ARTICLE 24 SUBSTITUTE A AS AMENDED

 

Relating To Tuition Tax Credits

 

SECTION 1. Title 44 of the General Laws entitled "Taxation" is hereby amended by adding thereto the following chapter:

 

CHAPTER 44-62

TAX CREDITS FOR CONTRIBUTIONS TO SCHOLARSHIP ORGANIZATIONS

 

§ 44-62-1. Tax credit for contributions to a scholarship organization. – General

In order to enhance the educational opportunities available to all students in this state, a business entity will be allowed a tax credit  to be computed as provided in this chapter for  voluntary cash contribution made by the business entity to a qualified scholarship.

 

§ 44-62-2. Qualification of scholarship organization. –  A scholarship organization must certify annually by December 31st to the division of taxation that the organization is eligible to participate in the program in accordance with criteria as defined below:

(a) "Scholarship organization" means a charitable organization in this state that is exempt from federal taxation under section 501 (c)(3) of the internal revenue code, and that allocates at least ninety percent (90%) of its annual revenue through a scholarship program for tuition assistance grants to eligible students to allow them to attend any qualified school of their parents' choice represented by the scholarship organization.

 (b) "Scholarship program" means a program to provide tuition assistance grants to eligible students to attend a nonpublic school located in this state. A scholarship program must include an application and review process for the purpose of making these grants only to eligible students. The award of scholarships to eligible students shall be made without limiting availability to only students of one school.

(c) "Eligible student" means a school-age student who is registered in a qualified school and is a member of a household with an annual household income of not more than two hundred fifty percent (250%) of the federal poverty guidelines as published in the federal register by the United States department of health and human services.

(d) "Household" means one or more persons occupying a dwelling unit and living as a single nonprofit housekeeping unit. Household does not mean bona fide lessees, tenants, or

roomers and borders on contract.

(e) "Household income" means all income received by all persons of a household in a

calendar year while members of the household.

(f) "Income" means the sum of federal adjusted gross income as defined in the internal revenue code of the United States, 26 U.S.C. section 1 et seq., and all nontaxable income including, but not limited to, the amount of capital gains excluded from adjusted gross income, alimony, support money, nontaxable strike benefits, cash public assistance and relief (not including relief granted under this chapter), the gross amount of any pension or annuity (including Railroad Retirement Act (see 45 U.S.C. section 231 et seq.) benefits, all payments received under the federal Social Security Act, 42 U.S.C. section 301 et seq., state unemployment insurance laws, and veterans' disability pensions (see 38 U.S.C. section 301 et seq.), nontaxable interest received from the federal government or any of its instrumentalities, workers' compensation, and the gross amount of "loss of time" insurance. It does not include gifts from nongovernmental sources, or surplus foods or other relief in kind supplied by a public or private agency.

(g) "Qualified school" means a nonpublic elementary or secondary school that is located in this state and that satisfies the requirements prescribed by law for nonpublic schools in this state.

(h) "School-age student" means a child at the earliest admission age to a qualified school's kindergarten program or, when no kindergarten program is provided, the school's earliest admission age for beginners, until the end of the school year, the student attains twenty-one (21) years of age or graduation from high school whichever occurs first.

(i) Designation. A donation to a scholarship organization, for which the donor receives a tax credit under this provision, may not be designated to any specific school or student by the donor.

(j) Nontaxable income. A scholarship received by an eligible student shall not be considered to be taxable income.

 

§ 44-62-3. Application for the tax credit program. – (a) Prior to the contribution, a business entity shall apply in writing to the division of taxation.  The application shall contain such information and certification as the tax administrator deems necessary for the proper administration of this chapter.  A business entity shall be approved if it meets the criteria of this chapter; the dollar amount of the applied for tax credit is no greater than one hundred thousand dollars ($100,000) in any tax year, and the scholarship organization which is to receive the contribution has qualified under section 44-62-2.

(b) Approvals for contributions under this section shall be made available by the division of taxation on a first-come-first-serve basis.  The total aggregate amount of all tax credits approved shall not exceed one million dollars ($1,000,000) in a fiscal year.

(c) The division of taxation shall notify the business entity in writing within thirty (30) days of the receipt of application of the division's approval or rejection of the application.

(d) Unless the contribution is part of a two-year plan, the actual cash contribution by the business entity to a qualified scholarship organization must be made no later than one hundred twenty (120) days following the approval of its application.  If the contribution is part of a two-year plan, the first year’s contribution follows the general rule and the second year’s contribution must be made in the subsequent calendar year by the same date . 

(e) The contributions must be those charitable contributions made in cash as set forth in the Internal Revenue Code.

 

§ 44-62-4. Calculation of tax credit and issuance of tax credit certificate. -- (a)  When the contribution has been made as set forth in section 3 above, the business entity shall apply to the division of taxation for a tax credit certificate.  The application will include such information, documentation, and certification as the tax administrator deems proper for the administration of this chapter including, but not limited to a certification by an independent Rhode Island certified public accountant  that the cash contribution has actually been made to the qualified scholarship organization. For purposes of the proper administration of this section, an independent Rhode Island certified public accountant shall be licensed in accordance with RIGL 5-3.1 and means a person, partnership, corporation, limited liability corporation that is not affiliated with or an employee of said business entity or its affiliates and is not affiliated in any manner whatsoever with a qualified scholarship organization or scholarship program as defined in § 42-62-2 (a) through(j).

(b) The division of taxation will review the documentation submitted; calculate the tax credit pertaining to the contribution, and prepare and mail a certificate for amount of credit to be granted.

(c) Unless a two year contribution plan is in place, the  credit, is computed at seventy-five percent (75%) of the total voluntary cash contribution made by the business entity.

(d) The credit is available against taxes otherwise due under provisions of chapters 11, 13, 14, 15 or 17 of this title. 

 (e) (1) A two year contribution plan is based on the written commitment of the business entity to provide the scholarship organization with the same amount of contribution for two (2) consecutive tax years. The business entity must provide in writing a commitment to this extended contribution to the scholarship organization and the division of taxation at the time of application.

(2) In the event that a two year contribution plan is in place, the calculation of credit for each year shall be ninety percent (90%) of the total voluntary contribution made by a business entity

(3) In the event that, in the second year of the plan, a business entity's contribution falls below the contribution amount made in the first year but the second year's contribution is eighty percent (80%) or greater than the first year's contribution, the business entity shall receive a credit for both the first and second year contributions equal to ninety percent (90%) of each year's contribution.

(4) If the amount of the second year contribution is less than eighty percent (80%) of the first year contribution, then the credit for both the first and second year contributions shall be equal to seventy-five percent (75%) of each year's contribution.  In such case, the tax administrator shall prepare the tax credit certificate for the second year at seventy-five percent (75%).  The difference in credit allowable for the first year [90% - 75% = 15% x first year contribution] shall be recaptured by adding it to the taxpayer's tax in that year. 

 

§ 44-62-5. Limitations. -- (a) The credit shall not exceed one hundred thousand dollars ($100,000) annually per business entity.

(b) The tax credit must be used in the tax year the contribution was made.  Any amounts of unused tax credit may not be carried forward.  The tax credit is not refundable, assignable or transferable.  The tax credit may not reduce the tax below the state minimum tax.

(c) The credit allowed under this chapter is only allowed against the tax of that corporation included in a consolidated return that qualifies for the credit and not against the tax of other corporations that may join in the filing of a consolidated tax return.

 

§ 44-62-6. Definitions. – The following words and phrases used in this chapter shall have the meanings given to them in this section unless the context clearly indicates otherwise:

(1) "Business entity" means an entity authorized to do business in this state and subject to taxes imposed under chapters 44-11, 44-13, 44-14, 44-15 and 44-17 of the general laws.

(2) "Division of taxation" means the Rhode Island division of taxation.

 

§ 44-62-7. Miscellaneous  – Lists. – By June 30 of each year, the division of taxation shall annually publish in print and on the division of taxation’s website a list of all qualified scholarship organizations under  44-62-4. The list will indicate which scholarship organizations  received contributions from business entities for which tax credits were authorized under this chapter. In addition, each scholarship organization shall submit to the division of taxation by December 31st of each year the following information, which shall be a public record: the number of scholarships distributed by the organization, per school, and the dollar range of those scholarships; a breakdown by zip code of the place of residence for each student receiving a scholarship under this program; and a description of all criteria used by the organization in determining to whom scholarships under this program shall be awarded.  

 

SECTION 2. This article shall take effect as of January 1, 2007.

ARTICLE 24 SUBSTITUTE A AS AMENDED

 

Relating To Tuition Tax Credits

 

SECTION 1. Title 44 of the General Laws entitled "Taxation" is hereby amended by adding thereto the following chapter:

 

CHAPTER 44-62

TAX CREDITS FOR CONTRIBUTIONS TO SCHOLARSHIP ORGANIZATIONS

 

§ 44-62-1. Tax credit for contributions to a scholarship organization. – General

In order to enhance the educational opportunities available to all students in this state, a business entity will be allowed a tax credit  to be computed as provided in this chapter for  voluntary cash contribution made by the business entity to a qualified scholarship.

 

§ 44-62-2. Qualification of scholarship organization. –  A scholarship organization must certify annually by December 31st to the division of taxation that the organization is eligible to participate in the program in accordance with criteria as defined below:

(a) "Scholarship organization" means a charitable organization in this state that is exempt from federal taxation under section 501 (c)(3) of the internal revenue code, and that allocates at least ninety percent (90%) of its annual revenue through a scholarship program for tuition assistance grants to eligible students to allow them to attend any qualified school of their parents' choice represented by the scholarship organization.

 (b) "Scholarship program" means a program to provide tuition assistance grants to eligible students to attend a nonpublic school located in this state. A scholarship program must include an application and review process for the purpose of making these grants only to eligible students. The award of scholarships to eligible students shall be made without limiting availability to only students of one school.

(c) "Eligible student" means a school-age student who is registered in a qualified school and is a member of a household with an annual household income of not more than two hundred fifty percent (250%) of the federal poverty guidelines as published in the federal register by the United States department of health and human services.

(d) "Household" means one or more persons occupying a dwelling unit and living as a single nonprofit housekeeping unit. Household does not mean bona fide lessees, tenants, or

roomers and borders on contract.

(e) "Household income" means all income received by all persons of a household in a

calendar year while members of the household.

(f) "Income" means the sum of federal adjusted gross income as defined in the internal revenue code of the United States, 26 U.S.C. section 1 et seq., and all nontaxable income including, but not limited to, the amount of capital gains excluded from adjusted gross income, alimony, support money, nontaxable strike benefits, cash public assistance and relief (not including relief granted under this chapter), the gross amount of any pension or annuity (including Railroad Retirement Act (see 45 U.S.C. section 231 et seq.) benefits, all payments received under the federal Social Security Act, 42 U.S.C. section 301 et seq., state unemployment insurance laws, and veterans' disability pensions (see 38 U.S.C. section 301 et seq.), nontaxable interest received from the federal government or any of its instrumentalities, workers' compensation, and the gross amount of "loss of time" insurance. It does not include gifts from nongovernmental sources, or surplus foods or other relief in kind supplied by a public or private agency.

(g) "Qualified school" means a nonpublic elementary or secondary school that is located in this state and that satisfies the requirements prescribed by law for nonpublic schools in this state.

(h) "School-age student" means a child at the earliest admission age to a qualified school's kindergarten program or, when no kindergarten program is provided, the school's earliest admission age for beginners, until the end of the school year, the student attains twenty-one (21) years of age or graduation from high school whichever occurs first.

(i) Designation. A donation to a scholarship organization, for which the donor receives a tax credit under this provision, may not be designated to any specific school or student by the donor.

(j) Nontaxable income. A scholarship received by an eligible student shall not be considered to be taxable income.

 

§ 44-62-3. Application for the tax credit program. – (a) Prior to the contribution, a business entity shall apply in writing to the division of taxation.  The application shall contain such information and certification as the tax administrator deems necessary for the proper administration of this chapter.  A business entity shall be approved if it meets the criteria of this chapter; the dollar amount of the applied for tax credit is no greater than one hundred thousand dollars ($100,000) in any tax year, and the scholarship organization which is to receive the contribution has qualified under section 44-62-2.

(b) Approvals for contributions under this section shall be made available by the division of taxation on a first-come-first-serve basis.  The total aggregate amount of all tax credits approved shall not exceed one million dollars ($1,000,000) in a fiscal year.

(c) The division of taxation shall notify the business entity in writing within thirty (30) days of the receipt of application of the division's approval or rejection of the application.

(d) Unless the contribution is part of a two-year plan, the actual cash contribution by the business entity to a qualified scholarship organization must be made no later than one hundred twenty (120) days following the approval of its application.  If the contribution is part of a two-year plan, the first year’s contribution follows the general rule and the second year’s contribution must be made in the subsequent calendar year by the same date . 

(e) The contributions must be those charitable contributions made in cash as set forth in the Internal Revenue Code.

 

§ 44-62-4. Calculation of tax credit and issuance of tax credit certificate. -- (a)  When the contribution has been made as set forth in section 3 above, the business entity shall apply to the division of taxation for a tax credit certificate.  The application will include such information, documentation, and certification as the tax administrator deems proper for the administration of this chapter including, but not limited to a certification by an independent Rhode Island certified public accountant  that the cash contribution has actually been made to the qualified scholarship organization. For purposes of the proper administration of this section, an independent Rhode Island certified public accountant shall be licensed in accordance with RIGL 5-3.1 and means a person, partnership, corporation, limited liability corporation that is not affiliated with or an employee of said business entity or its affiliates and is not affiliated in any manner whatsoever with a qualified scholarship organization or scholarship program as defined in § 42-62-2 (a) through(j).

(b) The division of taxation will review the documentation submitted; calculate the tax credit pertaining to the contribution, and prepare and mail a certificate for amount of credit to be granted.

(c) Unless a two year contribution plan is in place, the  credit, is computed at seventy-five percent (75%) of the total voluntary cash contribution made by the business entity.

(d) The credit is available against taxes otherwise due under provisions of chapters 11, 13, 14, 15 or 17 of this title. 

 (e) (1) A two year contribution plan is based on the written commitment of the business entity to provide the scholarship organization with the same amount of contribution for two (2) consecutive tax years. The business entity must provide in writing a commitment to this extended contribution to the scholarship organization and the division of taxation at the time of application.

(2) In the event that a two year contribution plan is in place, the calculation of credit for each year shall be ninety percent (90%) of the total voluntary contribution made by a business entity

(3) In the event that, in the second year of the plan, a business entity's contribution falls below the contribution amount made in the first year but the second year's contribution is eighty percent (80%) or greater than the first year's contribution, the business entity shall receive a credit for both the first and second year contributions equal to ninety percent (90%) of each year's contribution.

(4) If the amount of the second year contribution is less than eighty percent (80%) of the first year contribution, then the credit for both the first and second year contributions shall be equal to seventy-five percent (75%) of each year's contribution.  In such case, the tax administrator shall prepare the tax credit certificate for the second year at seventy-five percent (75%).  The difference in credit allowable for the first year [90% - 75% = 15% x first year contribution] shall be recaptured by adding it to the taxpayer's tax in that year. 

 

§ 44-62-6. Limitations. -- (a) The credit shall not exceed one hundred thousand dollars ($100,000) annually per business entity.

(b) The tax credit must be used in the tax year the contribution was made.  Any amounts of unused tax credit may not be carried forward.  The tax credit is not refundable, assignable or transferable.  The tax credit may not reduce the tax below the state minimum tax.

(c) The credit allowed under this chapter is only allowed against the tax of that corporation included in a consolidated return that qualifies for the credit and not against the tax of other corporations that may join in the filing of a consolidated tax return.

 

§ 44-62-7. Definitions. – The following words and phrases used in this chapter shall have the meanings given to them in this section unless the context clearly indicates otherwise:

(1) "Business entity" means an entity authorized to do business in this state and subject to taxes imposed under chapters 44-11, 44-13, 44-14, 44-15 and 44-17 of the general laws.

(2) "Division of taxation" means the Rhode Island division of taxation.

 

§ 44-62-8. Miscellaneous  – Lists. – By June 30 of each year, the division of taxation shall annually publish in print and on the division of taxation’s website a list of all qualified scholarship organizations under  44-62-4. The list will indicate which scholarship organizations  received contributions from business entities for which tax credits were authorized under this chapter. In addition, each scholarship organization shall submit to the division of taxation by December 31st of each year the following information, which shall be a public record: the number of scholarships distributed by the organization, per school, and the dollar range of those scholarships; a breakdown by zip code of the place of residence for each student receiving a scholarship under this program; and a description of all criteria used by the organization in determining to whom scholarships under this program shall be awarded.  

 

SECTION 2. This article shall take effect as of January 1, 2007.