HB4194 103RD GENERAL ASSEMBLY

LRB103 34921 HLH 64794 b

103RD GENERAL ASSEMBLY
State of Illinois
2023 and 2024
HB4194

Introduced 10/25/2023, by Rep. Angelica Guerrero-Cuellar - Elizabeth "Lisa" Hernandez - Kelly M. Burke and Martin J. Moylan

SYNOPSIS AS INTRODUCED:

35 ILCS 40/5
35 ILCS 40/10
35 ILCS 40/40
35 ILCS 40/65
35 ILCS 5/224

Amends the Invest in Kids Act. Provides that a taxpayer may take a credit under the Act for tax years ending before January 1, 2029 (currently January 1, 2024). Provides that, beginning in calendar year 2024, the aggregate amount of credits the Department of Revenue may award under the Act in any calendar year may not exceed $50,000,000 (currently, $75,000,000). Provides that contributions under the Act may be directed to students whose permanent address is located in an underserved area but may not be directed to a particular student. Provides that, for taxable years beginning on or after January 1, 2024, the amount of the credit under the Act shall be 100% of the first $5,000 in contributions made by the taxpayer during the taxable year, plus (i) 55% of the portion of the qualified contributions made by the taxpayer that exceeds the first $5,000 and is not directed to students whose permanent address is located in an underserved area and (ii) 65% of the of the portion of the qualified contributions made by the taxpayer that exceeds the first $5,000 and is directed to students whose permanent address is located in an underserved area. Effective immediately.

A BILL FOR

AN ACT concerning revenue.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 5. The Invest in Kids Act is amended by changing Sections 5, 10, 40, and 65 as follows:

(35 ILCS 40/5)

(Section scheduled to be repealed on January 1, 2025)

Sec. 5. Definitions. As used in this Act:

"Authorized contribution" means the contribution amount that is listed on the contribution authorization certificate issued to the taxpayer.

"Board" means the State Board of Education.

"Contribution" means a donation made by the taxpayer during the taxable year for providing scholarships as provided in this Act.

"Custodian" means, with respect to eligible students, an Illinois resident who is a parent or legal guardian of the eligible student or students.

"Department" means the Department of Revenue.

"Eligible student" means a child who:

(1) is a member of a household whose federal adjusted gross income the year before he or she initially receives a scholarship under this program, as determined by the Department, does not exceed 300% of the federal poverty level and, once the child receives a scholarship, does not exceed 400% of the federal poverty level;

(2) is eligible to attend a public elementary school or high school in Illinois in the semester immediately preceding the semester for which he or she first receives a scholarship or is starting school in Illinois for the first time when he or she first receives a scholarship; and

(3) resides in Illinois while receiving a scholarship.

"Family member" means a parent, child, or sibling, whether by whole blood, half blood, or adoption; spouse; or stepchild.

"Focus district" means a school district which has a school that is either (i) a school that has one or more subgroups in which the average student performance is at or below the State average for the lowest 10% of student performance in that subgroup or (ii) a school with an average graduation rate of less than 60% and not identified for priority.

"Jointly administered CTE program" means a program or set of programs within a non-public school located in Illinois, as determined by the State Board of Education pursuant to Section 7.5 of this Act.

"Necessary costs and fees" includes the customary charge for instruction and use of facilities in general and the additional fixed fees charged for specified purposes that are required generally of non-scholarship recipients for each academic period for which the scholarship applicant actually enrolls, including costs associated with student assessments, but does not include fees payable only once and other contingent deposits that are refundable in whole or in part. The Board may prescribe, by rules consistent with this Act, detailed provisions concerning the computation of necessary costs and fees.

"Scholarship granting organization" means an entity that:

(1) is exempt from taxation under Section 501(c)(3) of the Internal Revenue Code;

(2) uses at least 95% of the qualified contributions received during a taxable year for scholarships;

(3) provides scholarships to students according to the guidelines of this Act;

(4) deposits and holds qualified contributions and any income derived from qualified contributions in an account that is separate from the organization's operating fund or other funds until such qualified contributions or income are withdrawn for use; and

(5) is approved to issue certificates of receipt.

"Technical academy" means a non-public school located in Illinois that: (1) registers with the Board pursuant to Section 2-3.25 of the School Code; and (2) operates or will operate a jointly administered CTE program as the primary focus of the school. To maintain its status as a technical academy, the non-public school must obtain recognition from the Board pursuant to Section 2-3.25o of the School Code within 2 calendar years of its registration with the Board.

"Qualified contribution" means the authorized contribution made by a taxpayer to a scholarship granting organization for which the taxpayer has received a certificate of receipt from such organization.

"Qualified school" means a non-public school located in Illinois and recognized by the Board pursuant to Section 2-3.25o of the School Code.

"Scholarship" means an educational scholarship awarded to an eligible student to attend a qualified school of their custodians' choice in an amount not exceeding the necessary costs and fees to attend that school.

"Taxpayer" means any individual, corporation, partnership, trust, or other entity subject to the Illinois income tax. For the purposes of this Act, 2 individuals filing a joint return shall be considered one taxpayer.

"Underserved area" has the meaning given to that term in Section 5-5 of the Economic Development for a Growing Economy Tax Credit Act.

(Source: P.A. 102-16, eff. 6-17-21.)

(35 ILCS 40/10)

(Section scheduled to be repealed on January 1, 2025)

Sec. 10. Credit awards.

(a) The Department shall award credits against the tax imposed under subsections (a) and (b) of Section 201 of the Illinois Income Tax Act to taxpayers who make qualified contributions. For taxable years beginning before January 1, 2024 contributions made under this Act, the credit shall be equal to 75% of the total amount of qualified contributions made by the taxpayer during a taxable year, not to exceed a credit of $1,000,000 per taxpayer. For taxable years beginning on or after January 1, 2024, the credit shall be calculated as follows:

(1) If the total amount of qualified contributions made by the taxpayer during the taxable year does not exceed $5,000, then the credit shall be equal to 100% of the total amount of qualified contributions made by the taxpayer during the taxable year.

(2) If the total amount of qualified contributions made by the taxpayer during the taxable year exceeds $5,000, then the credit shall be equal to 100% of the first $5,000 in contributions made by the taxpayer, plus (i) 55% of the portion of the qualified contributions made by the taxpayer that exceeds the first $5,000 and is not directed to students whose permanent address is located in an underserved area and (ii) 65% of the of the portion of the qualified contributions made by the taxpayer that exceeds the first $5,000 and is directed to students whose permanent address is located in an underserved area.

For taxable years ending on or after January 1, 2024, the total credit amount per taxpayer shall not exceed $500,000 in any taxable year.

(b) Through calendar year 2023, the The aggregate amount of all credits the Department may award under this Act in any calendar year may not exceed $75,000,000. Beginning in calendar year 2024, the aggregate amount of all credits the Department may award under this Act in any calendar year may not exceed $50,000,000.

(c) Except as otherwise provided in this subsection, contributions Contributions made by corporations (including Subchapter S corporations), partnerships, and trusts under this Act may not be directed to a particular subset of schools, a particular school, a particular group of students, or a particular student. Except as otherwise provided in this Section, contributions Contributions made by individuals under this Act may be directed to a particular subset of schools or a particular school but may not be directed to a particular group of students or a particular student. Notwithstanding the provisions of this subsection, on and after January 1, 2024, contributions made by any taxpayer may be directed to students whose permanent address is located in an underserved area but may not be directed to a particular student.

(d) (Blank). No credit shall be taken under this Act for any qualified contribution for which the taxpayer claims a federal income tax deduction.

(e) Credits shall be awarded in a manner, as determined by the Department, that is geographically proportionate to enrollment in recognized non-public schools in Illinois. If the cap on the aggregate credits that may be awarded by the Department is not reached by June 1 of a given year, the Department shall award remaining credits on a first-come, first-served basis, without regard to the limitation of this subsection. Credits awarded for qualified contributions that are directed to students whose permanent address is located in an underserved area shall be awarded without regard to this subsection but shall not exceed 15% of the annual statewide program cap.

(f) Credits awarded for donations made to a technical academy shall be awarded without regard to subsection (e), but shall not exceed 15% of the annual statewide program cap. For the purposes of this subsection, "technical academy" means a technical academy that is registered with the Board within 30 days after the effective date of this amendatory Act of the 102nd General Assembly.

(Source: P.A. 102-16, eff. 6-17-21.)

(35 ILCS 40/40)

(Section scheduled to be repealed on January 1, 2025)

Sec. 40. Scholarship granting organization responsibilities.

(a) Before granting a scholarship for an academic year, all scholarship granting organizations shall assess and document each student's eligibility for the academic year.

(b) A scholarship granting organization shall grant scholarships only to eligible students.

(c) A scholarship granting organization shall allow an eligible student to attend any qualified school of the student's choosing, subject to the availability of funds.

(d) In granting scholarships, beginning in the 2022-2023 school year and for each school year thereafter, a scholarship granting organization shall give priority to eligible students who received a scholarship from a scholarship granting organization during the previous school year. Second priority shall be given to the following priority groups:

(1) (blank);

(2) eligible students who are members of a household whose previous year's total annual income does not exceed 185% of the federal poverty level;

(3) eligible students who reside within a focus district; and

(4) eligible students who are siblings of students currently receiving a scholarship.

(d-5) A scholarship granting organization shall begin granting scholarships no later than February 1 preceding the school year for which the scholarship is sought. Each priority group identified in subsection (d) of this Section shall be eligible to receive scholarships on a first-come, first-served basis until April 1 immediately preceding the school year for which the scholarship is sought, starting with the first priority group identified in subsection (d) of this Section. Applications for scholarships for eligible students meeting the qualifications of one or more priority groups that are received before April 1 must be either approved or denied within 10 business days after receipt. Beginning April 1, all eligible students shall be eligible to receive scholarships without regard to the priority groups identified in subsection (d) of this Section.

(e) Except as provided in subsection (e-5) of this Section, scholarships shall not exceed the lesser of (i) the statewide average operational expense per student among public schools or (ii) the necessary costs and fees for attendance at the qualified school. A qualified school may set a lower maximum scholarship amount for eligible students whose family income falls within paragraphs (2) and (3) of this subsection (e); that amount may not exceed the necessary costs and fees for attendance at the qualified school and is subject to the limitations on average scholarship amounts set forth in paragraphs (2) and (3) of this subsection, as applicable. The qualified school shall notify the scholarship granting organization of its necessary costs and fees as well as any maximum scholarship amount set by the school. Scholarships shall be prorated as follows:

(1) for eligible students whose household income is less than 185% of the federal poverty level, the scholarship shall be 100% of the amount determined pursuant to this subsection (e) and subsection (e-5) of this Section;

(2) for eligible students whose household income is 185% or more of the federal poverty level but less than 250% of the federal poverty level, the average of scholarships shall be 75% of the amount determined pursuant to this subsection (e) and subsection (e-5) of this Section; and

(3) for eligible students whose household income is 250% or more of the federal poverty level, the average of scholarships shall be 50% of the amount determined pursuant to this subsection (e) and subsection (e-5) of this Section.

(e-5) The statewide average operational expense per student among public schools shall be multiplied by the following factors:

(1) for students determined eligible to receive services under the federal Individuals with Disabilities Education Act, 2;

(2) for students who are English learners, as defined in subsection (d) of Section 14C-2 of the School Code, 1.2; and

(3) for students who are gifted and talented children, as defined in Section 14A-20 of the School Code, 1.1.

(f) A scholarship granting organization shall distribute scholarship payments to the participating school where the student is enrolled.

(g) For the 2018-2019 school year through the 2027-2028 2022-2023 school year, each scholarship granting organization shall expend no less than 75% of the qualified contributions received during the calendar year in which the qualified contributions were received. No more than 25% of the qualified contributions may be carried forward to the following calendar year.

(h) For the 2028-2029 2023-2024 school year, each scholarship granting organization shall expend all qualified contributions received during the calendar year in which the qualified contributions were received. No qualified contributions may be carried forward to the following calendar year.

(i) A scholarship granting organization shall allow an eligible student to transfer a scholarship during a school year to any other participating school of the custodian's choice. Such scholarships shall be prorated.

(j) With the prior approval of the Department, a scholarship granting organization may transfer funds to another scholarship granting organization if additional funds are required to meet scholarship demands at the receiving scholarship granting organization. All transferred funds must be deposited by the receiving scholarship granting organization into its scholarship accounts. All transferred amounts received by any scholarship granting organization must be separately disclosed to the Department.

(k) If the approval of a scholarship granting organization is revoked as provided in Section 20 of this Act or the scholarship granting organization is dissolved, all remaining qualified contributions of the scholarship granting organization shall be transferred to another scholarship granting organization. All transferred funds must be deposited by the receiving scholarship granting organization into its scholarship accounts.

(l) Scholarship granting organizations shall make reasonable efforts to advertise the availability of scholarships to eligible students.

(Source: P.A. 102-699, eff. 4-19-22; 102-1059, eff. 6-10-22; 103-154, eff. 6-30-23.)

(35 ILCS 40/65)

(Section scheduled to be repealed on January 1, 2025)

Sec. 65. Credit period; repeal.

(a) A taxpayer may take a credit under this Act for tax years beginning on or after January 1, 2018 and ending before January 1, 2029 January 1, 2024. A taxpayer may not take a credit pursuant to this Act for tax years beginning on or after January 1, 2029 January 1, 2024.

(b) This Act is repealed on January 1, 2030 January 1, 2025.

(Source: P.A. 102-16, eff. 6-17-21.)

Section 10. The Illinois Income Tax Act is amended by changing Section 224 as follows:

(35 ILCS 5/224)

Sec. 224. Invest in Kids credit.

(a) For taxable years beginning on or after January 1, 2018 and ending before January 1, 2029 January 1, 2024, each taxpayer for whom a tax credit has been awarded by the Department under the Invest in Kids Act is entitled to a credit against the tax imposed under subsections (a) and (b) of Section 201 of this Act in an amount equal to the amount awarded under the Invest in Kids Act.

(b) For partners, shareholders of subchapter S corporations, and owners of limited liability companies, if the liability company is treated as a partnership for purposes of federal and State income taxation, the credit under this Section shall be determined in accordance with the determination of income and distributive share of income under Sections 702 and 704 and subchapter S of the Internal Revenue Code.

(c) The credit may not be carried back and may not reduce the taxpayer's liability to less than zero. If the amount of the credit exceeds the tax liability for the year, the excess may be carried forward and applied to the tax liability of the 5 taxable years following the excess credit year. The tax credit shall be applied to the earliest year for which there is a tax liability. If there are credits for more than one year that are available to offset the liability, the earlier credit shall be applied first.

(d) (Blank). A tax credit awarded by the Department under the Invest in Kids Act may not be claimed for any qualified contribution for which the taxpayer claims a federal income tax deduction.

(Source: P.A. 102-699, eff. 4-19-22.)

Section 99. Effective date. This Act takes effect upon becoming law.