new text end

new text begin (2) the impact of the program on public and private prekindergarten and kindergarten
through grade 12 educational program capacity, availability, and quality.
new text end

new text begin (b) The researchers who conduct the study must:
new text end

new text begin (1) apply appropriate analytical and behavioral science methodologies to ensure public
confidence in the study; and
new text end

new text begin (2) protect the identity of participating prekindergarten educational programs, kindergarten
through grade 12 schools, and children by, among other things, keeping anonymous all
disaggregated data other than that for the categories of gender, race, and ethnicity.
new text end

new text begin (c) Participating prekindergarten educational programs and qualified schools must
cooperate with the research effort by providing any data necessary to complete the study.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 7. new text begin PURPOSE STATEMENT; TAX EXPENDITURES.
new text end

new text begin Subdivision 1. new text end

new text begin Authority. new text end

new text begin This section is intended to fulfill the requirement under
Minnesota Statutes, section 3.192, that a bill creating, renewing, or continuing a tax
expenditure provide a purpose for the tax expenditure and a standard or goal against which
the bill's effectiveness may be measured.
new text end

new text begin Subd. 2. new text end

new text begin Equity and opportunity in education tax credit. new text end

new text begin The provisions of this bill
are intended to provide quality education choices to Minnesota students. The standard
against which effectiveness is to be measured is the change in the number of students
receiving scholarships after enactment of the credit.
new text end

Sec. 8. new text begin APPROPRIATION.
new text end

new text begin $....... in fiscal year 2018 is appropriated from the general fund to the commissioner of
revenue for the evaluation in section 6. This appropriation does not cancel but is available
until January 31, 2020.
new text end