HB2014 - 561R

Be it enacted by the Legislature of the State of Arizona:

Section 1. Section 43-1184, Arizona Revised Statutes, is amended to read:

START_STATUTE43-1184. Credit for contributions to school tuition organization; displaced students; students with disabilities

A. Beginning from and after June 30, 2009, a credit is allowed against the taxes imposed by this title for the amount of voluntary cash contributions made by the taxpayer during the taxable year to a school tuition organization that is certified pursuant to chapter 15 of this title at the time of donation.

B. The amount of the credit is the total amount of the taxpayer's contributions for the taxable year under subsection A of this section and is preapproved by the department of revenue pursuant to subsection D of this section.

C. The department of revenue:

1. Shall not allow tax credits under this section and section 20-224.07 that exceed in the aggregate a combined total of $5,000,000 in any fiscal year through fiscal year 2020-2021. Beginning in fiscal year 2021-2022, the aggregate dollar amount of the tax credits allowed in each fiscal year is as follows:

(a) For fiscal year 2021-2022, $6,000,000 in any fiscal year.

(b) For fiscal year 2022-2023, $10,000,000.

(d) For fiscal year 2024-2025 and each fiscal year thereafter, $20,000,000.

2. Shall preapprove tax credits under this section and section 20-224.07 subject to subsection D of this section.

3. Shall allow the tax credits under this section and section 20-224.07 on a first-come, first-served basis.

D. For the purposes of subsection C, paragraph 2 of this section, before making a contribution to a school tuition organization, the taxpayer under this title or title 20 must notify the school tuition organization of the total amount of contributions that the taxpayer intends to make to the school tuition organization. Before accepting the contribution, the school tuition organization shall request preapproval from the department of revenue for the taxpayer's intended contribution amount. The department of revenue shall preapprove or deny the requested amount within twenty days after receiving the request from the school tuition organization. If the department of revenue preapproves the request, the school tuition organization shall immediately notify the taxpayer that the requested amount was preapproved by the department of revenue. In order to receive a tax credit under this subsection, the taxpayer shall make the contribution to the school tuition organization within twenty days after receiving notice from the school tuition organization that the requested amount was preapproved. If the school tuition organization does not receive the preapproved contribution from the taxpayer within the required twenty days, the school tuition organization shall immediately notify the department of revenue and the department shall no longer include this preapproved contribution amount when calculating the limit prescribed in subsection C, paragraph 1 of this section.

E. If the allowable tax credit exceeds the taxes otherwise due under this title on the claimant's income, or if there are no taxes due under this title, the taxpayer may carry the amount of the claim not used to offset the taxes under this title forward for not more than five consecutive taxable years' income tax liability.

F. Co-owners of a business, including corporate partners in a partnership and stockholders of an S corporation as defined in section 1361 of the internal revenue code, may each claim only the pro rata share of the credit allowed under this section based on the ownership interest. The total of the credits allowed all such owners may not exceed the amount that would have been allowed a sole owner.

G. The credit allowed by this section is in lieu of any deduction pursuant to section 170 of the internal revenue code and taken for state tax purposes.

H. A taxpayer shall not claim a credit under this section and also under section 43-1183 with respect to the same contribution.

I. The tax credit is not allowed if the taxpayer designates the taxpayer's contribution to the school tuition organization for the direct benefit of any specific student.

J. The department of revenue shall adopt rules necessary to administer this section. END_STATUTE

Sec. 2. Section 43-1501, Arizona Revised Statutes, is amended to read:

START_STATUTE43-1501. Definitions

In this chapter, unless the context otherwise requires:

1. "Allocate" includes reserving money monies for an award of a multiyear educational scholarship or tuition grant for a specific student.

2. "Custodian" means a resident of this state who is a parent or an authorized out-of-home care provider or, if none, the legal guardian of a qualified student, as defined in section 43-1505.

3. "Educational scholarship or tuition grant" includes monies for tuition and fees at a qualified school and any of the following expenses purchased from or through the qualified school:

(a) Textbooks required by a qualified school.

(b) If the student is either identified as having a disability under section 504 of the rehabilitation act of 1973 (29 United States Code section 794), identified by a school district or by a licensed physician, psychiatrist or psychologist as a child with a disability as defined in section 15-731 or 15-761 or is a child with a disability who is eligible to receive services from a school district under section 15-763:

(i) Educational therapies from a licensed or accredited practitioner or provider, including and up to any amount not covered by insurance if the expense is partially paid by a health insurance policy for the qualified student.

(ii) Services from a licensed or accredited paraprofessional or educational aide.

(iii) Tuition for vocational and life skills education approved by the department.

(iv) Associated goods and services, including educational and psychological evaluations, assistive technology rentals and braille translation goods and services approved by the department.

(c) Tutoring or teaching services provided by an individual or facility accredited by a state, regional or national accrediting organization.

(d) Curricula and supplementary materials.

(e) Tuition or fees for a nonpublic online learning program.

(f) Fees for a nationally standardized norm-referenced achievement test, an advanced placement examination or any exams related to college or university admission.

(g) Tuition or fees at an eligible postsecondary institution and textbooks required by an eligible postsecondary institution. For the purposes of this subdivision, "eligible postsecondary institution" means a community college as defined in section 15-1401, a university under the jurisdiction of the Arizona board of regents or an accredited private postsecondary institution.

(h) Services provided by a public school, including individual classes and extracurricular programs.

(i) Uniforms.

(j) Public transportation services in this state, including a commuter pass for the qualified student, or transportation network services as defined in section 28-9551 between the qualified student's residence and a qualified school in which the student is enrolled.

(k) Computer hardware and technological devices primarily used for an educational purpose. For the purposes of this subdivision, "computer hardware and technological devices":

(i) Includes calculators, personal computers, laptops, tablet devices, microscopes, telescopes and printers.

(ii) Does not include entertainment and other primarily noneducational devices, including televisions, telephones, video game consoles and accessories, and home theatre and audio equipment.

3. 4. "Fiscal year" means the fiscal year of the state as prescribed in section 35-102.

4. 5. "Qualified school" means a preschool that offers services to students with disabilities, nongovernmental primary school or secondary school that is located in this state and that does not discriminate on the basis of race, color, disability, familial status or national origin and that requires all teaching staff and personnel that have unsupervised contact with students to be fingerprinted. Qualified school does not include a charter school or programs operated by a charter school. END_STATUTE

Sec. 3. Section 43-1504, Arizona Revised Statutes, is amended to read:

START_STATUTE43-1504. Special provisions; corporate donations for low-income scholarships; rules

A. A school tuition organization that receives contributions from a corporation for the purposes of section 20-224.06 or 43-1183 must use at least ninety percent of those contributions to provide educational scholarships or tuition grants only to children whose family income does not exceed one hundred eighty-five percent of the income limit required to qualify a child for reduced-price lunches under the national school lunch and child nutrition acts (42 United States Code sections 1751 through 1793) and to whom any of the following applies:

1. Attended a governmental primary or secondary school as a full-time student as defined in section 15-901 or attended a preschool program that offers services to students with disabilities at a governmental school for at least ninety days of the prior fiscal year or one full semester and transferred from a governmental school to a qualified school.

2. 1. Enroll in a qualified school in a kindergarten program, or a preschool program that offers services to students with disabilities or grades one through twelve.

3. 2. Are the dependent of a member of the armed forces of the United States who is stationed in this state pursuant to military orders.

4. 3. Are homeschooled before enrolling in a qualified school.

5. 4. Moved to this state from out of state before enrolling in a qualified school.

6. 5. Participated in an Arizona empowerment scholarship account and did not renew the account or accept the scholarship in order to accept a scholarship or tuition grant under this section.

7. 6. Received an educational scholarship or tuition grant under paragraph 1, 2, 3, 4, or 5 or 6 of this subsection or chapter 16, article 1 of this title if the children continue to attend a qualified school in a subsequent year.

B. A child is eligible to receive an educational scholarship or tuition grant under subsection A of this section if the child meets the criteria to receive a reduced-price lunch but does not actually claim that benefit.

C. In 2021, a school tuition organization shall not issue an educational scholarship or a tuition grant for the purposes of section 20-224.06 or 43-1183 in an amount that exceeds $5,600 for students who are in a kindergarten program, a preschool program that offers services to students with disabilities or grades one through eight or $7,500 for students who are in grades nine through twelve. In each year after 2021 2022, the limit amount for a scholarship or a grant under this subsection shall be increased by $200. beginning in 2023 and in each year thereafter, the amount of an educational scholarship or tuition grant that is issued by a school tuition organization under this section shall not exceed the amount of state aid that otherwise would be computed for the student as provided in title 15, chapter 9, article 5. On request from a school tuition organization, the department of education shall provide to the school tuition organization in a timely manner the amount computed for the student as provided in title 15, chapter 9, article 5.

D. A school tuition organization shall require that student beneficiaries use the educational scholarships or tuition grants on a full-time basis. If a child leaves the school before completing an entire school year, the school shall refund a prorated amount of the educational scholarship or tuition grant to the school tuition organization that issued the scholarship or grant. The school tuition organization shall allocate any refunds it receives under this subsection for educational scholarships or tuition grants.

E. Students who receive an educational scholarship or tuition grant under this section shall be allowed to attend any qualified school of their parents' choice.

F. The department of revenue, with the cooperation of the department of insurance and financial institutions, shall adopt rules and publish and prescribe forms and procedures necessary to administer this section. END_STATUTE

Sec. 4. Section 43-1505, Arizona Revised Statutes, is amended to read:

START_STATUTE43-1505. Special provisions; corporate donations for displaced students and students with disabilities; definition

A. A school tuition organization that receives contributions for the purposes of section 20-224.07 or 43-1184 must use at least ninety per cent percent of those contributions to provide educational scholarships or tuition grants to qualified students.

B. The amount of an educational scholarship or a tuition grant that is issued by a school tuition organization under this section shall not exceed the cost of tuition for the student to attend the qualified school or ninety per cent of the amount of state aid that otherwise would be computed for the student as provided in title 15, chapter 9, article 5, whichever is less. On request from a school tuition organization, the department of education shall provide to the school tuition organization in a timely manner the amount computed for the student under this subsection that represents the ninety per cent limitation prescribed in this subsection as provided in title 15, chapter 9, article 5.

C. A school tuition organization shall require that student beneficiaries use the educational scholarships or tuition grants on a full-time basis. If a child leaves the school before completing an entire school year, the school shall refund a prorated amount of the educational scholarship or tuition grant to the school tuition organization that issued the scholarship or grant. The school tuition organization shall allocate any refunds it receives under this subsection for educational scholarships or tuition grants.

D. Qualified students who receive an educational scholarship or tuition grant under this section shall be allowed to attend any qualified school of their custodians' choice.

E. For the purposes of this section, "qualified student" means a student, including a student who previously qualified for an educational scholarship or tuition grant under this section and continues to attend a qualified school, who has been either:

1. Placed in foster care pursuant to title 8, chapter 4 at any time before the student graduates from high school or obtains a general equivalency diploma.

2. Identified as having a disability under section 504 of the rehabilitation act (29 United States Code section 794) or identified at any time by a school district as a child with a disability as defined in section 15-761 or a child with a disability who is eligible to receive services from a school district under section 15-763. END_STATUTE

Sec. 5. Section 43-1601, Arizona Revised Statutes, is amended to read:

START_STATUTE43-1601. Definitions

In this chapter, unless the context otherwise requires:

1. "Allocate" includes reserving money monies for an award of a multiyear educational scholarship or tuition grant for a specific student.

2. "educational scholarship or tuition grant" includes monies for tuition and fees at a qualified school and any of the following expenses purchased from or through the qualified school:

(a) Textbooks required by a qualified school.

(ii) Services from a licensed or accredited paraprofessional or educational aide.

(iii) Tuition for vocational and life skills education approved by the department.

(iv) Associated goods and services, including educational and psychological evaluations, assistive technology rentals and braille translation goods and services approved by the department.

(c) Tutoring or teaching services provided by an individual or facility accredited by a state, regional or national accrediting organization.

(d) Curricula and supplementary materials.

(e) Tuition or fees for a nonpublic online learning program.

(f) Fees for a nationally standardized norm-referenced achievement test, an advanced placement examination or any exams related to college or university admission.

(h) Services provided by a public school, including individual classes and extracurricular programs.

(i) Uniforms.

(k) Computer hardware and technological devices primarily used for an educational purpose. For the purposes of this subdivision, "computer hardware and technological devices":

(i) Includes calculators, personal computers, laptops, tablet devices, microscopes, telescopes and printers.

(ii) Does not include entertainment and other primarily noneducational devices, including televisions, telephones, video game consoles and accessories, and home theatre and audio equipment.

2. 3. "Fiscal year" means the fiscal year of the state as prescribed in section 35-102.

3. 4. "Qualified school" means a preschool that offers services to students with disabilities, nongovernmental primary school or secondary school that is located in this state and that does not discriminate on the basis of race, color, disability, familial status or national origin and that requires all teaching staff and personnel that have unsupervised contact with students to be fingerprinted. Qualified school does not include a charter school or programs operated by a charter school.

4. 5. "Students with disabilities" means students who have any of the following conditions:

(a) A hearing impairment.

(b) A visual impairment.

(d) A preschool severe delay.

(e) A speech/language impairment. END_STATUTE

Sec. 6. Section 43-1603, Arizona Revised Statutes, is amended to read:

START_STATUTE43-1603. Operational requirements for school tuition organizations; notice; qualified schools

A. A certified school tuition organization must be established to receive contributions from taxpayers for the purposes of income tax credits under sections 43-1089 and 43-1089.03 and to pay educational scholarships or tuition grants to allow students to attend any qualified school of their parents' choice.

B. To be eligible for certification and retain certification, the school tuition organization:

1. Must allocate at least ninety percent of its annual revenue from contributions made for the purposes of sections 43-1089 and 43-1089.03 for educational scholarships or tuition grants.

2. Shall not limit the availability of educational scholarships or tuition grants to only students of one school.

3. May allow donors to recommend student beneficiaries, but shall not award, designate or reserve scholarships solely on the basis of donor recommendations.

4. Shall not allow donors to designate student beneficiaries as a condition of any contribution to the organization, or facilitate, encourage or knowingly allow the exchange of beneficiary student designations in violation of section 43-1089, subsection F, section 43-1089.03, subsection F and section 43-1089.04, subsection E.

5. Shall include on the organization's website, if one exists, the percentage and total dollar amount of educational scholarships and tuition grants awarded during the previous fiscal year to:

(a) Students whose family income meets the economic eligibility requirements established under the national school lunch and child nutrition acts (42 United States Code sections 1751 through 1793) for free or reduced-price lunches.

(b) Students whose family income exceeds the threshold prescribed by subdivision (a) of this paragraph but does not exceed one hundred eighty-five percent of the economic eligibility requirements established under the national school lunch and child nutrition acts (42 United States Code sections 1751 through 1793) for free or reduced-price lunches.

6. Must not award educational scholarships or tuition grants to students who are simultaneously enrolled in a district school or charter school and a qualified school.

C. A school tuition organization shall include the following notice in any printed materials soliciting donations, in applications for scholarships and on its website, if one exists:

Notice

A school tuition organization cannot award, restrict or reserve scholarships solely on the basis of a donor's recommendation.

A taxpayer may not claim a tax credit if the taxpayer agrees to swap donations with another taxpayer to benefit either taxpayer's own dependent.

D. In evaluating applications and awarding, designating or reserving scholarships, a school tuition organization:

1. Shall not award, designate or reserve a scholarship solely on the recommendation of any person contributing money to the organization, but may consider the recommendation among other factors.

2. Shall consider the financial need of applicants.

E. A taxpayer's contribution to a school tuition organization that exceeds the amount of the credit allowed by section 43-1089 but does not exceed the amount of the credit allowed by section 43-1089.03 is considered a contribution pursuant to section 43-1089.03. A school tuition organization must use at least ninety percent of contributions made pursuant to section 43-1089.03 for educational scholarships or tuition grants for students to whom any of the following applies:

1. Attended a governmental primary or secondary school as a full-time student as defined in section 15-901 or attended a preschool program that offers services to students with disabilities at a governmental school for at least ninety days of the prior fiscal year and transferred from a governmental school to a qualified school.

2. 1. Enroll in a qualified school in a kindergarten program, or a preschool program that offers services to students with disabilities or grades one through twelve.

3. 2. Are the dependent of a member of the armed forces of the United States who is stationed in this state pursuant to military orders.

4. 3. Are homeschooled before enrolling in a qualified school.

5. 4. Moved to this state from out of state before enrolling in a qualified school.

6. 5. Participated in an Arizona empowerment scholarship account and did not renew the account or accept the scholarship in order to accept a scholarship or tuition grant under this section.

7. 6. Received an educational scholarship or tuition grant under paragraph 1, 2, 3, 4, or 5 or 6 of this subsection or under chapter 15 of this title if the student continues to attend a qualified school in a subsequent year.

F. In awarding educational scholarships or tuition grants from contributions made pursuant to section 43-1089.03, a school tuition organization shall give priority to students and siblings of students on a waiting list for scholarships if the school tuition organization maintains a waiting list.

G. If an individual educational scholarship or tuition grant exceeds the qualified school's cost of tuition and fees and expenses described in section 43-1601, paragraph 2 purchased from or through the qualified school, the amount in excess shall be returned to the school tuition organization that made the award educational scholarship or tuition grant. The school tuition organization may allocate the returned monies as a multiyear award for that student and report the award pursuant to section 43-1604, subsection A, paragraph 5, subdivision (b) or may allocate the returned monies for educational scholarships or tuition grants for other students. END_STATUTE