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First Substitute S.B. 69

Senator D. Chris Buttars proposes the following substitute bill:


             1     
TUITION TAX CREDITS

             2     
2002 GENERAL SESSION

             3     
STATE OF UTAH

             4     
Sponsor: D. Chris Buttars

             5      This act modifies Corporate Franchise and Income Taxes and the Individual Income Tax Act
             6      to provide for nonrefundable tax credits for contributions made to a scholarship granting
             7      organization to be used for tuition grants for a qualifying student to attend a private school,
             8      or nonrefundable tax credits for amounts paid for tuition to a private school on behalf of a
             9      qualifying student. The act provides definitions and establishes procedures and
             10      requirements for administering the tax credits. The act establishes duties of scholarship
             11      granting organizations and provides penalties. This act has retrospective operation for
             12      taxable years beginning on or after January 1, 2002.
             13      This act affects sections of Utah Code Annotated 1953 as follows:
             14      ENACTS:
             15          59-7-615, Utah Code Annotated 1953
             16          59-7-616, Utah Code Annotated 1953
             17          59-10-135, Utah Code Annotated 1953
             18          59-10-136, Utah Code Annotated 1953
             19      Be it enacted by the Legislature of the state of Utah:
             20          Section 1. Section 59-7-615 is enacted to read:
             21          59-7-615. Tax credit for contributions to scholarship granting organizations --
             22      Definitions -- Duties of scholarship granting organizations -- Penalties.
             23          (1) As used in this section:
             24          (a) "Parent" means an individual who is a parent as described in Section 59-10-108.1 of
             25      a qualifying student.


             26          (b) (i) "Private school" means an elementary or secondary school within this state that:
             27          (A) provides instruction for one or more grades kindergarten through 12;
             28          (B) is not subject to the control and supervision of the State Board of Education in
             29      accordance with Section 53A-1-401 ; and
             30          (C) satisfies the requirements of Title 53A, Chapter 11, Part 1, Compulsory Education
             31      Requirements.
             32          (ii) "Private school" does not include a home school.
             33          (c) "Qualifying student" means an individual:
             34          (i) who is enrolled at a private school as a full-time student as determined by the private
             35      school;
             36          (ii) who will be under 21 years of age on the last day of the school year as determined by
             37      the private school;
             38          (iii) who meets one or more of the following criteria:
             39          (A) the individual was born on or after September 1, 1996;
             40          (B) the individual was not enrolled at a private school on February 1, 2002; or
             41          (C) the total federal adjusted gross income of all of the individuals who may claim the
             42      individual described in Subsections (1)(c)(i) and (ii) as a dependent on those individuals' federal
             43      individual income tax return is $30,000 or less for the taxable year immediately preceding the
             44      current taxable year; and
             45          (iv) for which the private school described in Subsection (1)(c)(i) has on file a release of
             46      information form.
             47          (d) "Release of information form" means a form developed by a private school that:
             48          (i) states that a parent of a qualifying student consents to the release of the information
             49      contained in the school tuition certificate; and
             50          (ii) is consistent with the requirements of 20 U.S.C. Sec. 1232g, Family Educational
             51      Rights and Privacy Act of 1974.
             52          (e) "Scholarship granting organization" means an organization that:
             53          (i) is exempt from taxation under Section 501(c)(3), Internal Revenue Code;
             54          (ii) subject to Subsection (1)(e)(iii), expends 100% of each contribution for which the
             55      organization issues a written statement in accordance with Subsection (4):
             56          (A) to make tuition grants to qualifying students to attend private schools in this state; and


             57          (B) within a 12-month period after the day on which the organization receives the
             58      contribution; and
             59          (iii) allows a qualifying student receiving a tuition grant from the organization to attend
             60      any private school in this state as determined by a parent of the qualifying student.
             61          (f) Subject to Subsection (6), "school tuition certificate" means a certificate developed by
             62      a private school that:
             63          (i) is issued by the private school to the first taxpayer or scholarship granting organization
             64      that during the calendar year:
             65          (A) makes a:
             66          (I) tuition payment on behalf of a qualifying student in accordance with Section 59-10-135
             67      or Section 59-10-136 ; or
             68          (II) tuition grant to a qualifying student in accordance with Section 59-7-615 or Section
             69      59-7-616 ; and
             70          (B) requests the certificate from the private school; and
             71          (ii) lists the:
             72          (A) name of the qualifying student:
             73          (I) on behalf of whom a tuition payment is made in accordance with Section 59-10-135
             74      or Section 59-10-136 ; or
             75          (II) receiving a tuition grant in accordance with Section 59-7-615 or Section 59-7-616 ;
             76          (B) calendar year for which the school tuition certificate is issued; and
             77          (C) value of the weighted pupil unit on the first day of the calendar year described in
             78      Subsection (1)(f)(ii)(B).
             79          (g) "Value of the weighted pupil unit" means the dollar amount specified in Subsection
             80      53A-17a-103 (1) before multiplying that dollar amount by the number of weighted pupil units for
             81      each school district.
             82          (2) For taxable years beginning on or after January 1, 2002, a taxpayer may claim a
             83      nonrefundable tax credit against the taxes imposed by this chapter as provided in this section for
             84      amounts the taxpayer contributes during a taxable year to a scholarship granting organization.
             85          (3) The tax credit provided for in this section may not be carried forward or carried back.
             86          (4) A scholarship granting organization shall within 30 days after the day on which a
             87      taxpayer seeking to claim a tax credit under this section makes a contribution to the scholarship


             88      granting organization, provide to the taxpayer a written statement:
             89          (a) certifying that the scholarship granting organization is a scholarship granting
             90      organization; and
             91          (b) listing the amount of the contribution.
             92          (5) A scholarship granting organization may make a tuition grant during a calendar year
             93      to a qualifying student from a contribution for which the scholarship granting organization issues
             94      a written statement in accordance with Subsection (4) if the scholarship granting organization
             95      during the calendar year:
             96          (a) does not make tuition grants to that qualifying student the total amount of which exceed
             97      the greater of:
             98          (i) $2,116; or
             99          (ii) the value of the weighted pupil unit on the first day of the calendar year for which the
             100      private school issues the school tuition certificate in accordance with this section; and
             101          (b) obtains from the private school a school tuition certificate listing the name of that
             102      qualifying student.
             103          (6) A private school may not issue more than one school tuition certificate during a
             104      calendar year that lists the name of one qualifying student.
             105          (7) (a) A scholarship granting organization shall pay to the commission a penalty
             106      calculated under Subsection (7)(b) if the scholarship granting organization makes one or more
             107      tuition grants to a qualifying student:
             108          (i) that exceed the total amount described in Subsection (5)(a); or
             109          (ii) without obtaining from the private school a school tuition certificate listing the name
             110      of that qualifying student.
             111          (b) For purposes of Subsection (7)(a), the penalty is an amount equal to the total amount
             112      of tuition grants the scholarship granting organization makes to the qualifying student described
             113      in Subsection (7)(a) during a calendar year from a contribution for which the scholarship granting
             114      organization issues a written statement in accordance with Subsection (4).
             115          (c) The commission shall deposit any penalties the commission collects under this
             116      Subsection (7) into the Uniform School Fund.
             117          (8) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
             118      commission may make rules providing procedures for:


             119          (a) imposing the penalty described in Subsections (7)(a) and (b); or
             120          (b) depositing the penalty described in Subsection (7)(c) into the Uniform School Fund.
             121          Section 3. Section 59-7-616 is enacted to read:
             122          59-7-616. Nonrefundable tuition tax credit -- Definitions.
             123          (1) As used in this section:
             124          (a) "Private school" is as defined in Section 59-7-615 .
             125          (b) "Qualifying student" is as defined in Section 59-7-615 .
             126          (c) "School tuition certificate" is as defined in Section 59-7-615 .
             127          (d) "Value of the weighted pupil unit" is as defined in Section 59-7-615 .
             128          (2) For taxable years beginning on or after January 1, 2002, a taxpayer may claim a
             129      nonrefundable tax credit against the taxes imposed by this chapter as provided in this section for
             130      amounts paid to a private school for tuition:
             131          (a) on behalf of a qualifying student; and
             132          (b) during the taxable year.
             133          (3) Subject to Subsection (4), for a taxable year the amount of tax credit that a taxpayer
             134      may claim under this section for a qualifying student on whose behalf the taxpayer paid tuition in
             135      accordance with Subsection (2) may not exceed the lesser of:
             136          (a) the amount of tuition the taxpayer paid on behalf of the qualifying student during the
             137      taxable year; or
             138          (b) the greater of:
             139          (i) $2,116; or
             140          (ii) the value of the weighted pupil unit on the first day of the calendar year for which the
             141      private school issues the school tuition certificate in accordance with this section.
             142          (4) The tax credit provided for in this section may not be carried forward or carried back.
             143          (5) A taxpayer may claim a tax credit under this section for a taxable year only if the
             144      taxpayer obtains from a private school a school tuition certificate listing the name of the qualifying
             145      student on whose behalf the taxpayer paid tuition in accordance with Subsection (2).
             146          (6) A private school may not issue more than one school tuition certificate during a
             147      calendar year that lists the name of one qualifying student.
             148          Section 4. Section 59-10-135 is enacted to read:
             149          59-10-135. Tax credit for contributions to scholarship granting organizations --


             150      Definitions -- Duties of scholarship granting organizations -- Penalties.
             151          (1) As used in this section:
             152          (a) "Private school" is as defined in Section 59-7-615 .
             153          (b) "Qualifying student" is as defined in Section 59-7-615 .
             154          (c) "Scholarship granting organization" is as defined in Section 59-7-615 .
             155          (d) "School tuition certificate" is as defined in Section 59-7-615 .
             156          (e) "Value of the weighted pupil unit" is as defined in Section 59-7-615 .
             157          (2) For taxable years beginning on or after January 1, 2002, a taxpayer may claim a
             158      nonrefundable tax credit against the taxes imposed by this chapter as provided in this section for
             159      amounts the taxpayer contributes during a taxable year to a scholarship granting organization.
             160          (3) The tax credit provided for in this section may not be carried forward or carried back.
             161          (4) A scholarship granting organization shall within 30 days after the day on which a
             162      taxpayer seeking to claim a tax credit under this section makes a contribution to the scholarship
             163      granting organization, provide to the taxpayer a written statement:
             164          (a) certifying that the scholarship granting organization is a scholarship granting
             165      organization; and
             166          (b) listing the amount of the contribution.
             167          (5) A scholarship granting organization may make a tuition grant during a calendar year
             168      to a qualifying student from a contribution for which the scholarship granting organization issues
             169      a written statement in accordance with Subsection (4) if the scholarship granting organization
             170      during the calendar year:
             171          (a) does not make tuition grants to that qualifying student the total amount of which exceed
             172      the greater of:
             173          (i) $2,116; or
             174          (ii) the value of the weighted pupil unit on the first day of the calendar year for which the
             175      private school issues the school tuition certificate in accordance with this section; and
             176          (b) obtains from the private school a school tuition certificate listing the name of that
             177      qualifying student.
             178          (6) A private school may not issue more than one school tuition certificate during a
             179      calendar year that lists the name of one qualifying student.
             180          (7) (a) A scholarship granting organization shall pay to the commission a penalty


             181      calculated under Subsection (7)(b) if the scholarship granting organization makes one or more
             182      tuition grants to a qualifying student:
             183          (i) that exceed the total amount described in Subsection (5)(a); or
             184          (ii) without obtaining from the private school a school tuition certificate listing the name
             185      of that qualifying student.
             186          (b) For purposes of Subsection (7)(a), the penalty is an amount equal to the total amount
             187      of tuition grants the scholarship granting organization makes to the qualifying student described
             188      in Subsection (7)(a) during a calendar year from a contribution for which the scholarship granting
             189      organization issues a written statement in accordance with Subsection (4).
             190          (c) The commission shall deposit any penalties the commission collects under this
             191      Subsection (7) into the Uniform School Fund.
             192          (8) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
             193      commission may make rules providing procedures for:
             194          (a) imposing the penalty described in Subsections (7)(a) and (b); or
             195          (b) depositing the penalty described in Subsection (7)(c) into the Uniform School Fund.
             196          Section 5. Section 59-10-136 is enacted to read:
             197          59-10-136. Nonrefundable tuition tax credit -- Definitions.
             198          (1) As used in this section:
             199          (a) "Private school" is as defined in Section 59-7-615 .
             200          (b) "Qualifying student" is as defined in Section 59-7-615 .
             201          (c) "School tuition certificate" is as defined in Section 59-7-615 .
             202          (d) "Value of the weighted pupil unit" is as defined in Section 59-7-615 .
             203          (2) For taxable years beginning on or after January 1, 2002, a taxpayer may claim a
             204      nonrefundable tax credit against the taxes imposed by this chapter as provided in this section for
             205      amounts paid to a private school for tuition:
             206          (a) on behalf of a qualifying student; and
             207          (b) during the taxable year.
             208          (3) Subject to Subsection (4), for a taxable year the amount of tax credit that a taxpayer
             209      may claim under this section for a qualifying student on whose behalf the taxpayer paid tuition in
             210      accordance with Subsection (2) may not exceed the lesser of:
             211          (a) the amount of tuition the taxpayer paid on behalf of the qualifying student during the


             212      taxable year; or
             213          (b) the greater of:
             214          (i) $2,116; or
             215          (ii) the value of the weighted pupil unit on the first day of the calendar year for which the
             216      private school issues the school tuition certificate in accordance with this section.
             217          (4) The tax credit provided for in this section may not be carried forward or carried back.
             218          (5) A taxpayer may claim a tax credit under this section for a taxable year only if the
             219      taxpayer obtains from a private school a school tuition certificate listing the name of the qualifying
             220      student on whose behalf the taxpayer paid tuition in accordance with Subsection (2).
             221          (6) A private school may not issue more than one school tuition certificate during a
             222      calendar year that lists the name of one qualifying student.
             223          Section 6. Retrospective operation.
             224          This act has retrospective operation for taxable years beginning on or after January 1, 2002.





Legislative Review Note
    as of 2-21-02 9:12 AM



This legislation provides tax credits for contributions made to a scholarship granting organization
to fund tuition grants for qualifying students to attend private schools. The legislation also
provides tax credits for amounts paid for tuition to a private school on behalf of a qualifying
student. This legislation may raise constitutional issues. For example, the legislation does not
prohibit the tax credits from being claimed for amounts that are used to pay tuition to parochial
schools. The Constitution of the United States prohibits laws "respecting an establishment of
religion or prohibiting the free exercise thereof." The Utah Constitution contains similar
prohibitions, as well as prohibitions on "appropriation for the direct support of any school or
educational institution controlled by any religious organization." Because case law is still
developing in this area, it is unclear whether a court would interpret the tax credits authorized by
this legislation as endorsing or supporting religion in violation of these constitutional prohibitions.

The legislation also defines the class of students on whose behalf tuition may be paid for which
a tax credit may be claimed on the basis of factors such as the student's date of birth, the student's
enrollment at a private school, or the student's parents' income. The legislation arguably creates
classes of students, and these classifications impact a taxpayer's eligibility to claim a tax credit.
If these classifications are challenged as being special legislation or a violation of equal protection
or uniform operation of the laws principles, a court is likely to uphold these classifications if the
court finds that the classifications are rational and related to a reasonable statutory objective.

Office of Legislative Research and General Counsel


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