SF 1872

as introduced - 91st Legislature (2019 - 2020) Posted on 02/28/2019 03:11pm

A bill for an act
relating to taxation; income; providing a credit for donations to fund K-12
scholarships; amending Minnesota Statutes 2018, sections 290.0131, by adding a
subdivision; 290.0133, by adding a subdivision; 290.0674, 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 2018, section 290.0131, 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 290.0693 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, 2019.
new text end

Sec. 2.

Minnesota Statutes 2018, 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 deductions under sections 170 and 162 of the Internal Revenue Code that represent
contributions to a qualified foundation under section 290.0693 are 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, 2019.
new text end

Sec. 3.

Minnesota Statutes 2018, section 290.0674, is amended by adding a subdivision
to read:

new text begin Subd. 6. new text end

new text begin Inflation adjustment. new text end

new text begin The credit amount and the income threshold at which
the maximum credit begins to be reduced in subdivision 2 must be adjusted for inflation.
The commissioner shall adjust the credit amount and income threshold by the percentage
change in the Consumer Price Index for All Urban Consumers. For 2021, the commissioner
shall determine the percent change from the 12 months ending on August 31, 2019, to the
12 months ending on August 31, 2020, and in each subsequent year, from the 12 months
ending August 31, 2019, to the 12 months ending on August 31 of the year preceding the
taxable year. The credit amount and income threshold as adjusted for inflation must be
rounded to the nearest $10 amount. If the amount ends in $5, the amount is rounded up to
the nearest $10 amount. The determination of the commissioner under this subdivision is
not a rule subject to the Administrative Procedure Act in chapter 14, including section
14.386.
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, 2020.
new text end

Sec. 4.

new text begin [290.0693] 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 following terms have
the meanings given.
new text end

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

new text begin (1) resides in Minnesota;
new text end

new text begin (2) is either:
new text end

new text begin (i) a member of a household that has total annual income during the year prior to initial
receipt of a qualified scholarship or a qualified transportation scholarship, without
consideration of the benefits under this program, that does not exceed an amount equal to
two times the income standard used to qualify for a reduced-price meal under the National
School Lunch Program; or
new text end

new text begin (ii) is a child with a disability as defined in section 125A.02; and
new text end

new text begin (3) meets one of the following criteria:
new text end

new text begin (i) attended a school, as defined in section 120A.22, subdivision 4, in the semester
preceding initial receipt of a qualified scholarship or a qualified transportation scholarship;
new text end

new text begin (ii) is younger than age seven and not enrolled in kindergarten or first grade in the
semester preceding initial receipt of a qualified scholarship or a qualified transportation
scholarship;
new text end

new text begin (iii) previously received a qualified scholarship or a qualified transportation scholarship
under this section; or
new text end

new text begin (iv) lived in Minnesota for less than a year prior to initial receipt of a qualified scholarship
or a qualified transportation scholarship.
new text end

new text begin (c) "Equity and opportunity in education donation" means a donation to a qualified public
school foundation or to a qualified foundation that awards qualified scholarships, awards
qualified transportation scholarships, or makes qualified grants.
new text end

new text begin (d) "Household" means household as used to determine eligibility under the National
School Lunch Program.
new text end

new text begin (e) "National School Lunch Program" means the program in United States Code, title
42, section 1758.
new text end

new text begin (f) "Qualified charter school" means a charter elementary or secondary school in
Minnesota at which at least 30 percent of students qualify for a free or reduced-price meal
under the National School Lunch Program.
new text end

new text begin (g) "Qualified school" means a school operated in Minnesota that is a nonpublic
elementary or secondary school in Minnesota wherein a resident may legally fulfill the
state's compulsory attendance laws that:
new text end

new text begin (1) is not operated for profit;
new text end

new text begin (2) adheres to the provisions of United States Code, title 42, section 1981, and Minnesota
Statutes, chapter 363A;
new text end

new text begin (3) administers the Minnesota Comprehensive Assessments or a norm-referenced test
in reading and math approved by a qualified foundation to all students in grades 3 to 8 and
once in high school; and
new text end

new text begin (4) reports annual student performance on the test on the school's website, including the
number of students who opt out of the test, the aggregate test results, and the test results
disaggregated by student category listed in section 120B.31, subdivision 4, unless the cell
count data is insufficient to protect student identity.
new text end

new text begin (h) "Qualified foundation" means a nonprofit organization granted an exemption from
the federal income tax under section 501(c)(3) of the Internal Revenue Code that has been
approved as a qualified foundation by the commissioner of revenue under subdivision 5.
new text end

new text begin (i) "Qualified grant" means a grant from a qualified foundation to a qualified charter
school for use in support of the school's mission of educating students in academics, arts,
or athletics, including transportation.
new text end

new text begin (j) "Qualified public school foundation" means a qualified foundation formed for the
primary purpose of supporting one or more public schools or school districts in Minnesota
in which at least 30 percent of students qualify for a free or reduced-price meal under the
National School Lunch Program.
new text end

new text begin (k) "Qualified scholarship" means a payment from a qualified foundation to or on behalf
of the parent or guardian of an eligible student for payment of tuition for enrollment in
grades kindergarten through 12 at a qualified school. A qualified scholarship must not
exceed an amount greater than 70 percent of the state average general education revenue
under section 126C.10, subdivision 1, per pupil unit.
new text end

new text begin (l) "Qualified transportation scholarship" means a payment from a qualified foundation
to or on behalf of a parent or guardian of an eligible student for payment of transportation
to a school, as defined in section 120A.22, subdivision 4. A qualified transportation
scholarship must not exceed an amount greater than 70 percent of the state average general
education revenue under section 126C.10, subdivision 1, per pupil unit.
new text end

new text begin (m) "Total annual income" means the income measure used to determine eligibility
under the National School Lunch Program in United States Code, title 42, section 1758.
new text end

new text begin Subd. 2. new text end

new text begin Credit allowed. new text end

new text begin (a) An individual or corporate taxpayer who has been issued
a credit certificate under subdivision 3 is allowed a credit against the tax due under this
chapter equal to 70 percent of the amount donated during the taxable year to the qualified
foundation or qualified public school foundation designated on the taxpayer's credit
certificate. No credit is allowed if the taxpayer designates a specific child as the beneficiary
of the contribution. No credit is allowed to a taxpayer for an equity and opportunity in
education donation made before the taxpayer was issued a credit certificate as provided in
subdivision 3.
new text end

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

new text begin (1) $21,000 for married joint filers for a one-year donation of $30,000;
new text end

new text begin (2) $10,500 for other individual filers for a one-year donation of $15,000; and
new text end

new text begin (3) $105,000 for corporate filers for a one-year donation of $150,000.
new text end

new text begin (c) A taxpayer must provide a copy of the receipt provided by the qualified foundation
or qualified public school foundation when claiming the credit for the donation if requested
by the commissioner.
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) The commissioner must make applications
for tax credits for 2020 available on the department's website by January 1, 2020.
Applications for subsequent years must be made available by January 1 of the taxable year.
new text end

new text begin (b) A taxpayer must apply to the commissioner for an equity and opportunity in education
tax credit certificate. The application must be in the form and manner specified by the
commissioner and must designate the qualified foundation or qualified public school
foundation to which the taxpayer intends to make a donation. The commissioner must begin
accepting applications for a taxable year on January 1. The commissioner must issue tax
credit certificates under this section on a first-come, first-served basis until the maximum
statewide credit amount has been reached. The certificates must list the qualified foundation
or qualified public school foundation the taxpayer designated on the application. The
maximum statewide credit amount is $35,000,000 per taxable year, excluding any amounts
carried forward from a previous taxable year under subdivision 2.
new text end

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

new text begin (d) The commissioner must not issue a credit certificate for an application that designates
a qualified foundation or qualified public school foundation that the commissioner has
barred from participation as provided in subdivision 5.
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) A qualified foundation that
awards qualified scholarships or qualified transportation scholarships must:
new text end

new text begin (1) award qualified scholarships or qualified transportation scholarships to eligible
students;
new text end

new text begin (2) not restrict the availability of scholarships to students of one qualified school;
new text end

new text begin (3) not charge a fee of any kind for a child to be considered for a scholarship;
new text end

new text begin (4) require a qualified school receiving payment of tuition through a scholarship funded
by contributions qualifying for the tax credit under this section to sign an agreement that it
will not use different admissions standards for a student with a qualified scholarship; and
new text end

new text begin (5) in awarding scholarships, give priority to a student in a household that has total
annual income during the year prior to initial receipt of a qualified scholarship, without
consideration of the benefits under this program, that does not exceed an amount equal to
two times the income standard used to qualify for a reduced-price meal under the National
School Lunch Program.
new text end

new text begin (b) An entity that is eligible to be a qualified foundation must apply to the commissioner
by September 15 of the year preceding the year in which it will first receive equity and
opportunity in education donations. The application must be in the form and manner
prescribed by the commissioner. The application must:
new text end

new text begin (1) demonstrate to the commissioner that the entity has been granted an exemption from
the federal income tax as an organization described in section 501(c)(3) of the Internal
Revenue Code; and
new text end

new text begin (2) demonstrate the entity's financial accountability by submitting its most recent 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 (c) A qualified foundation must provide to taxpayers who make donations or
commitments to donate a receipt or verification on a form approved by the commissioner.
new text end

new text begin (d) A qualified foundation that awards qualified scholarships or qualified transportation
scholarships must, in each year it awards qualified scholarships or qualified transportation
scholarships to eligible students to enroll in a qualified school, obtain from the qualified
school documentation that the school:
new text end

new text begin (1) complies with all health and safety laws or codes that apply to nonpublic schools;
new text end

new text begin (2) holds a valid occupancy permit if required by its municipality;
new text end

new text begin (3) certifies that it adheres to the provisions of chapter 363A and United States Code,
title 42, section 1981; and
new text end

new text begin (4) administers the Minnesota Comprehensive Assessment or a foundation approved
norm-referenced test by providing the foundation a report on student performance on the
test, including the number of students who opt out of the test, the aggregate test results, and
the test results disaggregated by student category listed in section 120B.31, subdivision 4,
unless the cell count data is insufficient to protect student identity.
new text end

new text begin A qualified foundation must make the documentation available to the commissioner on
request, and report student performance on the Minnesota Comprehensive Assessment or
norm-referenced test, by qualified school, on its website.
new text end

new text begin (e) A qualified foundation must, by June 1 of each year following a year in which it
receives donations, provide the following information to the commissioner:
new text end

new text begin (1) financial information that demonstrates the financial viability of the qualified
foundation;
new text end

new text begin (2) documentation that it has conducted criminal background checks on all of its
employees and board members and has excluded 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 (3) consistent with paragraph (f), document that it has used amounts received as donations
to provide qualified scholarships, to provide qualified transportation scholarships, to make
qualified grants, or in support of the mission of one or more public schools or school districts
of educating students in academics, arts, or athletics, including transportation within one
calendar year of the calendar year in which it received the donation;
new text end

new text begin (4) if the qualified foundation awards qualified scholarships or qualified transportation
scholarships, a list of qualified schools that enrolled eligible students to whom the qualified
foundation awarded qualified scholarships;
new text end

new text begin (5) if the qualified foundation makes qualified grants, a list of qualified charter schools
to which the qualified foundation made qualified grants;
new text end

new text begin (6) if the qualified foundation is a qualified public school foundation, a list of expenditures
made in support of the mission of one or more public schools or school districts of educating
students in academics, arts, or athletics, including transportation; and
new text end

new text begin (7) the following information prepared by a certified public accountant regarding
donations received in the previous calendar year:
new text end

new text begin (i) the total number and total dollar amount of donations received from taxpayers;
new text end

new text begin (ii) the dollar amount of donations used for administrative expenses, as allowed by
paragraph (f);
new text end

new text begin (iii) if the qualified foundation awarded qualified scholarships, the total number and
dollar amount of qualified scholarships awarded;
new text end

new text begin (iv) if the qualified foundation awarded qualified transportation scholarships, the total
number and dollar amount of qualified transportation scholarships awarded;
new text end

new text begin (v) if the qualified foundation made qualified grants, the total number and dollar amount
of qualified grants made; and
new text end

new text begin (vi) if the qualified foundation is a qualified public school foundation, the total number
and dollar amount of expenditures made in support of the mission of one or more public
schools or school districts of educating students in academics, arts, or athletics, including
transportation.
new text end

new text begin (f) The foundation may use up to five percent of the amounts received as donations for
reasonable administrative expenses, including but not limited to fund-raising, scholarship
tracking, and reporting requirements.
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 make
applications for an entity to be approved as a qualified foundation for a taxable year available
on the department's website by August 1 of the year preceding the taxable year. The
commissioner must approve an application that provides the documentation required in
subdivision 4, paragraph (b), clauses (1) and (2), within 60 days of receiving the application.
The commissioner must notify a foundation that provides incomplete documentation and
the foundation may resubmit its application within 30 days.
new text end

new text begin (b) By November 15 of each year, the commissioner must post on the department's
website the names and addresses of qualified foundations for the next taxable year. The
commissioner must 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 (c) 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 and of a
commitment to make a donation.
new text end

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

new text begin (e) The commissioner may conduct either a financial review or audit of a qualified
foundation upon finding evidence of fraud or misreporting. If the commissioner determines
that the qualified foundation committed fraud or intentionally misreported information, the
qualified foundation is barred from further program participation.
new text end

new text begin (f) If a qualified foundation fails to submit the documentation required under subdivision
4, paragraph (c), by June 1, the commissioner must notify the qualified foundation by July
1. A qualified foundation that fails to submit the required information by August 1 is barred
from participation for the next taxable year.
new text end

new text begin (g) If a qualified foundation fails to comply with the requirements of subdivision 4,
paragraph (c), the commissioner must by September 1 notify the qualified foundation that
it has until November 1 to document that it has remedied its noncompliance. A qualified
foundation that fails to document that it has remedied its noncompliance by November 1 is
barred from participation for the next taxable year.
new text end

new text begin (h) A qualified foundation barred under paragraph (f) or (g) may become eligible to
participate by submitting the required information in future years.
new text end

new text begin Subd. 6. new text end

new text begin Special education services. new text end

new text begin A student's receipt of a qualified scholarship or
qualified transportation scholarship does not affect the student's eligibility for instruction
and service under chapter 125A or otherwise affect the student's status under federal special
education laws.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment for
donations made and credits allowed in taxable years beginning after December 31, 2019.
new text end

Sec. 5. 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
its effectiveness is measured.
new text end

new text begin Subd. 2. new text end

new text begin Credit providing equity and opportunity in education tax credit. new text end

new text begin The
provisions of section 3, providing a tax credit to expand educational choice, are intended
to give financial assistance to low-income and middle-income families who seek better
educational opportunities for their children. The standard against which the effectiveness
of the credit is to be measured is the total number of eligible students who receive opportunity
scholarships and better educational opportunities as a result of donations from corporations
and individuals that qualify for the tax credit.
new text end