Second Substitute H.B. 39

Representative James A. Ferrin proposes the following substitute bill:

1 TUITION TAX CREDITS
2 2005 GENERAL SESSION
3 STATE OF UTAH
4 Sponsor: James A. Ferrin
5
6 LONG TITLE
7 General Description:
8 This bill modifies the Individual Income Tax Act to provide a tax credit for tuition
9 expenses for private school education.
10 Highlighted Provisions:
11 This bill:
12 . provides a refundable tax credit against individual income tax for tuition expenses
13 paid or incurred during the taxable year for private school education received by a
14 qualifying student;
15 . provides legislative findings;
16 . establishes maximum tax credit amounts based upon a taxpayer's federal adjusted
17 gross income and household size;
18 . provides that a qualifying student is an individual who was not enrolled in a private
19 school on January 1, 2005, unless the adjusted gross income of the taxpayer who
20 paid or incurred the private school tuition expenses is less than or equal to 100% of
21 the income eligibility guideline for reduced price school meals;
22 . defines a private school as an elementary or secondary school that:
23 . has a physical location in Utah;
24 . enrolls at least 25 students;
25 . annually assesses the achievement of each qualifying student; and

26 . provides information to parents on teachers' credentials and school
27 accreditation; and
28 . requires the parent of a school-age minor who transfers from a public school to a
29 private school to notify the school district or charter school of the transfer.
30 Monies Appropriated in this Bill:
31 This bill appropriates:
32 . $1,500,000 from the General Fund for fiscal year 2005-06 only, to the State Board
33 of Education.
34 Other Special Clauses:
35 This bill provides for retrospective operation.
36 Utah Code Sections Affected:
37 ENACTS:
38 53A-11-102.3, Utah Code Annotated 1953
39 53A-17a-152, Utah Code Annotated 1953
40 59-10-136, Utah Code Annotated 1953
41
42 Be it enacted by the Legislature of the state of Utah:
43 Section 1. Section 53A-11-102.3 is enacted to read:
44 53A-11-102.3. Transfers to private school.
45 The parent of a school-age minor who transfers from a public school to a private school
46 as defined in Section 59-10-136 shall notify the school district or charter school where the
47 minor was enrolled of the transfer:
48 (1) before the starting date of the school district's or charter school's school year, if the
49 transfer will occur at the beginning of a school year; or
50 (2) before the date the minor transfers to the private school, if the transfer occurs
51 within a school year.
52 Section 2. Section 53A-17a-152 is enacted to read:
53 53A-17a-152. Appropriation for school districts affected by tuition tax credits.
54 (1) There is appropriated $1,500,000 from the General Fund, for fiscal year 2005-06
55 only, to the State Board of Education to be distributed to school districts that demonstrate
56 measurable financial harm that can be attributed to the enactment of the tuition tax credit under

57 Section 59-10-136 .
58 (2) The appropriation under Subsection (1) shall be nonlapsing.
59 (3) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
60 board shall make rules establishing criteria and procedures for the distribution of funds
61 appropriated under Subsection (1).
62 Section 3. Section 59-10-136 is enacted to read:
63 59-10-136. Refundable tuition tax credit.
64 (1) As used in this section:
65 (a) "Applicable household size" means the household size of the qualifying student.
66 (b) "Disabled" means having a disability and qualifying for special education services
67 pursuant to the Individuals with Disabilities Education Act, 20 U.S.C. Sec. 1400 et. seq.
68 (c) "Income eligibility guideline" means the maximum annual income allowed to
69 qualify for reduced price meals for the applicable household size as published by the U.S.
70 Department of Agriculture by notice in the Federal Register and as established pursuant to
71 Subsection (3).
72 (d) (i) "Private school" means an elementary or secondary school that:
73 (A) is not owned and controlled by a governmental entity:
74 (B) provides instruction for one or more grades kindergarten through 12;
75 (C) is generally supported, in part at least, by tuition charges;
76 (D) is established to operate indefinitely and independently, not dependent upon the
77 age of students available or upon individual family situations;
78 (E) has a physical location in Utah;
79 (F) is on file with the Division of Corporations and Commercial Code pursuant to
80 Section 42-2-5 ;
81 (G) is in compliance with local governmental business licensing requirements;
82 (H) (I) annually assesses the achievement of each student by administering a
83 norm-referenced test scored by an independent party that provides a comparison of the student's
84 performance to other students on a national basis;
85 (II) reports the test results to the student's parents; and
86 (III) upon request, makes test results available to other persons, in a manner that does
87 not reveal the identity of any student;

88 (I) provides to parents the relevant credentials of teachers who will be teaching their
89 children; and
90 (J) provides, upon request to any person, a statement indicating which, if any,
91 organizations have accredited the private school.
92 (ii) "Private school" does not include a school that has an enrollment of fewer than 25
93 students.
94 (e) (i) "Qualifying student" means an individual:
95 (A) who is enrolled at a private school as a full-time student as determined by the
96 private school and is not participating in a dual enrollment program pursuant to Section
97 53A-11-102.5 ;
98 (B) who will be under 19 years of age on the last day of the school year as determined
99 by the private school, or, if the individual is disabled and has not graduated from high school
100 with a regular diploma, will be under 22 years of age on the last day of the school year as
101 determined by the private school; and
102 (C) who was not enrolled at a private school on January 1, 2005, except as provided in
103 Subsection (1)(e)(ii).
104 (ii) Subsection (1)(e)(i)(C) does not apply if the adjusted gross income of the taxpayer
105 who paid or incurred the private school tuition expenses is less than or equal to 100% of the
106 income eligibility guideline as defined in Subsection (1)(c).
107 (2) The Legislature finds:
108 (a) parents are best equipped to make decisions for their children, including the
109 educational setting that will best serve the interests and educational needs of their children;
110 (b) children, parents, and families are the primary beneficiaries of the tuition tax credit
111 authorized in this section and any benefit to private schools, sectarian or otherwise, is purely
112 incidental; and
113 (c) the tuition tax credit authorized in this section:
114 (i) is enacted for the valid secular purpose of tailoring a student's education to that
115 student's specific needs;
116 (ii) is neutral with respect to religion; and
117 (iii) provides tax relief to a broad class of persons who are then able to direct their
118 resources to religious and secular schools solely as a result of their genuine and independent

119 private choices.
120 (3) The reduced price meals income guidelines in effect on July 1 of the taxable year
121 for which a taxpayer applies for a tax credit under this section shall be used to establish the
122 income eligibility guideline.
123 (4) (a) For taxable years beginning on or after January 1, 2005, a taxpayer may claim,
124 as provided in this section, a refundable tax credit against the taxes imposed by this chapter for
125 tuition expenses paid or incurred by the taxpayer during the taxable year for private school
126 education received by a qualifying student to the extent the taxpayer did not claim a tax credit
127 for those tuition expenses in the previous taxable year.
128 (b) For the purposes of this section, tuition expenses shall be considered to be incurred
129 when the qualifying student receives the private school education.
130 (c) A taxpayer may claim a refundable tax credit under Subsection (4)(a) for tuition
131 expenses paid or incurred by the taxpayer during the taxable year for private school education
132 received by one or more qualifying students.
133 (d) The refundable tax credit for each qualifying student's tuition expenses may not
134 exceed the total tuition expenses paid or incurred during the taxable year for the private school
135 education received by the qualifying student, up to the maximum amount shown in the
136 following table, except as provided in Subsections (4)(e) and (4)(f):
137 -------------------------------------------------------------------------------------------------------------------
138 If the taxpayer's adjusted gross income The maximum refundable tax credit for
139 on the taxpayer's federal individual each qualifying student's tuition expenses
140 income tax return for the taxable year is: is:
141 --------------------------------------------------- --------------------------------------------------
142 Less than or equal to 100% of the
143 income eligibility guideline $3750
144 Greater than 100% but less than or equal to
145 125% of the income eligibility guideline $3500
146 Greater than 125% but less than or equal to
147 150% of the income eligibility guideline $3250
148 Greater than 150% but less than or equal to
149 175% of the income eligibility guideline $3000

150 Greater than 175% but less than or equal to
151 200% of the income eligibility guideline $2750
152 Greater than 200% but less than or equal to
153 225% of the income eligibility guideline $2500
154 Greater than 225% but less than or equal to
155 250% of the income eligibility guideline $1750
156 Greater than 250% but less than or equal to
157 275% of the income eligibility guideline $1000
158 Greater than 275% but less than or equal to
159 300% of the income eligibility guideline $500
160 -------------------------------------------------------------------------------------------------------------------
161 (e) The maximum refundable tax credit amounts shown in the table in Subsection
162 (4)(d) apply to tuition expenses for all grades except kindergarten. The maximum refundable
163 tax credit for tuition expenses for kindergarten shall be .55 times the amounts shown in the
164 table in Subsection (4)(d).
165 (f) The maximum refundable tax credits amounts shown in the table in Subsection
166 (4)(d) apply to tuition expenses of qualifying students who are enrolled in a private school for
167 140 school days or more within the taxable year. For tuition expenses of qualifying students
168 who are enrolled in a private school for fewer than 140 school days within the taxable year, the
169 maximum refundable tax credit amounts are 50% of the amounts shown in the table in
170 Subsection (4)(d), except the maximum refundable tax credit for a kindergarten student is 50%
171 of the amount provided in Subsection (4)(e).
172 (5) The tax credit provided for in this section may not be carried forward or carried
173 back.
174 (6) (a) Only one taxpayer may claim a refundable tax credit for each qualifying student
175 each taxable year.
176 (b) The taxpayer who claims a personal exemption for the qualifying student shall have
177 the right to claim the refundable tax credit, unless that taxpayer authorizes another person to
178 claim the refundable tax credit.
179 (c) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
180 commission shall make rules to administer Subsections (6)(a) and (6)(b).

181 Section 4. Retrospective operation.
182 This bill has retrospective operation for taxable years beginning on or after January 1,
183 2005.