Senate Bill 3092

AN ACT TO PROVIDE AN INCOME OR FRANCHISE TAX CREDIT TO ANY PERSON WHO MAKES CONTRIBUTIONS TO A NONPROFIT EDUCATIONAL ASSISTANCE ORGANIZATION THAT PROVIDES SCHOLARSHIPS FOR LOW-INCOME STUDENTS TO ATTEND QUALIFIED SCHOOLS IN AN AMOUNT EQUAL TO 70% OF THE AMOUNT THE TAXPAYER CONTRIBUTED DURING THE TAXABLE YEAR FOR WHICH THE CREDIT IS BEING CLAIMED; TO PROVIDE THAT THE AMOUNT OF THE TAX CREDIT MAY NOT EXCEED THE TAXPAYER'S STATE TAX LIABILITY FOR THE TAXABLE YEAR IN WHICH THE CREDIT IS CLAIMED; TO PROVIDE THAT ANY UNUSED CREDIT MAY BE CARRIED FORWARD TO ANY OF THE FOUR SUBSEQUENT TAXABLE YEARS; TO PROVIDE THE MINIMUM AMOUNT THAT MAY BE CONTRIBUTED IN ORDER TO RECEIVE THE CREDIT; TO PROVIDE THAT THE CUMULATIVE AMOUNT OF THE TAX CREDIT THAT MAY BE ALLOCATED TO ALL TAXPAYERS IN ANY ONE FISCAL YEAR MAY NOT EXCEED $10,000,000.00; TO REQUIRE THE CHAIRMAN OF THE STATE TAX COMMISSION TO DETERMINE ANNUALLY WHICH ORGANIZATIONS MAY BE CLASSIFIED AS NONPROFIT EDUCATIONAL ASSISTANCE ORGANIZATIONS; TO PROVIDE THE CRITERIA FOR QUALIFICATION AS A NONPROFIT EDUCATIONAL ASSISTANCE ORGANIZATION; TO PROVIDE WHAT SCHOLARSHIP MONEY GRANTED BY NONPROFIT EDUCATIONAL ASSISTANCE ORGANIZATIONS MAY BE UTILIZED TO COVER; TO LIMIT THE AMOUNT OF SUCH SCHOLARSHIPS; TO AUTHORIZE A CERTAIN AMOUNT OF THE QUALIFYING CONTRIBUTIONS TO BE UTILIZED TO ASSIST LOW INCOME STUDENTS WHO ATTEND PUBLIC SCHOOLS TO DEFRAY CERTAIN COSTS; TO AUTHORIZE THE CHAIRMAN OF THE STATE TAX COMMISSION TO ENTER INTO CONTRACTS WITH DESIGNATED NONPROFIT ORGANIZATIONS FOR THE PURPOSE OF ADMINISTERING THE CREDIT; AND FOR RELATED PURPOSES.

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

SECTION 1. (1) As used in this section:

(a) "Administrator" means the administrator of the designated nonprofit oversight organization;

(b) "Designated nonprofit oversight organization" means a charitable organization in this state that is exempt from federal taxation pursuant to the Internal Revenue Code, as amended, designated to certify nonprofit educational assistance organizations, approve applications for the tax credit allowed by this section, and coordinate with the Chairman of the State Tax Commission in administering the tax credit allowed by this section;

(d) "Income eligible student" means elementary or secondary school student whose parents' or guardians' income is no more than one hundred seventy-five percent (175%) of the level that would make the student eligible for a free or reduced price school lunch pursuant to the National School Lunch Act;

(e) "Nonprofit educational assistance organization" means a charitable organization in this state that is exempt from federal taxation pursuant to the Internal Revenue Code, as amended, is certified by the chairman, and that allocates at least ninety percent (90%) of its annual revenue derived from contributions for which credit is claimed pursuant to this section for educational assistance. The term "nonprofit educational assistance organization" does not include an organization that only provides scholarships to students of a particular school;

(f) "Qualified school" means any accredited elementary or secondary school situated in this state which a child may attend to satisfy the requirements;

(g) "Qualified student" means an income eligible student who in the previous school year was enrolled in a public school or who had received a scholarship as a qualified student and is not enrolled in a public school in the year in which the nonprofit educational assistance organization is providing a scholarship to that student. The term shall include all income eligible kindergarten students;

(h) "Qualifying contribution" means a donation of cash, stock, bonds or other marketable securities for purposes of claiming a tax credit pursuant to this section;

(i) "State tax liability" means any liability incurred by a taxpayer pursuant to Chapters 7 and 13, Title 27, Mississippi Code of 1972;

(j) "Taypayer" shall have the meaning ascribed to such term in Section 27-7-3 or a corporation, association or joint stock company subject to the franchise tax imposed by Chapter 13, Title 27, Mississippi Code of 1972;

(2) For all tax years beginning on or after January 1, 2004, any taxpayer who makes contributions to a nonprofit educational assistance organization may claim a credit against the tax imposed pursuant to Chapters 7 and 13, Title 27, Mississippi Code of 1972, in an amount equal to seventy percent (70%) of the amount the taxpayer contributed during the taxable year for which the credit is claimed; however, no taxpayer shall claim a credit pursuant to this section for any contribution made by the taxpayer, or agent of the taxpayer, on behalf of the taxpayer's dependent, or in the case of a business taxpayer, on behalf of a dependent of an agent of the business. Any amount of contribution subtracted from federal adjusted gross income or federal taxable income shall be added back in the determination of Mississippi taxable income before the credit can be claimed.

(3) The amount of the tax credit claimed shall not exceed the amount of the taxpayer's state tax liability for the taxable year for which the credit is claimed. Any unused amount of the credit may be carried forward to any of the four (4) subsequent taxable years. No taxpayer shall claim a credit pursuant to this section unless the amount contributed to a nonprofit educational assistance organization is Two Hundred Dollars ($200.00) or more.

(4) The cumulative amount of tax credits which may be allocated to all taxpayers contributing to a nonprofit educational assistance organization in any one (1) fiscal year shall not exceed Ten Million Dollars ($10,000,000.00). The chairman, with the assistance of the administrator, shall establish a procedure by which, from the beginning of the fiscal year until some point in time later in the fiscal year to be determined by the chairman, the cumulative amount of tax credits are apportioned among all nonprofit educational assistance organizations. To the maximum extent possible, the chairman shall establish the procedure described in this subsection in such a manner so as to ensure that taxpayers can claim all the tax credits possible up to the cumulative amount of tax credits available for the fiscal year. The chairman shall certify to the organizations the amount of eligible tax credits that can be taken by the organizations.

(5) The chairman shall determine, at least annually, which organizations in this state may be classified as nonprofit educational assistance organizations. The chairman may require a charity seeking classification as a nonprofit educational assistance organization to provide any information reasonably necessary to make such a determination. The chairman shall classify an organization as a nonprofit educational assistance organization if the organization qualifies as a nonprofit educational assistance organization as provided in this section.

To qualify as a nonprofit educational assistance organization, the organization shall meet the following conditions:

(a) (i) At least seventy percent (70%) of all qualifying contributions it receives during any given state fiscal year are allocated for the purpose of providing scholarships to any qualified student who attends a qualified school, and the organization gives priority in awarding scholarships to those students who demonstrate the greatest need for such scholarships, as defined by:

(1) Children of inmates;

(2) Children attending a school or residing in a school district that fails to meet a Level III, IV or V accreditation level (priority schools); or

(3) Children residing within the boundaries of schools targeted for improvement under the No Child Left Behind Act of 2001 pursuant to public law 107-110. Scholarship money may be used to cover applicable tuition, transportation, textbooks, supplies and other related educational or extracurricular expenses.

(ii) Any qualifying contributions not required to be allocated in accordance with this paragraph may be used to provide scholarships for income eligible students who attend qualified schools or may be used for the purposes set forth in paragraph (c) of this subsection;

(b) It does not provide any scholarship to any qualified student for a single school year that exceeds Three Thousand Eight Hundred Dollars ($3,800.00), which amount shall annually be increased for inflation based on increases in the Consumer Price Index rounded to the nearest Fifty Dollar ($50.00) increment, except that the nonprofit educational assistance organization may award scholarships to children with disabilities who are age three (3) or older in any amount that is substantially comparable to the amount the state would have paid for such child, and except that scholarships may be awarded in amounts in excess of the limitation if the increased amount of the scholarships is offset by a reduction in the monetary amount of the scholarships provided by the nonprofit educational assistance organization to nonqualifying students. To qualify for a scholarship, children with disabilities are not required to meet the income eligible student definition if the disabled child's parents or guardians have unreimbursed medical expenses in excess of seven and one-half percent (7 1/2%) of federal adjusted gross income;

(c) The organization may allocate up to thirty percent (30%) of any qualifying contributions it receives during any state fiscal year that are not required to be allocated pursuant to paragraphs (a) and (b) of this subsection to directly assist any income eligible student who attends a public school in defraying the costs of private instructional assistance, including any related private educational supplies; for transportation to any public school to the extent that such transportation is not paid for by a school district or the state; for offsetting fees for out-of-school programs; for apprenticeship programs; for scholarship assistance for dropouts to pursue a GED or its equivalent; for grants for public school academic or extracurricular programs; or for income eligible or qualified students to attend a qualified school;

(d) All interest accruing from contributions shall be used for educational assistance; and

(e) All marketing and administrative expenses for the nonprofit educational assistance organization shall be not more than eight percent (8%) of the qualifying contributions it raises.

(6) A nonprofit educational assistance organization shall report annually to the chairman the name of the participating qualified schools.

(7) The chairman, with the assistance of the administrator, shall establish a procedure by which a taxpayer can determine if an organization has been classified as a nonprofit educational assistance organization, and by which taxpayers can claim the tax credit pursuant to this section.

(8) The chairman may certify and enter into a contract with a designated nonprofit organization for the purpose of administering this section. A designated nonprofit organization shall be subject to an audit by the State Tax Commission. To qualify for designation, a nonprofit organization shall:

(a) Have the administrative capability to promote the success of the tax credit allowed by this section by recruiting and coordinating activities with all interested nonprofit educational assistance organizations in this state and certifying those nonprofit educational assistance organizations that meet the criteria set forth in subsection (5) of this section;

(b) Demonstrate the ability to handle large volumes of and amounts of financial transactions and be able to resolve Internal Revenue Service compliance issues;

(c) Review the staff qualifications, evaluate fundraising capabilities and confirm exempt status of the nonprofit educational assistance organizations;

(d) Create a standardized application for use by nonprofit educational assistance organizations;

(e) Produce an annual report for the Legislature;

(f) Complete other duties as required by the chairman; and

(g) The designated nonprofit oversight organization shall receive no more than two percent (2%) of the qualifying contributions for marketing and administrative expenses, or if a designated nonprofit oversight organization is not selected, up to two percent (2%) of the qualifying contributions shall be required by the State Tax Commission for costs it incurs in administering the program.

(9) The State Tax Commission may promulgate rules and regulations for the administration of this section.

SECTION 2. This act shall take effect and be in force from and after January 1, 2004.