STATE OF OKLAHOMA

1st Session of the 53rd Legislature (2011)

HOUSE BILL 2133	By:	Steele

AS INTRODUCED

An act relating to revenue and taxation; creating Educational Improvement Act; creating income tax credits; limiting amount of credits; capping total amount of credits; defining terms; prohibiting refund; requiring educational innovation organizations to submit an application; specifying content of application; authorizing the Oklahoma Tax Commission to consult with certain state agency; providing for review of applications; requiring organizations to submit an annual report; specifying contents of the annual report; directing the Commission to distribute certain forms; prohibiting additional information; creating Educational Improvement Act Fund; providing for deposit of revenues; prescribing procedures; providing for refund claim process; imposing limitation upon payment of claims until specified period; allowing carryover; providing for recapture; requiring promulgation of rules; providing for codification; and providing an effective date.

BE IT ENACTED BY THE PEOPLE OF THE STATE OF OKLAHOMA:
SECTION 1.     NEW LAW     A new section of law to be codified in the Oklahoma Statutes as Section 2357.206 of Title 68, unless there is created a duplication in numbering, reads as follows:
A.  This section shall be known and may be cited as the “Educational Improvement Act”.
B.  1.  For tax years beginning after December 31, 2011, there shall be allowed against the tax imposed by Section 2355 of Title 68 of the Oklahoma Statutes a credit for any taxpayer who makes a contribution to an eligible educational improvement grant organization or educational improvement scholarship organization.  The credit authorized by this paragraph shall be equal to fifty percent (50%) of the total amount of contributions made during a taxable year, not to exceed an amount which is equal to fifty percent (50%) of the total tax liability of the taxpayer for the taxable year in which the credit provided in this paragraph is claimed.
2.  For tax years beginning after December 31, 2011, there shall be allowed against the tax imposed by Section 2355 of Title 68 of the Oklahoma Statutes a credit for any taxpayer who makes a contribution to an eligible educational improvement grant organization or educational improvement scholarship organization and makes a written commitment to contribute the same amount for two (2) additional consecutive years.  The credit authorized by this paragraph shall be equal to seventy-five percent (75%) of the total amount of contributions made during each taxable year, not to exceed an amount which is equal to seventy-five percent (75%) of the total tax liability of the taxpayer for the taxable year in which the credit provided in this paragraph is claimed.  The taxpayer shall provide evidence of the written commitment to the Oklahoma Tax Commission at the time of filing the refund claim.
3.  The total of the credits authorized by this subsection shall not exceed Two Million Five Hundred Thousand Dollars ($2,500,000.00) annually, to be allocated by the Oklahoma Tax Commission on a first-come, first-served basis.
C.  As used in this section:
1.  “Early childhood education programs” means a program provided to children who are at least four (4) years of age but not more than five (5) years of age on or before September 1; 
2.  “Educational improvement grant organization” means an organization which:
a.	is a nonprofit entity exempt from taxation pursuant to the provisions of the Internal Revenue Code, 26 U.S.C., Section 501(c)(3), and
b.	contributes at least eighty percent (80%) of its annual receipts as grants to teachers or public schools for innovative educational programs.  For purposes of this subparagraph, an educational improvement organization contributes it annual cash receipts when it expends or otherwise irrevocably encumbers those funds for expenditure during the then current fiscal year of the organization or during the next succeeding fiscal year of the organization;
3.  “Educational improvement scholarship organization” means an organization which:
a.	is a nonprofit entity exempt from taxation pursuant to the provisions of the Internal Revenue Code, 26 U.S.C., Section 501(c)(3), and 
b.	awards at least eighty percent (80%) of its annual receipts as scholarships to individual eligible students to enroll in or attend an innovative educational program operated by a school or in conjunction with a school located in this state.  The award of scholarships to eligible students shall be made without limiting availability to only students of one school;
4.  “Eligible student” means a student who is lawfully present in the United States and who is a member of a household whose total annual income during the preceding tax year does not exceed an amount equal to the income standard used to qualify for a free or reduced-price school lunch.  Once a student meets the requirements of this paragraph, the student remains eligible regardless of household income until the student graduates high school or reaches twenty-one (21) years of age, whichever occurs first;
5.  “Innovative educational program” means an advanced academic or academic improvement program that is not part of the regular academic program of a school but that enhances the curriculum or academic program of the school, provides private academic instruction or provides early childhood education programs to students; and
6.  "Public school" means public schools as defined in Section 1-106 of Title 70 of the Oklahoma Statutes. 
D.  1.  In order to qualify under this section, an educational improvement grant organization or educational improvement scholarship organization shall submit an application with information to the Oklahoma Tax Commission on a form prescribed by the Commission that:
a.	enables the Commission to confirm that the organization is a nonprofit entity exempt from taxation pursuant to the provisions of the Internal Revenue Code, 26 U.S.C., Section 501(c)(3), and
b.	describes the proposed innovative educational program or programs supported by the organization.  
2.  The Commission shall consult with the State Department of Education as necessary.
3.  The Commission shall review and approve or disapprove the application.  
4.  In order to maintain eligibility under this section, an educational improvement grant organization shall annually report the following information to the Commission by September 1 of each year:
a.	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, 
b.	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, 
c.	the names of the public school and school districts where innovative educational programs that received grants during the immediately preceding school year were implemented, 
d.	where the organization collects information on a county-by-county basis, and 
e.	the total number and total amount of grants made during the immediately preceding school year for innovative educational programs at public school by each county in which the organization made grants. 
5.  In order to maintain eligibility under this section, an educational improvement scholarship organization shall annually report the following information to the Commission by September 1 of each year:
a.	the number of scholarships awarded during the immediately preceding school year to eligible students, 
b.	the total and average amounts of the scholarships awarded during the immediately preceding school year to eligible students, 
c.	the number of scholarships and the total and average amounts of the scholarships awarded during the immediately preceding school year to eligible students in kindergarten through the eighth grade, 
d.	the number of scholarships and the total and average amounts of the scholarships awarded during the immediately preceding school year to eligible students in the ninth grade through twelfth grade, and 
e.	where the organization collects information on a county-by-county basis.
6.  The information required under paragraphs 4 and 5 of this subsection shall be submitted on a form provided by the Commission.  No later than May 1 of each year, the Commission shall annually distribute sample forms together with the forms on which the reports are required to be made to each approved organization. 
7.  The Commission shall not require any other information be provided by an organization, except as expressly authorized in this section.
E.  There is hereby created within the State Treasury a special fund for the Oklahoma Tax Commission to be designated the “Educational Improvement Act Fund”.  The Oklahoma Tax Commission is hereby authorized and directed to withhold a portion of the taxes levied and collected pursuant to Section 2355 of Title 68 of the Oklahoma Statutes for deposit into the fund.  The amount deposited shall be appropriate to pay the claims for the credit provided in subsection B of this section.  All of the amounts deposited in such fund shall be used and expended by the Oklahoma Tax Commission solely for the purpose of payment of the credits authorized by subsection B of this section.  The liability of the State of Oklahoma to make the credit payments under subsection B of this section shall be limited to the balance contained in the fund created by this section.  Provided, no claim for credit may be paid by the Tax Commission before July 1, 2012.
F.  The credit provided in subsection B of this section shall be perfected by a refund claim filed by the taxpayer who shall provide evidence of the contribution satisfactory to the Oklahoma Tax Commission.  The Tax Commission shall provide the necessary forms and instructions to taxpayers electing to make a refund claim as provided herein.
G.  If an individual claims a credit under this section and later has any of the contributions made to an eligible educational improvement grant organization or eligible educational improvement scholarship organization for which the credit was claimed returned, then the individual shall be required to add to the Oklahoma income tax liability of the individual the amount of the credit claimed pursuant to this section the following taxable year.
H.  The Tax Commission shall promulgate rules necessary to implement this section.
SECTION 2.  This act shall become effective January 1, 2012.

53-1-6549	KB	01/20/11