MISSISSIPPI LEGISLATURE

2012 Regular Session

To: Education; Finance

By: Senator(s) Watson, McDaniel, Collins

Senate Bill 2400

AN ACT ENTITLED THE "MISSISSIPPI OPPORTUNITY SCHOLARSHIP AND EDUCATION IMPROVEMENT TAX CREDIT ACT OF 2012"; TO PROVIDE DEFINITIONS; TO PROVIDE AN OPPORTUNITY SCHOLARSHIP PROGRAM UNDER WHICH LOW-INCOME AND MIDDLE-INCOME STUDENTS IN PERSISTENTLY LOW ACHIEVING SCHOOLS MAY USE THE STATE PAYMENTS TO THEIR HOME SCHOOL DISTRICT TO PAY TUITION TO ATTEND A NONRESIDENT PUBLIC SCHOOL OR A PARTICIPATING PRIVATE SCHOOL; TO PROVIDE FOR A 3-YEAR PHASE-IN OF THIS OPPORTUNITY SCHOLARSHIP PROGRAM; TO PROVIDE STANDARDS FOR THE RECEIPT AND CALCULATION OF SUCH SCHOLARSHIPS; TO ESTABLISH AN OPPORTUNITY SCHOLARSHIP FUND; TO PROVIDE FOR THE PHASED-IN REDUCTION OF ADEQUATE EDUCATION FUND PAYMENTS IN RESIDENT SCHOOL DISTRICTS IN THE AMOUNT OF SUCH SCHOLARSHIP PAYMENTS; TO ESTABLISH AND EMPOWER AN EDUCATION OPPORTUNITY BOARD WITHIN THE STATE DEPARTMENT OF EDUCATION TO ADMINISTER THE OPPORTUNITY SCHOLARSHIP PROGRAM; TO PROVIDE FOR AN OPTIONAL LOCAL TUITION GRANT PROGRAM FOR SUCH STUDENTS; TO PROVIDE FOR A MIDDLE-INCOME SCHOLARSHIP PROGRAM; TO PRESCRIBE LIMITATIONS AND REQUIRE ANNUAL REPORTING; TO ESTABLISH AN EDUCATIONAL IMPROVEMENT TAX CREDIT (EITC) PROGRAM ADMINISTERED BY THE MISSISSIPPI DEVELOPMENT AUTHORITY TO PROVIDE FINANCIAL ASSISTANCE TO LOW- AND MIDDLE-INCOME FAMILIES SEEKING EDUCATIONAL OPTIONS FOR THEIR CHILDREN; TO AUTHORIZE THE INCOME TAX CREDIT FOR BUSINESS FIRMS MAKING CONTRIBUTIONS TO QUALIFIED EDUCATIONAL SCHOLARSHIP ORGANIZATIONS, PREKINDERGARTEN SCHOLARSHIP ORGANIZATIONS OR EDUCATIONAL IMPROVEMENT ORGANIZATIONS AND TO PROVIDE STANDARDS AND LIMITATIONS FOR SUCH CONTRIBUTIONS; TO PROVIDE THAT THE AMOUNT OF SUCH CONTRIBUTIONS ARE NONTAXABLE INCOME TO THE RECIPIENT; TO AMEND SECTION 27-7-17, MISSISSIPPI CODE OF 1972, TO PROVIDE A STATE INCOME TAX DEDUCTION FOR PARENTS WHO SEND THEIR CHILDREN OR DEPENDENTS TO A PRIVATE SCHOOL OR A HOMESCHOOL PROGRAM; AND FOR RELATED PURPOSES.

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

     SECTION 1.  Short title.  This act shall be known and may be cited as the "Mississippi Opportunity Scholarship and Educational Improvement Tax Credit Act of 2012."

     SECTION 2.  Opportunity scholarships.  (1)  The Legislature finds that:

          (a)  Pursuant to Section 201 of the Mississippi Constitution of 1890, the Legislature has the responsibility to provide for the maintenance and support of a thorough and efficient system of public education to serve the needs of this state.

          (b)  Parents are best suited to choose the most appropriate means of education for their school-age children.

          (c)  Providing diverse educational opportunities for the children of this state is a civic and civil rights imperative and a matter of serious concern.

          (d)  The importance of providing educational choices that will meet the needs of parents and the need to maintain and support an effective system of education make it imperative to provide for the increased availability of diverse opportunities, including both public and nonpublic programs of education, to benefit all citizens of this state.

          (e)  Public schools are the foundation of the system of education in this state.  Further, Mississippi's longstanding tradition of local control of public education allows communities to adapt their public school programs to meet local needs.  For these reasons, a robust program of interdistrict school choice is a critical means of providing families with increased educational options within the traditional public school system.

          (f)  The accessibility to families of nonpublic educational alternatives decreases the burden on the state and local school districts and increases the range of educational choices available to Mississippi families, thus providing a benefit to all citizens Mississippi.

          (g)  It is the long-term goal of the Legislature to offer assistance to all families in this state, in order to provide every child in this state with diverse educational opportunities and options.

          (h)  As an initial step toward the long-term goal of offering assistance to all Mississippi families, this act provides assistance to disadvantaged school-age children in this state who would otherwise attend persistently lowest achieving schools.

          (i)  Many disadvantaged school-age children in this state enjoy comparatively fewer educational opportunities or options than school-age children who possess greater economic means.

          (j)  The programs of educational choice provided in this act are elements of an overall program of providing funds to increase the availability of educational opportunities for school-age children in this state.

          (k)  A comparatively far greater proportion of public funds are and, upon implementation of an educational choice program, will continue to be devoted to the benefit of children enrolled in the public schools of this state.  Therefore, an Opportunity Scholarship Program that offers assistance to parents who choose to enroll their children in participating nonpublic schools should be viewed as an integral part of the state's overall program of educational funding and not as an isolated individual program.

          (l)  A program of financial assistance to enhance educational choice in this state, as one (1) element of the state's plan for the funding of diverse educational opportunities for the citizens of this state, will better prepare Mississippi citizens to compete for employment opportunities, will foster development of a more capable and better-educated workforce and will better enable the state to fulfill its obligation of providing children with the opportunity to receive a quality education.

     SECTION 3.  Definitions.  The following words and phrases when used in this act shall have the meanings given to them in this section unless the context clearly indicates otherwise:

          (a)  "Assessment" means the Mississippi Department of Education System of School Assessment Test, an equivalent local assessment or another test established by the State Board of Education to meet accreditation requirements and required under the No Child Left Behind Act of 2001 (Public Law 107-110, 115 Stat. 1425) or its successor federal statute or required to achieve other standards established by the department for the public school or school district under Section 37-17-6, (relating to single accountability system).

          (b)  "Average daily attendance" means a school district's average daily attendance as defined in the Adequate Education Program.

          (c)  "Board" means the Education Opportunity Board established under this act.

          (d)  "Department" means the State Department of Education.

          (e)  "Excess Scholarship Fund" or "fund" means the Excess Scholarship Fund established in this act.

          (f)  "Federal poverty line" means the official federal poverty line as defined in Section 673(2) of Subtitle B of the Community Services Block Grant Act (Public Law 97-35, 95 Stat. 511), as adjusted from time to time.

          (g)  "Household income" means income as used for the purposes of determining eligibility for a free lunch under the Richard B. Russell National School Lunch Act (60 Stat. 230, 1751 et seq.).

          (h)  "Kindergarten" means a one-year formal kindergarten program that occurs during the school year immediately prior to First Grade.

          (i)  "Local scholarship" means a scholarship that is both:

              (i)  Funded by the local revenues of a low-income child's resident school district in an amount equal to at least thirty-five percent (35%) of the school district's share of its total revenue per average daily membership; and

              (ii)  Applied toward the low-income child's tuition to attend a nonresident public school.

          (j)  "Low-income child" means a school-age child with a household income that does not exceed one and three tenths (1.3) times the federal poverty line for the school year preceding the school year for which an opportunity scholarship is to be distributed.

          (k)  "Middle-income child" means a school-age child with a household income that does not exceed three (3) times the federal poverty level for the school year immediately preceding the school year for which an opportunity scholarship is to be distributed.

          (l)  "Middle-income scholarship" means a middle-income scholarship awarded to a middle-income child under this act to pay tuition for the child to attend a nonresident public school or a participating nonpublic school.

          (m)  "Middle-income scholarship recipient" means a middle-income child who is awarded a middle-income scholarship under this act.

          (n)  "Nonpublic school" means a school, other than a public school, located within this state where a Mississippi resident may legally fulfill the compulsory school attendance requirements of Section 37-13-91, and that meets the applicable requirements of Title VI of the Civil Rights Act of 1964 (Public Law 88-352, 78 Stat. 241).  The term also includes a full-time or part-time kindergarten program operated by a nonpublic school.

          (o)  "Nonresident public school" means a public school outside a child's resident school district.

          (p)  "Nonresident school district" means a school district other than the school district in which a school-age child resides.

          (q)  "Nonresident student" means a school-age child attending a public school outside the child's resident school district.

          (r)  "Opportunity scholarship" means an opportunity scholarship awarded to a low-income child under this act to pay tuition for the child to attend a nonresident public school or a participating nonpublic school.

          (s)  "Opportunity Scholarship Program" or "program" means the Opportunity Scholarship Program established under this act.

          (t)  "Opportunity scholarship recipient" means a low-income child who is awarded an opportunity scholarship under this act.

          (u)  "Parent" means a Mississippi resident who is a parent or guardian of a compulsory-school-age child.

          (v)  "Participating nonpublic school" means a nonpublic school located in this state and offering a program of instruction for Kindergarten through 12th Grade, or a combination of grades, that certifies to the board under Section 6 of this act that it meets the following criteria:

              (i)  The nonpublic school is a nonprofit entity that is exempt from federal taxation under Section 501(c)(3) of the Internal Revenue Code of 1986 (Public Law 99-514, 26 USC Section 1 et seq.);

              (ii)  The nonpublic school does not discriminate in its admission policies or practices for opportunity scholarship applicants on the basis of measures of achievement or aptitude or status as a handicapped person; provided, however, that an applicant may be required to meet established eligibility criteria for participation in magnet schools or in schools with specialized academic missions; and

              (iii)  The nonpublic school is in full compliance with all federal and state laws applicable to nonpublic schools on the date prior to the effective date of this act.

          (w)  "Persistently lowest achieving school" means a public elementary or secondary school within this state that is among the lowest performing five percent (5%) of schools.  To determine the lowest performing five percent (5%) of schools, the State Department of Education shall:

              (i)  Consider all public schools in this state, with the exception of charter schools, area vocational-technical schools, schools that do not draw their student body from a particular attendance boundary, and schools with specialized academic programs with specific admissions criteria;

              (ii)  Exclude schools that have made adequate yearly progress or were determined to be making progress for at least one (1) of the two (2) most recent school years or that have not been measured for adequate yearly progress in one (1) of the two (2) most recent school years;

               (iii)  Rank all remaining schools based upon their performance on the most recent assessment for which data is posted on the department's publicly accessible internet website; and

              (iv)  Include the lowest performing ten (10) schools ranked under subparagraph (iii) of this paragraph on a list of persistently lowest achieving schools.

          (x)  "Resident school district" means the school district in which a school-age child resides.

          (y)  "School-age child" means a compulsory-school-age child enrolling in Grades 1 through 12 pursuant to Section 37-13-91.

          (z)  "Student with a disability" means a school-age child who has been identified, in accordance with special education services and programs, as a "child with a disability," as defined in 34 CFR Section 300.8 (relating to a child with a disability).

          (aa)  "Total revenue per average daily attendance" means a school district's total revenue per average daily attendance minus the amount of reimbursement to the school district from the Adequate Education Program for pupil transportation.

     SECTION 4.  Opportunity Scholarship Program.  (1)  Establishment.  Beginning with the 2012-2013 school year, the Opportunity Scholarship Program shall be established to provide scholarships to help low-income children pay tuition to attend a nonresident public school or a participating nonpublic school.

     (2)  Phase-in.  The Opportunity Scholarship Program shall be phased in as follows:

          (a)  During the 2012-2013 school year, the Opportunity Scholarship Program shall be available to low-income children who satisfy both of the following:

              (i)  Either attended a persistently lowest achieving school during the 2011-2012 school year or will be a Kindergarten student during the 2012-2013 school year; and

              (ii)  Will reside within the attendance boundary of a persistently lowest achieving school as of the first day of classes of the 2012-2013 school year; or

              (iii)  Student has a documented diagnosis of dyslexia and requires specialized dyslexia therapy intervention services that are available in a nonpublic special purpose school.

          (b)  During the 2013-2014 school year, the Opportunity Scholarship Program shall be available to low-income children who qualified for the program for the 2012-2013 school year under paragraph (a) of this subsection and to low-income children who will reside within the attendance boundary of a persistently lowest achieving school as of the first day of classes of the 2013-2014 school year.

          (c)  (i)  During the 2014-2015 school year and each school year thereafter, the Opportunity Scholarship Program shall be available to all low-income children residing in this state, provided that the aggregate amount of all opportunity scholarships awarded for the 2014-2015 school year and for each school year thereafter to low-income children who do not reside within the attendance boundary of a persistently lowest achieving school as of the first day of classes of the school year shall not exceed Twenty-five Million Dollars ($25,000,000.00).

              (ii)  Nothing in this paragraph shall be construed to limit the amount of opportunity scholarships awarded to low-income children who were eligible for opportunity scholarships in the 2012-2013 and 2013-2014 school years or who reside within the attendance boundary of a persistently lowest achieving school as of the first day of classes of a school year.

     (3)  List of persistently lowest achieving schools to be published.  By July 1, 2012, and by February 1 of each year thereafter, the department shall publish on the department's publicly accessible Internet website a list of persistently lowest achieving schools that will be in effect for purposes of this act for the following school year.  The department shall publish the list based upon the most recent school year for which data is available.

     (4)  Notice.  (a)  For each school year, by a date established by the board, each school district in this state shall post on its publicly accessible Internet website notice of the following:

              (i)  A description of the Opportunity Scholarship Program.

              (ii)  Instructions for applying for an opportunity scholarship.

              (iii)  Instructions for applying for a local scholarship where the school district has elected to provide a local scholarship under Section 5 of this act.

              (iv)  A statement as to whether any schools in the school district have been designated by the department as persistently lowest achieving schools.

              (v)  Notice that a parent must contact directly the nonresident public school or participating nonpublic school in which the parent's child seeks to enroll for application instructions.

          (b)  The notice shall be in a form provided by the board.

     SECTION 5.  Opportunity scholarship to attend a nonresident public school.  (1)  Eligibility.  A low-income child who is eligible to participate in the Opportunity Scholarship Program may receive an opportunity scholarship to pay tuition to attend a nonresident public school that accepts a child's enrollment application under subsection (4) of this section.

     (2)  Local scholarship.  A school district may elect to provide a local scholarship to low-income children residing within the school district to pay tuition to attend a nonresident public school that accepts a child's enrollment application under subsection (4) of this section.  A school district that elects to provide a local scholarship shall:

          (a)  By a date established by the board, notify all residents of the school district of the availability and amount of the local scholarship for the following school year and the process by which a low-income child may apply to the board to receive the opportunity and local scholarships.  The school district shall post the notice on the school district's publicly accessible Internet website.  The notice may be incorporated into the notice the school district is required to provide under Section 4 of this act.

          (b)  By a date established by the board, notify the board of the availability and amount of the local scholarship for the following school year.

          (c)  When directed to do so by the board, pay to the board the local scholarship for each low-income child residing in the district who the board determines to be eligible for the local scholarship and who the board confirms has enrolled in a nonresident public school.

          (d)  Comply with all guidelines developed by the board under Section 10 of this act.

     (3)  Application for opportunity and local scholarships.  (a)  By a date established by the board and pursuant to guidelines developed by the board under Section 10 of this act, the parent of a low-income child may apply to the board:

              (i)  For an opportunity scholarship for the following school year.

              (ii)  For a local scholarship for the following school year, where the low-income child's resident school district has elected to provide a local scholarship under subsection (2) of this section.

          (b)  By a date established by the board, the board shall notify parents whether the scholarships for which the student applied will be awarded for the following school year.

     (4)  Application for enrollment in a nonresident public school.  (a)  By a date established by the board, the parent of a low-income child who has been awarded a scholarship under subsection (3) of this section may apply to one or more nonresident public schools for enrollment of the child for the following school year.  The application shall be on a form provided by the nonresident school district.

          (b)  (i)  By a date established by the board, the nonresident school district shall provide written notice to the parent and the board as to whether the child will be offered enrollment in the requested nonresident public school for the following school year.

              (ii)  By a date established by the board, the parent must provide written notice to the board, the resident school district and the nonresident school district whether the offer of enrollment will be accepted.

              (iii)  By a date established by the board, the board shall provide the resident school district and the nonresident school district with written confirmation of the opportunity scholarship recipient's enrollment in the nonresident school district.

              (iv)  If the child is not enrolled in a nonresident public school, the child's resident school district shall determine the public school within the resident school district to which the child will be assigned.

          (c)  Each school district shall develop guidelines setting forth the terms and conditions under which it will enroll nonresident students receiving opportunity and local scholarships and shall develop an enrollment application form and process.  If a school district determines to enroll nonresident students receiving opportunity and local scholarships, the school district must enroll such nonresident students on a random basis from a pool of applicants who meet the application deadline established by the board, provided that:

              (i)  The nonresident student's enrollment in the nonresident school district would not place either the nonresident school district or the resident school district in violation of a valid and binding desegregation order;

              (ii)  The nonresident student has not been expelled nor is the nonresident student in the process of being expelled under applicable regulations of the State Board of Education;

              (iii)  The nonresident student has not been recruited by the school district or its representatives for athletic purposes; or

              (iv)  The nonresident student meets the established eligibility criteria for participation in a magnet school or in a public school with a specialized academic mission.

          (d)  A nonresident school district may give priority in enrollment to a nonresident student who has been awarded a local scholarship.

     (5)  State payments.  The state shall make payment pursuant to the schedule contained in Section 7 of this act to each school district or area vocational-technical school that accepts a nonresident student under the provisions of this act subject to the following terms and conditions:

          (a)  The state shall pay to each school district or area vocational-technical school that accepts a nonresident student, on a tuition basis, the amount determined under Section 7 of this act.

          (b)  (i)  For a nonresident student who is an opportunity scholarship recipient and defined as a "student with a disability," services provided to the opportunity scholarship recipient shall be charged against the state's special education payments to the resident school district, provided that the resident school district shall not be charged more for services provided to the opportunity scholarship recipient by the nonresident school district than the difference between the current year cost of the services had the opportunity scholarship recipient remained in the resident school district and the sum of the opportunity scholarship, the local scholarship and the per-pupil special education funding following the opportunity scholarship recipient.

              (ii)  The resident school district shall provide the board with documentation of the prior year's cost of services provided to the opportunity scholarship recipient and an estimate of the cost of providing those services in the current year had the opportunity scholarship recipient remained in the resident school district.  Any cost not covered by this funding shall be paid by the nonresident school district enrolling the opportunity scholarship recipient.

          (c)  An opportunity scholarship recipient shall be included in the average daily attendance of the opportunity scholarship recipient's resident school district.

          (d)  In the event an opportunity scholarship recipient withdraws from a nonresident school district prior to the completion of the school year, the following shall apply:

              (i)  The nonresident school district shall, within fifteen (15) days of the opportunity scholarship recipient's withdrawal from the nonresident school district, provide the board with written notice of the opportunity scholarship recipient's withdrawal from the nonresident school district.

              (ii)  The resident school district, nonresident school district or participating nonpublic school in which the opportunity scholarship recipient subsequently enrolls shall notify the board within five (5) days of the opportunity scholarship recipient's enrollment.

              (iii)  Within thirty (30) days after receiving the notice required under subparagraph (ii) of this paragraph, the board shall do the following:

                   1.  If the opportunity scholarship recipient enrolls in the resident school district or a nonresident school district, pay the resident school district or nonresident school district the full amount of the opportunity scholarship payment reduced on a pro rata basis for the portion of the school year in which the opportunity scholarship recipient was enrolled in another school.

                   2.  If the opportunity scholarship recipient enrolls in a participating nonpublic school, pay the opportunity scholarship recipient's parent the full amount of the opportunity scholarship payment reduced on a pro rata basis for the portion of the school year in which the opportunity scholarship recipient was enrolled in another school.  Such payment shall be made to the parents of the opportunity scholarship recipient pursuant to the provisions of Section 6(2)(c)(i)1 of this act.

     (6)  Limitation.  The tuition charged by a nonresident school district to an opportunity scholarship recipient under this section shall not exceed the sum of the opportunity scholarship and the local scholarship, if applicable, awarded to the opportunity scholarship recipient.

     (7)  Transportation.  (a)  Notwithstanding any provisions of Section 37-41-1 to the contrary, a school district that provides its resident public school pupils with transportation to and from the resident public schools or to and from any points within or without this state in order to provide field trips shall provide a student who resides within the school district but regularly attends a nonresident public school, including a charter school, that is located not more than ten (10) miles from the student's resident school district by the nearest public highway, with transportation to and from such nonresident public school or to and from any points within or without this state in order to provide field trips.

          (b)  Transportation of a student under this subsection shall be subject to reimbursement.

     SECTION 6.  Opportunity scholarship to attend a participating nonpublic school.  (1)  Eligibility.  The parent of a low-income child who is eligible to receive an opportunity scholarship under Section 4 of this act and desires to apply for an opportunity scholarship to attend a participating nonpublic school must:

          (a)  By a date established by the board, apply to the board for an opportunity scholarship for the following school year pursuant to guidelines developed by the board under Section 10 of this act.  By a date established by the board, the board shall notify parents whether the opportunity scholarship will be awarded for the following school year.

          (b)  Apply for enrollment directly to the participating nonpublic school pursuant to application procedures developed by the participating nonpublic school.  By a date established by the board, a participating nonpublic school shall provide written confirmation to the board of each opportunity scholarship recipient whose application for enrollment has been accepted for the following school year.  By a date established by the board, the board shall provide the opportunity scholarship recipient's resident school district with written confirmation of the opportunity scholarship recipient's enrollment in the participating nonpublic school.

     (2)  Payment of opportunity scholarship awards.  The state shall provide payment of an opportunity scholarship to the parents of each opportunity scholarship recipient who is enrolled in a participating nonpublic school under the provisions of this section subject to the following terms and conditions:

          (a)  Opportunity scholarships shall be awarded only for the payment of costs of tuition at a participating nonpublic school within this state.  Opportunity scholarships shall not be awarded for enrollment in a home education program defined under Section 37-13-91.

          (b)  Opportunity scholarships shall be paid to the parents of an opportunity scholarship recipient upon the board's receipt of written confirmation of enrollment from the participating nonpublic school selected by the recipient.  The opportunity scholarship award shall be paid by check which may be endorsed by the parents only for payment of tuition at the participating nonpublic school at which the opportunity scholarship recipient's enrollment has been confirmed.

          (c)  In the event an opportunity scholarship recipient withdraws from a participating nonpublic school prior to the completion of the school year, the following shall apply:

              (i)  The participating nonpublic school shall, within fifteen (15) days of the opportunity scholarship recipient's withdrawal from the participating nonpublic school:

                   1.  Provide the board with written notice of the opportunity scholarship recipient's withdrawal from the participating nonpublic school; and

                   2.  Return to the board the full amount of the opportunity scholarship payment reduced on a pro rata basis by the tuition for the portion of the school year in which the opportunity scholarship recipient was enrolled.

              (ii)  If the participating nonpublic school fails to submit to the board the amount required to be paid under subparagraph (i) of this paragraph, the board shall impose interest on the unpaid amount, calculated from the due date at the rate determined by the Commissioner of Revenue for interest payments on overdue taxes or the refund of taxes.

              (iii)  If the opportunity scholarship recipient enrolls in another participating nonpublic school within the school year for which the opportunity scholarship was awarded, the board shall pay the parent of the opportunity scholarship recipient the opportunity scholarship award prorated for the remaining portion of the school year.

          (d)  In the event an opportunity scholarship recipient is expelled from a participating nonpublic school prior to the completion of the school year and the opportunity scholarship recipient subsequently enrolls in his resident school district, the board shall pay the resident school district the opportunity scholarship award prorated for the remaining portion of the school year.  The resident school district shall apply this amount toward providing educational services for the opportunity scholarship recipient, which may include, but shall not be limited to, an alternative assignment or alternative education services.

          (e)  Penalties.  (i)  Each opportunity scholarship check issued under this section shall contain the following statement:

     "FAILURE TO ENDORSE THIS CHECK AS DIRECTED BY THE BOARD MAY SUBJECT THE ENDORSER TO CIVIL PENALTIES AND CRIMINAL PROSECUTION."

              (ii)  A parent's endorsement or use of an opportunity scholarship check in a manner other than as directed by the department may subject the parent to the following penalties:

                   1.  A civil penalty equal to three hundred percent (300%) of the full amount of the annual opportunity scholarship award made to the parent.

                   2.  Disqualification from future eligibility for an opportunity scholarship.

                   3.  Criminal prosecution.

     (3)  Enrollment requirements.  The following shall apply to a participating nonpublic school which admits an opportunity scholarship recipient:

          (a)  The participating nonpublic school shall not discriminate on any basis that is illegal under federal or state laws applicable to nonpublic schools on the date prior to the effective date of this act.

          (b)  The participating nonpublic school shall prohibit discrimination in enrollment on the basis of race or color.

          (c)  The participating nonpublic school may not recruit any public school student to enroll for athletic purposes.

          (d)  For each school year, by a date established by the board, a nonpublic school that desires to enroll opportunity scholarship recipients under this act shall certify to the board that it satisfies the definition of "participating nonpublic school" in Section 3 of this act.  Such certification shall be on a form developed by the board.

     (4)  Policies.  Upon request, a participating nonpublic school shall make available for review by the parents of any opportunity scholarship recipient seeking enrollment, its written school policies and procedures related to tuition charges, admissions, academic offerings and requirements, discipline, religious instruction, parent involvement, standardized testing, the release of results of standardized tests administered by the participating nonpublic school, and extracurricular activities, and suspension and expulsion of students, including educational accommodations and counseling offered to students and parents.

     (5)  Assessments.  (a)  (i)  Each participating nonpublic school shall administer annually an assessment or a nationally normed standardized achievement test in reading/language arts and mathematics to each opportunity scholarship recipient attending the participating nonpublic school in Grades 3, 5, 8 and 11.

              (ii)  To comply with this paragraph, a participating nonpublic school may either administer an assessment or administer a nationally normed standardized achievement test chosen by the participating nonpublic school from a list established under paragraph (b) of this subsection.

          (b)  The board shall establish a list of at least eight (8) nationally normed standardized achievement tests from which the participating nonpublic school shall select a test to be administered if the participating nonpublic school does not choose to administer an assessment.

          (c)  Each participating nonpublic school shall:

              (i)  release each opportunity scholarship recipient's individual results on the assessment or nationally normed standardized achievement test administered to opportunity scholarship recipients under paragraph (a) of this subsection to the parent of the opportunity scholarship recipient.

              (ii)  If the participating nonpublic school has a publicly accessible Internet website, post on the website the participating nonpublic school's aggregate results on the assessment or nationally normed standardized achievement test administered to opportunity scholarship recipients under paragraph (a) of this subsection, provided that the participating nonpublic school shall not post results that reveal the identity of any individual student.

          (d)  The participating nonpublic school shall bear the cost of the testing administered under this subsection and shall not impose an assessment or testing fee on an opportunity scholarship recipient.

     (6)  Construction.  Nothing in this section shall be construed to:

          (a)  Prohibit a participating nonpublic school from limiting admission to a particular grade level, a single gender or to areas of concentration of the participating nonpublic school, including, but not limited to, mathematics, science and the arts.

          (b)  Empower the state or any of its agencies or officers or political subdivisions to impose any additional requirements on any participating nonpublic school which are not otherwise authorized under the laws of this state or to require any participating nonpublic school to enroll any opportunity scholarship recipient if the participating nonpublic school does not offer appropriate programs or is not structured or equipped with the necessary facilities to meet the special needs of the opportunity scholarship recipient or does not offer a particular program requested.

     SECTION 7.  Amount of opportunity scholarship.  (1)  Calculation.  (a)  The amount of the opportunity scholarship shall equal one hundred percent (100%) of the state's share of the resident school district's total revenue per average daily attendance of the prior school year.

          (b)  In no case shall the combined amount of the opportunity scholarship award and any additional financial assistance provided by a participating nonpublic school exceed the tuition rate for the participating nonpublic school.

     (2)  Limitation.  No nonresident public school or participating nonpublic school may charge an opportunity scholarship recipient a higher tuition rate than the rate the nonresident public school or participating nonpublic school would have charged to a student who had not received an opportunity scholarship.

     (3)  Excess Scholarship Fund.  (a)  The Excess Scholarship Fund is established in the State Treasury and shall be funded by the amount of the opportunity scholarship awarded to an opportunity scholarship recipient under this section in excess of the amount of tuition charged to the opportunity scholarship recipient.

          (b)  The fund shall be administered by the board and applied as follows:

              (i)  During the 2013-2014 school year and each school year thereafter, money in the fund shall be applied toward the costs of the Opportunity Scholarship Program, subject to subparagraph (ii) of this paragraph.

              (ii)  During the 2015-2016 school year and each school year thereafter, one-half (1/2) of the money in the fund shall be applied toward costs of the following programs:

                   1.  One-half (1/2) of the money under this subparagraph shall be applied to the public school demonstration grant program.  Any unused grant funding shall be added to the total amount of funds available for the middle-income scholarship program.

                   2.  One-half (1/2) of the money under this subparagraph shall be applied toward the costs of the middle-income scholarship program.

     (4)  Annual appropriations.  (a)  Opportunity scholarships authorized under this section shall be made from annual appropriations made by the Legislature to the department and monies available in the fund for that purpose.

          (b)  In the event that insufficient monies are available in any fiscal year to provide opportunity scholarships to all eligible opportunity scholarship recipients in the amount authorized, the board shall make pro rata reductions in the amount of the opportunity scholarship provided to each opportunity scholarship recipient.

          (c)  The total amount of opportunity scholarships provided in any fiscal year shall be limited to the amount of money appropriated for that fiscal year and monies in the fund.

     (5)  Nontaxable.  Opportunity scholarship funds received by a parent pursuant to this section shall not be considered taxable income for purposes of Mississippi income tax provisions, nor shall such opportunity scholarships constitute financial assistance or appropriations to the participating nonpublic school attended by the opportunity scholarship recipient.

     (6)  Continued eligibility.  (a)  Subject to subsection (4) of this section, a child enrolled in a nonresident public school or a participating nonpublic school who received an opportunity scholarship under this section in the prior school year shall receive an opportunity scholarship in each school year of enrollment under the Opportunity Scholarship Program, provided that the child remains eligible.

          (b)  (i)  If a child who received an opportunity scholarship under this section in the prior school year ceases to qualify as a low-income child, the child shall continue to receive a partial scholarship until completing the eighth grade, provided that the child continues to meet all other eligibility requirements.

              (ii)  In calculating the amount of the partial scholarship, the board shall make a pro rata reduction in the child's opportunity scholarship award based upon the child's household income.

     (7)  Penalties.  Any person who fraudulently submits an opportunity or local scholarship application or who knowingly falsifies material information on an opportunity or local scholarship application shall be subject to the following penalties:

          (a)  Imposition by the board of a civil penalty of up to One Thousand Dollars ($1,000.00); and

          (b)  Disqualification from future participation in the Opportunity Scholarship Program.

     (8)  Residence in more than one (1) school district within a school year.  Where an opportunity scholarship recipient resides within more than one (1) school district during a school year, the amount of the opportunity scholarship shall be charged against each resident school district on a pro rata basis.

     SECTION 8.  Guidelines.  (1)  Requirements.  Within thirty (30) days of the effective date of this act, the board shall establish guidelines that provide the following:

          (a)  Forms to apply for opportunity and local scholarships, including application and approval processes and deadlines for application and notification.

          (b)  Procedures to verify the accuracy of the information provided in an opportunity or local scholarship application.

          (c)  Procedures for school district, school and parent notification of opportunity or local scholarship awards.

          (d)  Procedures for administration of the opportunity and local scholarship programs.

          (e)  Confirmation of school enrollment by opportunity scholarship recipients.

          (f)  Procedures for making payment of opportunity scholarship awards, including policies and procedures to minimize the likelihood of fraud or misuse of opportunity scholarship funds.  For an opportunity scholarship recipient enrolled in a participating nonpublic school, the procedures shall include restrictive endorsement of opportunity scholarship award checks to the participating nonpublic school in which the opportunity scholarship recipient is enrolled.

          (g)  Procedures for participating nonpublic schools to pay pro rata refunds of opportunity scholarships to the board when an opportunity scholarship recipient withdraws from a participating nonpublic school during the school year for which the opportunity scholarship was paid.

          (h)  Development and distribution of public information concerning the opportunity and local scholarship and interdistrict enrollment programs.

          (i)  Procedures to determine the eligibility of homeless students for opportunity scholarships under this section.

          (j)  Deadline dates for actions required to be taken by the board, the department, school districts, participating nonpublic schools and parents under this section.

          (k)  Such other procedures as are necessary to fully implement the opportunity and local scholarship and interdistrict enrollment programs.

          (l)  A list of at least eight (8) nationally normed standardized achievement tests from which a participating nonpublic school may select a test to be administered pursuant to Section 6 of this act.  The initial list developed by the board shall, at a minimum, include the following:  California Achievement Test, Comprehensive Testing Program (CTPIV), Iowa Test of Basic Skills, Metropolitan Achievement Test, Peabody Achievement Individual Test Revised Version, Stanford Achievement Test, Terra Nova and Woodcock Johnson Revised Tests of Achievement III.

     (2)  Publication.  The guidelines shall be published as a statement of policy.  The board shall post the guidelines on the department's publicly accessible Internet website.

     (3)  State Board of Education.  Notwithstanding any other provision of law to the contrary, the programs, procedures and guidelines authorized by this section shall not be subject to review, regulation or approval by the State Board of Education.

     SECTION 9.  Reduction in amount of school aid.  Notwithstanding any other provision of law to the contrary, beginning in the second consecutive school year of enrollment in a nonresident public school or a participating nonpublic school by an opportunity scholarship recipient who was enrolled in the recipient's resident school district or in a charter school when the recipient first received an opportunity scholarship under this act, the amount of Mississippi Adequate Education Program funding paid by the department to the resident school district shall be reduced by an amount equal to the state's share of the school district's total revenue per average daily attendance.

     SECTION 10.  Education Opportunity Board.  (1)  Establishment.  An independent board to be known as the Education Opportunity Board is established to be administratively located within the department.  The board shall consist of three (3) members appointed by the Governor with the advice and consent of the Senate.

     (2)  Terms of members.  Members of the board shall serve a term of four (4) years.  Vacancies shall be filled for an unexpired term in the same manner as original appointments.  Members shall continue to serve after the expiration of their term until the Governor appoints a replacement who is confirmed by the Senate.  All members of the board must be residents of this state.

     (3)  Chairperson.  The Governor shall annually select a chairperson from among the membership of the board.

     (4)  Meetings.  Meetings shall be held at the call of the chairperson or upon request in writing of a majority of the board.  A majority shall constitute a quorum and a majority of such quorum shall have the authority to act upon any matter properly before the board unless otherwise specified in this act.

     (5)  Compensation prohibited.  Members of the board shall receive no compensation for their services but shall be reimbursed for their actual and necessary expenses incurred in the performance of their official board duties.

     (6)  Executive director and staff.  (a)  There shall be an executive director of the board who shall serve as the executive officer and secretary of the board.  The board shall employ and fix the reasonable compensation of the executive director.

          (b)  The executive director, with approval of the board, may employ additional professional and clerical personnel as may be necessary to carry out the duties and responsibilities of the board.

          (c)  The department shall provide adequate funding, space and equipment to facilitate the activities of the board.

     (7)  Legal advice and assistance.  The Attorney General shall provide such legal advice and assistance as the board may require.

     (8)  Powers and duties.  The board shall have the following powers and duties:

          (a)  Establish guidelines for the administration of the opportunity and local scholarship programs as required under this act.

          (b)  Administer the opportunity and local scholarship application and approval processes.

          (c)  Develop the opportunity and local scholarship application form and any other forms necessary to administer the opportunity and local scholarship programs, including the notice required to be provided by school districts under Section 4 of this act.

          (d)  Review and verify the income and residence of opportunity and local scholarship applicants.

          (e)  Announce the award of opportunity and local scholarships for the following school year under Sections 5 and 6 of this act.

          (f)  Confirm the enrollment of opportunity scholarship recipients in nonresident public schools and participating nonpublic schools and allocate opportunity scholarship funds to opportunity scholarship recipients.

          (g)  Make payment of opportunity scholarship awards as provided in Sections 5 and 6 of this act.

          (h)  Notify school districts that elect to create a local scholarship when payment must be made.

          (i)  Beginning after the first school year of implementation of the Opportunity Scholarship Program, prepare a report to be submitted to the Governor and the Legislature by December 1 of each year, made available to the parents of opportunity scholarship recipients and placed on the department's publicly accessible Internet website that includes at least the following information for the prior school year:

              (i)  The total number of opportunity scholarships requested.

              (ii)  The total number and total dollar amount of opportunity scholarships awarded, in total and disaggregated by:

                   1.  Whether the opportunity scholarship recipient attends a nonresident public school or a participating nonpublic school.

                   2.  Grade level of the opportunity scholarship recipient.

                   3.  Whether the opportunity scholarship recipient resides in a school district with at least one (1) persistently lowest achieving school.

              (iii)  The administrative costs of the Opportunity Scholarship Program.

              (iv)  A listing of nonresident public schools to which opportunity scholarship funds were disbursed on behalf of opportunity scholarship recipients and the amount disbursed to each nonresident public school.

              (v)  A listing of participating nonpublic schools in which opportunity scholarship recipients enrolled and the number of opportunity scholarship recipients who enrolled in each participating nonpublic school.

              (vi)  The total number and total dollar amount of local scholarships awarded, disaggregated by the resident school districts that made the local scholarship awards.

          (j)  For the 2015-2016 school year and each school year thereafter, administer and announce the award of public school choice demonstration grants to eligible school districts as provided under Section 12 of this act, and annually redistribute any remaining funds from the public school choice demonstration grants program to the middle-income scholarship program.

          (k)  For the 2015-2016 school year and each school year thereafter, administer the middle-income scholarship program.

          (l)  Study.  Following the 2015-2016 school year, the board shall conduct a study of the effectiveness of the Opportunity Scholarship Program and shall deliver a written report of its findings, including any recommendations for changes to the program, to the Governor, the Chairman of the Education Committee of the Senate and the Chairman of the Education Committee of the House of Representatives by December 31, 2016.

     SECTION 11.  Optional local tuition grant program.  A school district may, out of funds received from the state for educational purposes, establish a program of tuition grants to provide for the education of resident students who wish to attend a nonresident public school or a participating nonpublic school on a tuition basis.  A student who receives a tuition grant under this section shall be included in the average daily attendance of the student's resident school district for the purpose of providing adequate education funding and special education funding.

     SECTION 12.  Public school choice demonstration grant program.  (1)  Establishment.  A school district may, out of funds received by the board under Section 7 of this act and available state and local funds, establish a program of tuition grants to provide for the education of resident students who wish to attend a nonresident public school.

     (2)  Limit.  No grant award issued by the board to a school district under this section shall exceed Five Hundred Thousand Dollars ($500,000.00).

     (3)  Procedure.  Grant applications shall only be received, reviewed and allocated by the board during an annual two-week grant review process to begin on July 1 and end on July 15 of each calendar year.

     (4)  Eligibility.  To be eligible for grants under this program, the school district shall:

          (a)  Submit an application to the board at a date to be determined by the board requesting a public school choice demonstration grant.

          (b)  Submit a statement of the amount of the grant sought, including the estimated number of tuition grants to be distributed.

          (c)  Demonstrate a commitment of funds received from both local sources and the state for educational purposes of at least Three Dollars ($3.00) for every One Dollar ($1.00) of grant funds issued under Section 7 of this act.

          (d)  Meet any other requirements as set by the board.

     (5)  Average daily attendance.  A student who receives a tuition grant under this section shall be included in the average daily attendance of the student's resident school district for the purpose of providing adequate education funding and special education funding.

     SECTION 13.  Middle-income scholarship program.  (1)  Establishment.  Beginning with the 2014-2015 school year, the board shall establish a middle-income scholarship program to provide scholarships to help middle-income children in this state pay tuition to attend a nonresident public school or participating nonpublic school.  The board shall make annual middle-income scholarship awards on a pro rata basis from the funding provided under Section 7 of this act.

     (2)  Notice.  (a)  By a date determined by the board, each school district in this state shall provide all residents of the school district with notice of the following:

              (i)  A description of the middle-income scholarship program.

              (ii)  Instructions for applying for a middle-income scholarship.

              (iii)  Notice that a parent must contact directly the nonresident public school or participating nonpublic school in which the parent's child seeks to enroll for application instructions.

          (b)  The school district shall provide the notice to all residents of the school district by notice posted on the school district's publicly accessible Internet website.  The notice shall be in a form provided by the board.

     (3)  Regulations.  In promulgating regulations for the administration of the middle-income scholarship, the board shall develop application and enrollment processes and procedures substantively similar to Sections 5 and 6 of this act.

     (4)  Limitation.  (a)  No nonresident public school or participating nonpublic school may charge a middle-income scholarship recipient a higher tuition rate than the rate the nonresident public school or participating nonpublic school would have charged to a student who had not received a middle-income scholarship.

          (b)  The combined amount of the middle-income scholarship award and any additional financial assistance provided by the participating nonpublic school shall not exceed the tuition rate for the participating nonpublic school.

     (5)  Applicability.  The provisions of Sections 5 and 6 of this act shall apply to the middle-income scholarship program established under this section.

     SECTION 14.  Educational Improvement Tax Credit (EITC).  (1)  Definitions.  The following words and phrases when used in this section shall have the meanings given to them in this section unless the context clearly indicates otherwise:

          (a)  "Business firm" means an entity authorized to do business in this state and subject to taxes imposed under the Mississippi Income Tax Law, Section 27-7-1 et seq.,  The term includes a pass-through entity.  For purposes of this section, a business firm shall be included in one (1) of the following groups:

              (i)  Group 1 includes any business firm that is either entering the second year of a two-year commitment or applying for tax credits for a contribution to an educational improvement organization that is also a school district foundation, public school foundation or charter school foundation.

              (ii)  Group 2 includes any business firm that is renewing a two-year commitment that was fulfilled in the most recent fiscal year or is applying for tax credits for a contribution to a prekindergarten scholarship organization in the same amount that it had contributed in the most recent fiscal year.

              (iii)  Group 3 includes any business firm other than a business firm in Group 1 or Group 2.

          (b)  "Contribution" means a donation of cash, personal property or services, the value of which is the net cost of the donation to the donor or the pro rata hourly wage, including benefits, of the individual performing the services.

          (c)  "Authority" means the Mississippi Development Authority.

          (d)  "Educational improvement organization" means a nonprofit entity which:

              (i)  Is exempt from federal taxation under Section 501(c)(3) of the Internal Revenue Code of 1986 (Public Law 99-514, 26 USC Section 1 et seq.); and

              (ii)  Contributes at least eighty percent (80%) of its annual receipts as grants to a public school for innovative educational programs.

     For purposes of this definition, a nonprofit entity "contributes" its annual cash receipts when it expends or otherwise irrevocably encumbers those funds for expenditure during the then current fiscal year of the nonprofit entity or during the next succeeding fiscal year of the nonprofit entity.  A "nonprofit entity" includes a school district foundation, public school foundation or charter school foundation.

          (e)  "Eligible prekindergarten student" means a student, including an eligible student with a disability, who is enrolled in a prekindergarten program and is a member of a household with a maximum annual household income as increased by the applicable income allowance.

          (f)  "Eligible student" means a school-age student, including an eligible student with a disability, who is enrolled in a school and is a member of a household with a maximum annual household income as increased by the applicable income allowance.

          (g)  "Eligible student with a disability" means a prekindergarten student or a school-age student who meets all of the following:

              (i)  Is either enrolled in a special education school or has otherwise been identified, in accordance with applicable state and federal law relating to special education services and programs as a "child with a disability," as defined in 34 CFR Section 300.8 (relating to a child with a disability).

              (ii)  Needs special education and related services.

              (iii)  Is enrolled in a prekindergarten program or in a school.

              (iv)  Is a member of a household with a household income of not more than the maximum annual household income.

          (h)  "Household" means an individual living alone or with the following:  a spouse, parent and their unemancipated minor children, other unemancipated minor children who are related by blood or marriage, or other adults or unemancipated minor children living in the household who are dependent upon the individual.

          (i)  "Household income" means all monies or property received of whatever nature and from whatever source derived.  The term does not include the following:

              (i)  Periodic payments for sickness and disability other than regular wages received during a period of sickness or disability.

              (ii)  Disability, retirement or other payments arising under workers' compensation acts, occupational disease acts, and similar legislation by any government.

              (iii)  Payments commonly recognized as old-age or retirement benefits paid to persons retired from service after reaching a specific age or after a stated period of employment.

              (iv)  Payments commonly known as public assistance or unemployment compensation payments by a governmental agency.

              (v)  Payments to reimburse actual expenses.

              (vi)  Payments made by employers or labor unions for programs covering hospitalization, sickness, disability or death, supplemental unemployment benefits, strike benefits, social security and retirement.

              (vii)  Compensation received by United States servicemen serving in a combat zone.

          (j)  "Income allowance" means:

              (i)  Subject to subparagraph (ii) of this paragraph, the amount of:

                   1.  Before July 1, 2013, Ten Thousand Dollars ($10,000.00) for each eligible student, eligible prekindergarten student, and dependent member of a household.

                   2.  After June 30, 2014, Twelve Thousand Dollars ($12,000.00) for each eligible student, eligible prekindergarten student, and dependent member of a household.

              (ii)  Beginning July 1, 2015, the Mississippi Development Authority shall annually adjust the income allowance amounts under subparagraph (i) of this paragraph to reflect any upward changes in the Consumer Price Index for all consumers for the Mississippi area in the preceding twelve (12) months and shall immediately submit the adjusted amounts to the Secretary of State for publication as a notice.

          (k)  "Innovative educational program" means an advanced academic or similar program that is not part of the regular academic program of a public school but that enhances the curriculum or academic program of the public school or provides prekindergarten programs to public school students.

          (l)  "Maximum annual household income" means:

              (i)  Except as stated in subparagraph (ii) of this paragraph and subject to subparagraph (iii) of this paragraph, the following:

                   1.  Before July 1, 2012, not more than Fifty Thousand Dollars ($50,000.00).

                   2.  After June 30, 2012, not more than Sixty Thousand Dollars ($60,000.00).

              (ii)  With respect to an eligible student with a disability, as calculated by multiplying the sum of:

                   1.  The applicable amount under subparagraph (i) of this paragraph; and

                   2.  The applicable income allowance; by

                   3.  The applicable support level factor according to the following table:

          Support Level                Support Level Factor

              1                            1.50

              2                            2.993

              (iii)  Beginning July 1, 2013, the Mississippi Development Authority shall annually adjust the income amounts under subparagraphs (i) and (ii) of this paragraph to reflect any upward changes in the Consumer Price Index for all consumers for the Mississippi area in the preceding twelve (12) months and shall immediately submit the adjusted amounts to the Secretary of State for publication as a notice.

          (m)  "Pass-through entity" means a partnership or a single-member limited liability company treated as a disregarded entity for federal income tax purposes or a Mississippi S Corporation as defined in Section 27-8-1.

          (n)  "Prekindergarten program" means a program of instruction for three-year-old or four-year-old students that utilizes a curriculum aligned with the curriculum of the school with which it is affiliated and that provides:

              (i)  A minimum of two (2) hours of instructional and developmental activities per day at least sixty (60) days per school year; or

              (ii)  A minimum of two (2) hours of instructional and developmental activities per day at least twenty (20) days over the summer recess.

          (o)  "Prekindergarten scholarship organization" means a nonprofit entity that:

              (i)  Either is exempt from federal taxation under Section 501(c)(3) of the Internal Revenue Code of 1986 or is operated as a separate segregated fund by a scholarship organization that has been qualified under this section.

              (ii)  Contributes at least eighty percent (80%) of its annual cash receipts to a prekindergarten scholarship program by expending or otherwise irrevocably encumbering those funds for distribution during the then current fiscal year of the organization or during the next succeeding fiscal year of the organization.

          (p)  "Prekindergarten scholarship program" means a program to provide tuition to eligible prekindergarten students to attend a prekindergarten program operated by or in conjunction with a school located in this state and that includes an application and review process for the purpose of making awards to eligible prekindergarten students and awards scholarships to eligible prekindergarten students without limiting availability to only students of one (1) school.

          (q)  "Scholarship" means an award under a scholarship program.

          (r)  "Scholarship organization" means a nonprofit entity that:

              (i)  Is exempt from federal taxation under Section 501(c)(3) of the Internal Revenue Code of 1986 (Public Law 99-514, 26 USC Section 1 et seq.); and

              (ii)  Contributes at least eighty percent (80%) of its annual cash receipts to a scholarship program.  For purposes of this definition, a nonprofit entity "contributes" its annual cash receipts to a scholarship program when it expends or otherwise irrevocably encumbers those funds for distribution during the then current fiscal year of the nonprofit entity or during the next succeeding fiscal year of the nonprofit entity.

          (s)  "Scholarship program" means a program to provide tuition to eligible students to attend a school located in this state.  A scholarship program must include an application and review process for the purpose of making awards to eligible students.  The award of scholarships to eligible students shall be made without limiting availability to only students of one (1) school.

          (t)  "School" means an elementary school or secondary school at which the compulsory attendance requirements of the state may be met or a public or nonpublic prekindergarten.

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

          (v)  "Special education school" means a school or program within a school that is designated specifically and exclusively for students with any of the disabilities listed in 34 CFR Section 300.8 (relating to a child with a disability) and meets one (1) of the following:

              (i)  Is licensed;

              (ii)  Is accredited by an accrediting association approved by the State Board of Education;

              (iii)  Is a school for the blind or deaf receiving state appropriations; or

              (iv)  Is operated by or under the authority of a bona fide religious institution or by the state or any political subdivision thereof.

          (w)  "Support level" means the level of support needed by an eligible student with a disability, as stated in the following:

              (i)  Support level 1.  The student is not enrolled in a special education school.

              (ii)  Support level 2.  The student is enrolled in a special education school.

          (x)  "Tax credit" means the educational improvement tax credit established under this section.

     SECTION 15.  Qualification and application.  (1)  Establishment.  An educational improvement tax credit program is established to enhance the educational opportunities available to all students in this state.

     (2)  Information.  In order to qualify under this section, a scholarship organization, a prekindergarten scholarship organization, or an educational improvement organization must submit information to the Mississippi Development Authority that enables the authority to confirm that the organization is exempt from taxation under Section 501(c)(3) of the Internal Revenue Code of 1986.

     (3)  Scholarship organizations and prekindergarten scholarship organizations.  A scholarship organization or prekindergarten scholarship organization must certify to the authority that the organization is eligible to participate in the program established under this section and must agree to annually report the following information to the authority by September 1 of each year:

          (a)  (i)  The number of scholarships awarded during the immediately preceding school year to eligible prekindergarten students.

              (ii)  The total and average amounts of scholarships awarded during the immediately preceding school year to eligible prekindergarten students.

              (iii)  The number of scholarships awarded during the immediately preceding school year to eligible students in Kindergarten through Grade 8.

              (iv)  The total and average amounts of scholarships awarded during the immediately preceding school year to eligible students in Kindergarten through Grade 8.

              (v)  The number of scholarships awarded during the immediately preceding school year to eligible students in Grades 9 through 12.

              (vi)  The total and average amounts of scholarships awarded during the immediately preceding school year to eligible students in Grades 9 through 12.

              (vii)  Where the scholarship organization or prekindergarten scholarship organization collects information on a county-by-county basis, the total number and the total dollar amount of scholarships awarded during the immediately preceding school year to residents of each county in which the scholarship organization or prekindergarten scholarship organization awarded scholarships.

          (b)  The information required under paragraph (a) of this subsection shall be submitted on a form provided by the authority.  No later than May 1 of each year, the authority shall annually distribute such sample forms, together with the forms on which the reports are required to be made, to each listed scholarship organization and prekindergarten scholarship organization.

          (c)  The authority may not require any other information to be provided by scholarship organizations or prekindergarten scholarship organizations, except as expressly authorized in this section.

     (4)  Educational improvement organization.  (a)  An application submitted by an educational improvement organization must describe its proposed innovative educational program or programs in a form prescribed by the authority.  In prescribing the form, the authority shall consult with the Department of Education as necessary.  The authority shall review and approve or disapprove the application.  In order to be eligible to participate in the program established under this section, an educational improvement organization must agree to annually report the following information to the authority by September 1 of each year:

              (i)  The name of the innovative educational program or programs and the total amount of the grant or grants made to those programs during the immediately preceding school year.

              (ii)  A description of how each grant was utilized during the immediately preceding school year and a description of any demonstrated or expected innovative educational improvements.

              (iii)  The names of the public schools and school districts where innovative educational programs that received grants during the immediately preceding school year were implemented.

              (iv)  Where the educational improvement organization collects information on a county-by-county basis, the total number and the total dollar amount of grants made during the immediately preceding school year for programs at public schools in each county in which the educational improvement organization made grants.

          (b)  The information required under paragraph (a) of this subsection shall be submitted on a form provided by the authority.  No later than May 1 of each year, the authority shall annually distribute such sample forms, together with the forms on which the reports are required to be made, to each listed educational improvement organization.

          (c)  The authority may not require any other information to be provided by educational improvement organizations, except as expressly authorized in this section.

     (5)  Notification.  The authority shall notify the scholarship organization, prekindergarten scholarship organization or educational improvement organization that the organization meets the requirements of this section for that fiscal year no later than sixty (60) days after the organization has submitted the information required under this section.

     (6)  Publication.  The authority shall annually publish a list of each scholarship organization, prekindergarten scholarship organization, or educational improvement organization qualified under this section.  The list shall also be posted and updated as necessary on the publicly accessible Internet website of the authority.

     SECTION 16.  Application.  (1)  Scholarship organization or prekindergarten scholarship organization.  In order to receive a tax credit, a business firm shall apply to the authority.  A business firm shall receive a tax credit if the scholarship organization or prekindergarten scholarship organization that receives the contribution appears on the list established under Section 15 of this act.

     (2)  Educational improvement organization.  In order to receive a tax credit, a business firm shall apply to the authority.  A business firm shall receive a tax credit if the authority has approved the program provided by the educational improvement organization that receives the contribution.

     (3)  Contributions.  A contribution by a business firm to a scholarship organization, prekindergarten scholarship organization, or educational improvement organization shall be made no later than sixty (60) days following the approval of an application under subsection (1) or (2) of this section.

     SECTION 17.  Tax credit.  (1)  Scholarship or educational improvement organizations.  In accordance with this act, the Mississippi Department of Revenue shall grant a tax credit against any income tax due to a business firm providing proof of a contribution to a scholarship organization or educational improvement organization in the taxable year in which the contribution is made which shall not exceed seventy-five percent (75%) of the total amount contributed during the taxable year by the business firm.  The tax credit shall not exceed Three Hundred Thousand Dollars ($300,000.00) annually per business firm for contributions made to scholarship organizations or educational improvement organizations.

     (2)  Additional amount.  The Mississippi Department of Revenue shall grant a tax credit of up to ninety percent (90%) of the total amount contributed during the taxable year if the business firm provides a written commitment to provide the scholarship organization or educational improvement organization with the same amount of contribution for two (2) consecutive tax years.  The business firm must provide the written commitment under this subsection to the authority at the time of application.

     (3)  Prekindergarten scholarship organizations.  In accordance with this act, the Mississippi Department of Revenue shall grant a tax credit against any income tax due to a business firm providing proof of a contribution to a prekindergarten scholarship organization in the taxable year in which the contribution is made which shall be equal to one hundred percent (100%) of the first Ten Thousand Dollars ($10,000.00) contributed during the taxable year by the business firm, and which shall not exceed ninety percent (90%) of the remaining amount contributed during the taxable year by the business firm.  The tax credit shall not exceed One Hundred Fifty Thousand Dollars ($150,000.00) annually per business firm for contributions made to prekindergarten scholarship organizations.

     (4)  Combination of tax credits.  A business firm may receive tax credits from the Department of Revenue in any tax year for any combination of contributions under subsection (1), (2) or (3) of this section.  In no case may a business firm receive tax credits in any tax year in excess of Three Hundred Thousand Dollars ($300,000.00) for contributions under subsections (1) and (2) of this section.  In no case shall a business firm receive tax credits in any tax year in excess of One Hundred Fifty Thousand Dollars ($150,000.00) for contributions under subsection (3) of this section.

     (5)  Pass-through entity.  (a)  If a pass-through entity does not intend to use all approved tax credits under this section, it may elect in writing to transfer all or a portion of the tax credit to shareholders, members or partners in proportion to the share of the entity's distributive income to which the shareholder, member or partner is entitled for use in the taxable year in which the contribution is made or in the taxable year immediately following the year in which the contribution is made.  The election shall designate the year in which the transferred tax credits are to be used and shall be made according to procedures established by the Department of Revenue.

          (b)  A pass-through entity and a shareholder, member or partner of a pass-through entity shall not claim the tax credit under this section for the same contribution.

          (c)  The shareholder, member or partner may not carryforward, carryback, obtain a refund of, or sell or assign the tax credit.

          (d)  The shareholder, member or partner may claim the credit on a joint return, but the tax credit may not exceed the separate income of that shareholder, member or partner.

     (6)  Restriction on applicability of credits.  No tax credits shall be applied against any tax withheld by an employer from an employee.

     (7)  Time of application for credits.  (a)  The authority may accept applications beginning on May 15 from business firms for tax credits available during a fiscal year that is to begin on July 1.

          (b)  If, on July 1 of a fiscal year, applications for tax credits available during the fiscal year exceed the total aggregate amount of tax credits available for the fiscal year, the authority shall approve applications for tax credits on the following basis, subject to the provisions of this section:

              (i)  Group 1 firms whose applications were received by July 1 shall be accorded first priority in the approval of tax credit applications.  If tax credits applied for by Group 1 firms exceed the total aggregate amount of tax credits available for the program under Section 18 of this act, the authority shall approve on a pro rata basis the applications of all Group 1 firms that applied by July 1, and the applications of Group 2 and Group 3 firms shall be denied.  Approval of a reduced tax credit under this subparagraph shall not disqualify a Group 1 firm from receiving a ninety percent (90%) tax credit under subsection (2) of this section even if the amount of tax credit approved would require the Group 1 firm to make a lower scholarship contribution in the second year of a two-year commitment.

              (ii)  If tax credits remain available after credits have been awarded under subparagraph (i) of this paragraph, Group 2 firms whose applications were received by July 1 shall be accorded priority in the approval of applications for the remaining tax credits.  If the sum of the tax credits approved under subparagraph (i) of this paragraph and the credits applied for by Group 2 firms exceeds the total aggregate amount of tax credits available for the program under Section 18 of this act, the authority shall approve on a pro rata basis the applications for the remaining tax credits submitted by all Group 2 firms that applied by July 1, and the applications of Group 3 firms shall be denied.

              (iii)  If tax credits remain available on July 1 after credits have been awarded under subparagraphs (i) and (ii) of this paragraph, applications of Group 3 firms shall be approved, on a pro rata basis within that group if necessary.  Thereafter, the authority shall approve the applications of all business firms on a daily basis.  If, on any day after July 1, the cumulative sum of the tax credits approved and the tax credits applied for on that day exceeds the total aggregate amount of tax credits available for the program under Section 18 of this act the authority shall approve on a pro rata basis the applications received on that day.

     SECTION 18.  Limitations.  (1)  Amount.  (a)  For the fiscal years 2012-2013, 2013-2014 and 2014-2015, the total aggregate amount of all tax credits approved for scholarship organizations and educational improvement organizations shall not exceed Ninety-two Million Dollars ($92,000,000.00) in a fiscal year.  No less than seventy-five percent (75%) of the total aggregate amount of all tax credits approved shall be used to provide tax credits for contributions from business firms to scholarship organizations.  No less than twenty-five (25%) of the total aggregate amount of all tax credits approved shall be used to provide tax credits for contributions from business firms to educational improvement organizations.

              (i)  From the tax credits for contributions by business firms to educational improvement organizations, twenty percent (20%) of the available amount shall initially be set aside for contributions by business firms to educational improvement organizations that are also school district foundations, public school foundations, or charter school foundations and shall be distributed in accordance with Section 17 of this act.

              (ii)  tax credits remaining from the amount set aside in subparagraph (i) of this paragraph after July 1 of each year shall be made available to business firms for contributions to any educational improvement organization and shall be distributed in accordance with Section 17 of this act.

          (b)  (i)  Subject to adjustment under subparagraph (ii) of this paragraph, in the fiscal year 2015-2016 and each fiscal year thereafter, the total aggregate amount of all tax credits available shall equal the total aggregate amount of all tax credits available in the prior fiscal year.

              (ii)  Beginning in the fiscal year 2015-2016, in any fiscal year in which the total aggregate amount of all tax credits approved for the prior fiscal year is equal to or greater than ninety percent (90%) of the total aggregate amount of all tax credits available for the prior fiscal year, the total aggregate amount of all tax credits available shall increase by five percent (5%).  The authority shall publish on its Internet website the total aggregate amount of all tax credits available when the amount is increased under this paragraph.

          (c)  For the fiscal years 2012-2013, 2013-2014 and 2014-2015, the total aggregate amount of all tax credits approved for contributions from business firms to prekindergarten scholarship programs shall not exceed Eight Million Dollars ($8,000,000.00) in a fiscal year.

          (d)  (i)  Subject to adjustment in subparagraph (ii) of this paragraph, in the fiscal year 2015-2016 and each fiscal year thereafter, the total aggregate amount of all tax credits available to prekindergarten scholarship programs shall equal the total aggregate amount of all tax credits available to prekindergarten scholarship programs in the prior fiscal year.

              (ii)  Beginning in the fiscal year 2015-2016, in any fiscal year in which the total aggregate amount of all tax credits available is increased under paragraph (b) of this subsection, the total aggregate amount of all tax credits available for prekindergarten scholarship programs shall increase by five percent (5%).  The authority shall publish on its Internet website the total aggregate amount of all tax credits available for prekindergarten scholarship programs when the amount is increased under this paragraph.

     (2)  Activities.  No tax credit shall be approved for activities that are a part of a business firm's normal course of business.

     (3)  Tax liability.  (a)  Except as provided in paragraph (b) of this subsection, a tax credit granted for any one (1) taxable year may not exceed the tax liability of a business firm.

          (b)  In the case of a credit granted to a pass-through entity which elects to transfer the credit according to Section 17 of this act, a tax credit granted for any one (1) taxable year and transferred to a shareholder, member or partner may not exceed the tax liability of the shareholder, member or partner.

     (4)  Use.  A tax credit not used by the applicant in the taxable year the contribution was made or in the year designated by the shareholder, member or partner to whom the credit was transferred may not be carried forward or carried back and is not refundable or transferable.

     (5)  Nontaxable income.  A scholarship received by an eligible student or eligible prekindergarten student shall not be considered to be taxable income for the purposes of the Mississippi Income Tax Law.

     SECTION 19.  Lists.  The Department of Revenue shall provide to the Legislature, by June 30 of each year, a list of all scholarship organizations, prekindergarten scholarship organizations and educational improvement organizations that receive contributions from business firms granted a tax credit.

     SECTION 20.  Guidelines.  The Mississippi Development Authority, in consultation with the Department of Education, shall develop guidelines to determine the eligibility of an innovative educational program.

     SECTION 21.  Sections 14 through 20 of this act shall be codified in Chapter 7, Title 27, Mississippi Code of 1972.

     SECTION 22.  Section 27-7-17, Mississippi Code of 1972, is amended as follows:

     27-7-17.  In computing taxable income, there shall be allowed as deductions:

     (1)  Business deductions.

          (a)  Business expenses.  All the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including a reasonable allowance for salaries or other compensation for personal services actually rendered; nonreimbursable traveling expenses incident to current employment, including a reasonable amount expended for meals and lodging while away from home in the pursuit of a trade or business; and rentals or other payments required to be made as a condition of the continued use or possession, for purposes of the trade or business of property to which the taxpayer has not taken or is not taking title or in which he had no equity.  Expense incurred in connection with earning and distributing nontaxable income is not an allowable deduction.  Limitations on entertainment expenses shall conform to the provisions of the Internal Revenue Code of 1986.

          (b)  Interest.  All interest paid or accrued during the taxable year on business indebtedness, except interest upon the indebtedness for the purchase of tax-free bonds, or any stocks, the dividends from which are nontaxable under the provisions of this article; provided, however, in the case of securities dealers, interest payments or accruals on loans, the proceeds of which are used to purchase tax-exempt securities, shall be deductible if income from otherwise tax-free securities is reported as income.  Investment interest expense shall be limited to investment income.  Interest expense incurred for the purchase of treasury stock, to pay dividends, or incurred as a result of an undercapitalized affiliated corporation may not be deducted unless an ordinary and necessary business purpose can be established to the satisfaction of the commissioner.  For the purposes of this paragraph, the phrase "interest upon the indebtedness for the purchase of tax-free bonds" applies only to the indebtedness incurred for the purpose of directly purchasing tax-free bonds and does not apply to any other indebtedness incurred in the regular course of the taxpayer's business.  Any corporation, association, organization or other entity taxable under Section 27-7-23(c) shall allocate interest expense as provided in Section 27-7-23(c)(3)(I).

          (c)  Taxes.  Taxes paid or accrued within the taxable year, except state and federal income taxes, excise taxes based on or measured by net income, estate and inheritance taxes, gift taxes, cigar and cigarette taxes, gasoline taxes, and sales and use taxes unless incurred as an item of expense in a trade or business or in the production of taxable income.  In the case of an individual, taxes permitted as an itemized deduction under the provisions of subsection (3)(a) of this section are to be claimed thereunder.

          (d)  Business losses.

              (i)  Losses sustained during the taxable year not compensated for by insurance or otherwise, if incurred in trade or business, or nonbusiness transactions entered into for profit.

              (ii)  Limitations on losses from passive activities and rental real estate shall conform to the provisions of the Internal Revenue Code of 1986.

          (e)  Bad debts.  Losses from debts ascertained to be worthless and charged off during the taxable year, if sustained in the conduct of the regular trade or business of the taxpayer; provided, that such losses shall be allowed only when the taxpayer has reported as income, on the accrual basis, the amount of such debt or account.

          (f)  Depreciation.  A reasonable allowance for exhaustion, wear and tear of property used in the trade or business, or rental property, and depreciation upon buildings based upon their reasonable value as of March 16, 1912, if acquired prior thereto, and upon cost if acquired subsequent to that date.

          (g)  Depletion.  In the case of mines, oil and gas wells, other natural deposits and timber, a reasonable allowance for depletion and for depreciation of improvements, based upon cost, including cost of development, not otherwise deducted, or fair market value as of March 16, 1912, if acquired prior to that date, such allowance to be made upon regulations prescribed by the commissioner, with the approval of the Governor.

          (h)  Contributions or gifts.  Except as otherwise provided in paragraph (p) of this subsection or subsection (3)(a) of this section for individuals, contributions or gifts made by corporations within the taxable year to corporations, organizations, associations or institutions, including Community Chest funds, foundations and trusts created solely and exclusively for religious, charitable, scientific or educational purposes, or for the prevention of cruelty to children or animals, no part of the net earnings of which inure to the benefit of any private stockholder or individual.  This deduction shall be allowed in an amount not to exceed twenty percent (20%) of the net income.  Such contributions or gifts shall be allowable as deductions only if verified under rules and regulations prescribed by the commissioner, with the approval of the Governor.  Contributions made in any form other than cash shall be allowed as a deduction, subject to the limitations herein provided, in an amount equal to the actual market value of the contributions at the time the contribution is actually made and consummated.

          (i)  Reserve funds - insurance companies.  In the case of insurance companies the net additions required by law to be made within the taxable year to reserve funds when such reserve funds are maintained for the purpose of liquidating policies at maturity.

          (j)  Annuity income.  The sums, other than dividends, paid within the taxpayer year on policy or annuity contracts when such income has been included in gross income.

          (k)  Contributions to employee pension plans.  Contributions made by an employer to a plan or a trust forming part of a pension plan, stock bonus plan, disability or death-benefit plan, or profit-sharing plan of such employer for the exclusive benefit of some or all of his, their, or its employees, or their beneficiaries, shall be deductible from his, their, or its income only to the extent that, and for the taxable year in which, the contribution is deductible for federal income tax purposes under the Internal Revenue Code of 1986 and any other provisions of similar purport in the Internal Revenue Laws of the United States, and the rules, regulations, rulings and determinations promulgated thereunder, provided that:

              (i)  The plan or trust be irrevocable.

              (ii)  The plan or trust constitute a part of a pension plan, stock bonus plan, disability or death-benefit plan, or profit-sharing plan for the exclusive benefit of some or all of the employer's employees and/or officers, or their beneficiaries, for the purpose of distributing the corpus and income of the plan or trust to such employees and/or officers, or their beneficiaries.

              (iii)  No part of the corpus or income of the plan or trust can be used for purposes other than for the exclusive benefit of employees and/or officers, or their beneficiaries.

     Contributions to all plans or to all trusts of real or personal property (or real and personal property combined) or to insured plans created under a retirement plan for which provision has been made under the laws of the United States of America, making such contributions deductible from income for federal income tax purposes, shall be deductible only to the same extent under the Income Tax Laws of the State of Mississippi.

          (l)  Net operating loss carrybacks and carryovers.  A net operating loss for any taxable year ending after December 31, 1993, and taxable years thereafter, shall be a net operating loss carryback to each of the three (3) taxable years preceding the taxable year of the loss.  If the net operating loss for any taxable year is not exhausted by carrybacks to the three (3) taxable years preceding the taxable year of the loss, then there shall be a net operating loss carryover to each of the fifteen (15) taxable years following the taxable year of the loss beginning with any taxable year after December 31, 1991.

     For any taxable year ending after December 31, 1997, the period for net operating loss carrybacks and net operating loss carryovers shall be the same as those established by the Internal Revenue Code and the rules, regulations, rulings and determinations promulgated thereunder as in effect at the taxable year end or on December 31, 2000, whichever is earlier.

     A net operating loss for any taxable year ending after December 31, 2001, and taxable years thereafter, shall be a net operating loss carryback to each of the two (2) taxable years preceding the taxable year of the loss.  If the net operating loss for any taxable year is not exhausted by carrybacks to the two (2) taxable years preceding the taxable year of the loss, then there shall be a net operating loss carryover to each of the twenty (20) taxable years following the taxable year of the loss beginning with any taxable year after the taxable year of the loss.

     The term "net operating loss," for the purposes of this paragraph, shall be the excess of the deductions allowed over the gross income; provided, however, the following deductions shall not be allowed in computing same:

              (i)  No net operating loss deduction shall be allowed.

              (ii)  No personal exemption deduction shall be allowed.

              (iii)  Allowable deductions which are not attributable to taxpayer's trade or business shall be allowed only to the extent of the amount of gross income not derived from such trade or business.

     Any taxpayer entitled to a carryback period as provided by this paragraph may elect to relinquish the entire carryback period with respect to a net operating loss for any taxable year ending after December 31, 1991.  The election shall be made in the manner prescribed by the Department of Revenue and shall be made by the due date, including extensions of time, for filing the taxpayer's return for the taxable year of the net operating loss for which the election is to be in effect.  The election, once made for any taxable year, shall be irrevocable for that taxable year.

          (m)  Amortization of pollution or environmental control facilities.  Allowance of deduction.  Every taxpayer, at his election, shall be entitled to a deduction for pollution or environmental control facilities to the same extent as that allowed under the Internal Revenue Code and the rules, regulations, rulings and determinations promulgated thereunder.

          (n)  Dividend distributions - real estate investment trusts.  "Real estate investment trust" (hereinafter referred to as REIT) shall have the meaning ascribed to such term in Section 856 of the federal Internal Revenue Code of 1986, as amended.  A REIT is allowed a dividend distributed deduction if the dividend distributions meet the requirements of Section 857 or are otherwise deductible under Section 858 or 860, federal Internal Revenue Code of 1986, as amended.  In addition:

              (i)  A dividend distributed deduction shall only be allowed for dividends paid by a publicly traded REIT.  A qualified REIT subsidiary shall be allowed a dividend distributed deduction if its owner is a publicly traded REIT.

              (ii)  Income generated from real estate contributed or sold to a REIT by a shareholder or related party shall not give rise to a dividend distributed deduction, unless the shareholder or related party would have received the dividend distributed deduction under this chapter.

              (iii)  A holding corporation receiving a dividend from a REIT shall not be allowed the deduction in Section 27-7-15(4)(t).

              (iv)  Any REIT not allowed the dividend distributed deduction in the federal Internal Revenue Code of 1986, as amended, shall not be allowed a dividend distributed deduction under this chapter.

     The commissioner is authorized to promulgate rules and regulations consistent with the provisions in Section 269 of the federal Internal Revenue Code of 1986, as amended, so as to prevent the evasion or avoidance of state income tax.

          (o)  Contributions to college savings trust fund accounts.  Contributions or payments to a Mississippi Affordable College Savings Program account are deductible as provided under Section 37-155-113.  Payments made under a prepaid tuition contract entered into under the Mississippi Prepaid Affordable College Tuition Program are deductible as provided under Section 37-155-17.

          (p)  Contributions of human pharmaceutical products.  To the extent that a "major supplier" as defined in Section 27-13-13(2)(d) contributes human pharmaceutical products in excess of Two Hundred Fifty Million Dollars ($250,000,000.00) as determined under Section 170 of the Internal Revenue Code, the charitable contribution limitation associated with those donations shall follow the federal limitation but cannot result in the Mississippi net income being reduced below zero.

     (2)  Restrictions on the deductibility of certain intangible expenses and interest expenses with a related member.

          (a)  As used in this subsection (2):

              (i)  "Intangible expenses and costs" include:

                   1.  Expenses, losses and costs for, related to, or in connection directly or indirectly with the direct or indirect acquisition, use, maintenance or management, ownership, sale, exchange or any other disposition of intangible property to the extent such amounts are allowed as deductions or costs in determining taxable income under this chapter;

                   2.  Expenses or losses related to or incurred in connection directly or indirectly with factoring transactions or discounting transactions;

                   3.  Royalty, patent, technical and copyright fees;

                   4.  Licensing fees; and

                   5.  Other similar expenses and costs.

              (ii)  "Intangible property" means patents, patent applications, trade names, trademarks, service marks, copyrights and similar types of intangible assets.

              (iii)  "Interest expenses and cost" means amounts directly or indirectly allowed as deductions for purposes of determining taxable income under this chapter to the extent such interest expenses and costs are directly or indirectly for, related to, or in connection with the direct or indirect acquisition, maintenance, management, ownership, sale, exchange or disposition of intangible property.

              (iv)  "Related member" means an entity or person that, with respect to the taxpayer during all or any portion of the taxable year, is a related entity, a component member as defined in the Internal Revenue Code, or is an entity or a person to or from whom there is attribution of stock ownership in accordance with Section 1563(e) of the Internal Revenue Code.

              (v)  "Related entity" means:

                   1.  A stockholder who is an individual or a member of the stockholder's family, as defined in regulations prescribed by the commissioner, if the stockholder and the members of the stockholder's family own, directly, indirectly, beneficially or constructively, in the aggregate, at least fifty percent (50%) of the value of the taxpayer's outstanding stock;

                   2.  A stockholder, or a stockholder's partnership, limited liability company, estate, trust or corporation, if the stockholder and the stockholder's partnerships, limited liability companies, estates, trusts and corporations own, directly, indirectly, beneficially or constructively, in the aggregate, at least fifty percent (50%) of the value of the taxpayer's outstanding stock;

                   3.  A corporation, or a party related to the corporation in a manner that would require an attribution of stock from the corporation to the party or from the party to the corporation, if the taxpayer owns, directly, indirectly, beneficially or constructively, at least fifty percent (50%) of the value of the corporation's outstanding stock under regulation prescribed by the commissioner;

                   4.  Any entity or person which would be a related member under this section if the taxpayer were considered a corporation for purposes of this section.

          (b)  In computing net income, a taxpayer shall add back otherwise deductible interest expenses and costs and intangible expenses and costs directly or indirectly paid, accrued to or incurred, in connection directly or indirectly with one or more direct or indirect transactions with one or more related members.

          (c)  The adjustments required by this subsection shall not apply to such portion of interest expenses and costs and intangible expenses and costs that the taxpayer can establish meets one (1) of the following:

              (i)  The related member directly or indirectly paid, accrued or incurred such portion to a person during the same income year who is not a related member; or

              (ii)  The transaction giving rise to the interest expenses and costs or intangible expenses and costs between the taxpayer and related member was done primarily for a valid business purpose other than the avoidance of taxes, and the related member is not primarily engaged in the acquisition, use, maintenance or management, ownership, sale, exchange or any other disposition of intangible property.

          (d)  Nothing in this subsection shall require a taxpayer to add to its net income more than once any amount of interest expenses and costs or intangible expenses and costs that the taxpayer pays, accrues or incurs to a related member.

          (e)  The commissioner may prescribe such regulations as necessary or appropriate to carry out the purposes of this subsection, including, but not limited to, clarifying definitions of terms, rules of stock attribution, factoring and discount transactions.

     (3)  Individual nonbusiness deductions.

          (a)  The amount allowable for individual nonbusiness itemized deductions for federal income tax purposes where the individual is eligible to elect, for the taxable year, to itemize deductions on his federal return except the following:

              (i)  The deduction for state income taxes paid or other taxes allowed for federal purposes in lieu of state income taxes paid;

              (ii)  The deduction for gaming losses from gaming establishments;

              (iii)  The deduction for taxes collected by licensed gaming establishments pursuant to Section 27-7-901;

              (iv)  The deduction for taxes collected by gaming establishments pursuant to Section 27-7-903.

          (b)  In lieu of the individual nonbusiness itemized deductions authorized in paragraph (a), for all purposes other than ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, an optional standard deduction of:

              (i)  Three Thousand Four Hundred Dollars ($3,400.00) through calendar year 1997, Four Thousand Two Hundred Dollars ($4,200.00) for the calendar year 1998 and Four Thousand Six Hundred Dollars ($4,600.00) for each calendar year thereafter in the case of married individuals filing a joint or combined return;

              (ii)  One Thousand Seven Hundred Dollars ($1,700.00) through calendar year 1997, Two Thousand One Hundred Dollars ($2,100.00) for the calendar year 1998 and Two Thousand Three Hundred Dollars ($2,300.00) for each calendar year thereafter in the case of married individuals filing separate returns;

              (iii)  Three Thousand Four Hundred Dollars ($3,400.00) in the case of a head of family; or

              (iv)  Two Thousand Three Hundred Dollars ($2,300.00) in the case of an individual who is not married.

     In the case of a husband and wife living together, having separate incomes, and filing combined returns, the standard deduction authorized may be divided in any manner they choose.  In the case of separate returns by a husband and wife, the standard deduction shall not be allowed to either if the taxable income of one of the spouses is determined without regard to the standard deduction.

          (c)  A nonresident individual shall be allowed the same individual nonbusiness deductions as are authorized for resident individuals in paragraph (a) or (b) of this subsection; however, the nonresident individual is entitled only to that proportion of the individual nonbusiness deductions as his net income from sources within the State of Mississippi bears to his total or entire net income from all sources.

          (d)  The following definitions apply throughout this paragraph (d):

              (i)  "Dependent child" means an individual who:

                   1.  Is eligible to receive a free elementary or high school education a Mississippi Public School;

                   2.  Qualifies as a dependent (as defined in Section 152 of the Internal Revenue Code) of the taxpayer; and

                   3.  Is the natural or adopted child or the taxpayer or, if custody of the child has been awarded in a court proceeding to someone other than the mother or father, the court-appointed guardian or custodian of the child.

If the parents of a child are divorced, the term refers to the parent who is eligible to take the exemption for the child under Section 151 of the Internal Revenue Code.

              (ii)  "Education expenditure" refers to any expenditures made in connection with enrollment, attendance, or participation of the taxpayer's dependent child in a private elementary or high school education program in Mississippi.  The term includes tuition, fees, computer software, textbooks, workbooks, curricula, school supplies (other than personal computers), and other written materials used primarily for academic instruction or for academic tutoring, or both.

              (iii)  "Private elementary or high school education program" means:

                   1.  Homeschooling; or

                   2.  Attendance at a private school;

in Mississippi that satisfies a child's obligation under Section 37-13-91 for compulsory attendance at a school.  The term does not include the delivery of instructional service in a home setting to a dependent child who is enrolled in a public school or a charter school.

     This paragraph (d) applies to taxable years beginning after December 31, 2011.

     A taxpayer who makes an unreimbursed education expenditure during the taxpayer's taxable year is entitled to a deduction against the taxpayer's adjusted gross income in the taxable year.

     The amount of the deduction is Five Thousand Dollars ($5,000.00) multiplied by the number of the taxpayer's dependent children for whom the taxpayer made education expenditures in the taxable year.  A husband and wife are entitled to only one (1) deduction under this paragraph (d).

     To receive the deduction provided by this paragraph (d), a taxpayer must claim the deduction on the taxpayer's annual state tax return or returns in the manner prescribed by the Department of Revenue.

     (4)  Nothing in this section shall permit the same item to be deducted more than once, either in fact or in effect.

     SECTION 23.  This act shall take effect and be in force from and after July 1, 2012.