HB5081 103RD GENERAL ASSEMBLY

LRB103 36429 HLH 66531 b

103RD GENERAL ASSEMBLY
State of Illinois
2023 and 2024
HB5081

Introduced 2/8/2024, by Rep. Lance Yednock

SYNOPSIS AS INTRODUCED:

New Act
35 ILCS 5/241 new

Creates the Investing in Tomorrow's Workforce Act. Creates an income tax credit for a taxpayer that makes a qualified contribution to a scholarship granting organization for which the taxpayer has received a certificate of receipt from the organization. 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 1. Short title. This Act may be cited as the Investing in Tomorrow's Workforce Act.

Section 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 in the year before the child initially receives a scholarship under this Act does not exceed 300% of the federal poverty level and, once the child receives a scholarship under this Act, 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 before the semester during which he or she first receives a scholarship under this Act or is starting school in Illinois for the first time when he or she first receives a scholarship under this Act; and

(3) resides in Illinois while receiving a scholarship under this Act.

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

"Jointly administered CTE program" means a program or set of programs within a qualified school located in Illinois, as determined by the State Board of Education under 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. "Necessary cost and fees" does not include fees payable only once or 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.

"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 technical academy in the State.

"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.

"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 in accordance with 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 is withdrawn for use; and

(5) is approved to issue certificates of receipt.

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

"Technical academy" means a nonpublic school located in Illinois that:

(1) registers with the Board under Section 2-3.25o of the School Code;

(2) operates or will operate a jointly administered CTE program as the primary focus of the academy; and

(3) partners with the United States Department of Labor's Office of Apprenticeship, or its successor organization.

To maintain its status as a technical academy, the academy must obtain recognition from the Board under Section 2-3.25o of the School Code within 2 calendar years of its registration with the Board.

Section 7.5. Determination of jointly administered CTE programs.

(a) Upon its own motion, or upon petition from a qualified school, the State Board of Education shall determine whether a program or set of programs offered or proposed by a qualified school provides coursework and training in career and technical education pathways aligned to industry-recognized certifications and credentials. The State Board of Education shall make that determination based upon whether the industry-recognized certifications or credentials that are the focus of a qualified school's coursework and training program or set of programs (i) are associated with an occupation determined to fall under the LEADING or EMERGING priority sectors as determined through Illinois' Workforce Innovation and Opportunity Act Unified State Plan and (ii) provide wages that are at least 70% of the average annual wage in the State, as calculated by the United States Bureau of Labor Statistics.

(b) The State Board of Education shall publish a list of approved jointly administered CTE programs on its website and otherwise make that list available to the public. A qualified school may petition the State Board of Education to obtain a determination that a proposed program or set of programs that it seeks to offer qualifies as a jointly administered CTE program under subsection (a) of this Section. A petitioner shall file one original petition in the form provided by the State Board of Education and in the manner specified by the State Board of Education. The petitioner may withdraw his or her petition by submitting a written statement to the State Board of Education indicating the petitioner's intent to withdraw. The State Board of Education shall approve or deny a petition within 180 days of its submission and, upon approval, shall proceed to add the program or set of programs to the list of approved jointly administered CTE programs. The approval or denial of any petition is a final decision of the Board, subject to judicial review under the Administrative Review Law. Jurisdiction and venue are vested in the circuit court.

(c) The State Board of Education shall evaluate the approved jointly administered CTE programs once every 5 years. During each evaluation, the State Board of Education shall determine whether these programs continue to meet the requirements of subsection (a) of this Section.

Section 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 contributions made under this Act, the credit shall be equal to 100% 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.

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

(c) Contributions made by corporations (including Subchapter S corporations), partnerships, and trusts under this Act may not be directed to a particular subset of qualified schools, a particular qualified school, a particular group of students, or a particular student. Contributions made by individuals under this Act may be directed to a particular subset of qualified schools or a particular qualified school but may not be directed to a particular group of students or a particular student.

(d) 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 that the Department determines is geographically proportionate to enrollment in recognized nonpublic qualified 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 the remaining credits on a first-come, first-served basis, without regard to the limitation of this subsection.

Section 15. Approval to issue certificates of receipt.

(a) A scholarship granting organization shall submit an application for approval to issue certificates of receipt in the form and manner prescribed by the Department, provided that each application shall include:

(1) documentary evidence that the scholarship granting organization has been granted an exemption from taxation under Section 501(c)(3) of the Internal Revenue Code;

(2) certification that all qualified contributions and any income derived from qualified contributions are deposited and held in an account that is separate from the scholarship granting organization's operating or other funds until such qualified contributions or income are withdrawn for use;

(3) certification that the scholarship granting organization will use at least 95% of its annual revenue from qualified contributions for scholarships;

(4) certification that the scholarship granting organization will provide scholarships to eligible students;

(5) a list of the names and addresses of all members of the governing board of the scholarship granting organization; and

(6) a copy of the most recent financial audit of the scholarship granting organization's accounts and records conducted by an independent certified public accountant in accordance with auditing standards generally accepted in the United States, government auditing standards, and rules adopted by the Department.

(b) A scholarship granting organization whose owner or operator has, in the 7 years immediately preceding the date of the application, filed for personal bankruptcy or corporate bankruptcy involving a corporation in which the owner owned more than 20% shall not be eligible to provide scholarships.

(c) A scholarship granting organization must not have an owner or operator who owns or operates a qualified school or has a family member who is a paid staff member or board member of a participating qualified school.

(d) A scholarship granting organization shall comply with the anti-discrimination provisions of 42 U.S.C. 2000d.

(e) The Department shall review and either approve or deny each application to issue certificates of receipt under this Act. Approval or denial of an application shall be made on a periodic basis. Applicants shall be notified of the Department's determination within 30 business days after the application is received.

(f) No scholarship granting organization shall issue any certificate of receipt without first being approved to issue certificates of receipt.

Section 20. Annual review.

(a) Each scholarship granting organization that receives approval to issue certificates of receipt shall file an application for recertification on an annual basis. Such application for recertification shall be in the form and manner prescribed by the Department and shall include:

(1) a certification from the Director or Chief Executive Officer of the organization that the organization has complied with and continues to comply with the requirements of this Act, including evidence of that compliance; and

(2) a copy of the organization's current financial statements.

(b) The Department may revoke the approval of a scholarship granting organization to issue certificates of receipt upon a finding that the organization has violated this Act or any rules adopted under this Act. These violations shall include, but need not be limited to, any of the following:

(1) failure to meet the requirements of this Act;

(2) failure to maintain full and adequate records with respect to the receipt of qualified contributions;

(3) failure to supply such records to the Department; or

(4) failure to provide notice to the Department of the issuance of certificates of receipt under Section 35 of this Act.

(c) Within 5 days after the determination to revoke approval, the Department shall provide notice of the determination to the scholarship granting organization and information regarding the process to request a hearing to appeal the determination.

Section 25. Contribution authorization certificates.

(a) A taxpayer shall not be allowed a credit under this Act for any contribution to a scholarship granting organization that was made before the Department issues to the taxpayer a contribution authorization certificate for the contribution.

(b) Before making a contribution to a scholarship granting organization, the taxpayer shall apply to the Department for a contribution authorization certificate.

(c) A taxpayer who makes more than one contribution to a scholarship granting organization must make a separate application for each contribution authorization certificate. The application shall be in the form and manner prescribed by the Department, provided that the application includes:

(1) the taxpayer's name and address;

(2) the amount the taxpayer will contribute; and

(3) any other information the Department deems necessary.

(d) The Department may allow taxpayers to make multiple applications on the same form, provided that each application shall be treated as a separate application.

(e) The Department shall issue credit authorization certificates on a first-come, first-served basis based upon the date that the Department received the taxpayer's application for the certificate subject to the provisions of subsection (e) of Section 10 of this Act.

(f) A taxpayer's aggregate authorized contribution amount, as listed on one or more authorized contribution certificates issued to the taxpayer, shall not exceed the aggregate of the amounts listed on the taxpayer's applications submitted in accordance with this Section.

(g) Each contribution authorization certificate shall state:

(1) the date the certificate was issued;

(2) the date by which the authorized contributions listed in the certificate must be made, which shall be 60 days from the date of the issuance of a credit authorization certificate;

(3) the total amount of authorized contributions; and

(4) any other information the Department deems necessary.

(h) Credit authorization certificates shall be mailed to the appropriate taxpayers within 3 business days after their issuance.

(i) A taxpayer may rescind all or part of an authorized contribution approved under this Act by providing written notice to the Department. Amounts rescinded shall no longer be deducted from the cap prescribed in Section 10 of this Act.

(j) The Department shall maintain on its website a running total of the amount of credits for which taxpayers may make applications for contribution authorization certification. The running total shall be updated every business day.

Section 30. Certificates of receipt.

(a) No scholarship granting organization shall issue a certificate of receipt for any qualified contribution made by a taxpayer under this Act unless that scholarship granting organization has been approved to issue certificates of receipt under Section 15 of this Act.

(b) No scholarship granting organization shall issue a certificate of receipt for a contribution made by a taxpayer unless the taxpayer has been issued a credit authorization certificate by the Department.

(c) If a taxpayer makes a contribution to a scholarship granting organization before the date by which the authorized contribution shall be made, the scholarship granting organization shall, within 30 days of receipt of the authorized contribution, issue to the taxpayer a written certificate of receipt.

(d) If a taxpayer fails to make all or a portion of a contribution before the date by which the authorized contribution is required to be made, the taxpayer shall not be entitled to a certificate of receipt for the portion of the authorized contribution not made.

(e) Each certificate of receipt shall state:

(1) the name and address of the issuing scholarship granting organization;

(2) the taxpayer's name and address;

(3) the date for each qualified contribution;

(4) the amount of each qualified contribution;

(5) the total qualified contribution amount; and

(6) any other information that the Department may deem necessary.

(f) Upon the issuance of a certificate of receipt, the issuing scholarship granting organization shall, within 10 days after issuing the certificate of receipt, provide the Department with notification of the issuance of the certificate in the form and manner prescribed by the Department, provided that the notification shall include:

(1) the taxpayer's name and address;

(2) the date of the issuance of a certificate of receipt;

(3) the qualified contribution date or dates and the amounts contributed on those dates;

(4) the total qualified contribution listed on the certificates;

(5) the issuing scholarship granting organization's name and address; and

(6) any other information the Department may deem necessary.

(g) Any portion of a contribution that a taxpayer fails to make by the date indicated on the authorized contribution certificate shall no longer be deducted from the cap prescribed in Section 10 of this Act.

Section 35. Reports.

(a) Within 180 days after the end of its fiscal year, each scholarship granting organization must provide to the Department a copy of a financial audit of its accounts and records conducted by an independent certified public accountant in accordance with auditing standards generally accepted in the United States, government auditing standards, and rules adopted by the Department. The audit must include a report on financial statements presented in accordance with generally accepted accounting principles. The audit must include evidence that no less than 95% of qualified contributions received were used to provide scholarships to eligible students. The Department shall review all audits submitted under this subsection. The Department shall request any significant items that were omitted in violation of a rule adopted by the Department. The items must be provided within 45 days after the date of request. If a scholarship granting organization does not comply with the Department's request, the Department may revoke the scholarship granting organization's ability to issue certificates of receipt.

(b) A scholarship granting organization that is approved to receive qualified contributions shall report to the Department, on a form prescribed by the Department, by January 31 of each calendar year. The report shall include:

(1) the total number of certificates of receipt issued during the immediately preceding calendar year;

(2) the total dollar amount of qualified contributions received, as set forth in the certificates of receipt issued during the immediately preceding calendar year;

(3) the total number of eligible students using scholarships for the immediately preceding calendar year and the academic year in progress and the total dollar value of the scholarships;

(4) the name and address of each qualified school for which scholarships using qualified contributions were issued during the immediately preceding calendar year, detailing the number, grade, race, gender, income level, and residency by zip code of eligible students and the total dollar value of scholarships being used at each qualified school by priority group, as identified in subsection (d) of Section 40 of this Act; and

(5) any additional information requested by the Department.

(c) On or before the last day of March for each calendar year, for the immediately preceding calendar year, the Department shall submit a written report to the Governor, the President of the Senate, the Speaker of the House of Representatives, the Minority Leader of the Senate, and the Minority Leader of the House of Representatives regarding this Act. The report shall include, but not be limited to, the following information:

(1) the names and addresses of all scholarship granting organizations approved to issue certificates of receipt;

(2) the number and aggregate total of certificates of receipt issued by each scholarship granting organization; and

(3) the information reported to the Department required by subsection (b) of this Section.

(d) The sharing and reporting of student data under this Section must be in accordance with the requirements of the federal Family Educational Rights and Privacy Act and the Illinois School Student Records Act. All parties must preserve the confidentiality of such information as required by law. Data reported by the Department under subsection (c) of this Section must not disaggregate data to a level that will disclose demographic data of individual students.

Section 40. Scholarship granting organization responsibilities.

(a) Before granting a scholarship for an academic year, each scholarship granting organization 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, a scholarship granting organization shall give priority to eligible students who received a scholarship from a scholarship granting organization during the previous qualified school year. Second priority shall be given to the following priority groups:

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

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

(d-5) A scholarship granting organization shall begin granting scholarships no later than the February 1 preceding the academic 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 the April 1 immediately preceding the academic 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 qualified school. Scholarships shall be awarded 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 under 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 under 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 under 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 qualified school where the student is enrolled.

(g) 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.

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

(i) 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.

(j) 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.

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

Section 45. State Board responsibilities.

(a) Students who have been granted a scholarship under this Act shall be annually assessed at the qualified school where the student attends qualified school in the same manner in which students that attend public schools are annually assessed under Section 2-3.64a-5 of the School Code. Such qualified school shall pay costs associated with this requirement.

(b) The Board shall select an independent research organization, which may be a public or private entity or university, to which the participating qualified school must report the scores of students who are receiving scholarships and are assessed under subsection (a) of this Section. Costs associated with the independent research organization shall be paid by the scholarship granting organizations on a per-pupil basis or by gifts, grants, or donations received by the Board under subsection (d) of this Section, as determined by the Board. The independent research organization must annually report to the Board on the year-to-year learning gains of students receiving scholarships on a statewide basis. The report shall also include, to the extent possible, a comparison of these learning gains to the statewide learning gains of public school students with socioeconomic backgrounds similar to those of students receiving scholarships. The annual report shall be delivered to the Board and published on its website.

(c) Beginning within 120 days after the Board first receives the annual report by the independent research organization as provided in subsection (b) of this Section and on an annual basis thereafter, the Board shall submit a written report to the Governor, the President of the Senate, the Speaker of the House of Representatives, the Minority Leader of the Senate, and the Minority Leader of the House of Representatives regarding this Act. The report shall include an evaluation of the academic performance of students receiving scholarships and recommendations for improving student performance.

(d) Subject to the State Officials and Employees Ethics Act, the Board may receive and expend gifts, grants, and donations of any kind from any public or private entity to carry out the purposes of this Section, subject to the terms and conditions under which the gifts are given, provided that all such terms and conditions are permissible under law.

(e) The sharing and reporting of student learning gain data under this Section must be in accordance with requirements of the federal Family Educational Rights and Privacy Act and the Illinois School Student Records Act. All parties must preserve the confidentiality of such information as required by law. The annual report must not disaggregate data to a level that will disclose the academic level of individual students.

Section 50. Qualified school responsibilities. A qualified school that accepts scholarship students must do all of the following:

(1) provide to a scholarship granting organization, upon request, all documentation required for the student's participation, including the qualified school cost and student's fee schedules;

(2) be academically accountable to the custodian for meeting the educational needs of the student by:

(A) at a minimum, annually providing to the custodian a written explanation of the student's progress; and

(B) annually administering assessments required by subsection (a) of Section 45 of this Act in the same manner in which they are administered at public schools under Section 2-3.64a-5 of the School Code; the Board shall bill participating qualified schools for all costs associated with administering assessments required by this paragraph; the participating qualified schools shall ensure that all test security and assessment administration procedures are followed; participating qualified schools must report individual student scores to the custodians of the students; the independent research organization described in subsection (b) of Section 45 of this Act shall be provided all student score data in a secure manner by the participating qualified school.

The inability of a qualified school to meet the requirements of this Section shall constitute a basis for the ineligibility of the qualified school to participate in the scholarship program as determined by the Board.

Section 55. Custodian and student responsibilities.

(a) The custodian must select a qualified school and apply for the admission of his or her child.

(b) The custodian shall ensure that the student participating in the scholarship program takes the assessment required by subsection (a) of Section 45 of this Act.

(c) Each custodian and each student has an obligation to comply with the published policies of the qualified school.

(d) The custodian shall authorize the scholarship granting organization to access information needed for income eligibility determinations.

Section 60. Recordkeeping; rulemaking; violations.

(a) Each taxpayer shall, for each taxable year for which the tax credit provided for under this Act is claimed, maintain records of the following information: (i) contribution authorization certificates obtained under Section 25 of this Act and (ii) certificates of receipt obtained under Section 30 of this Act.

(b) The Board and the Department may adopt rules consistent with and necessary for the implementation of this Act.

(c) Violations of State laws or rules and complaints relating to program participation shall be referred to the Attorney General.

Section 65. Credit period; repeal. A taxpayer may take a credit under this Act for tax years beginning on or after January 1, 2025. This Act is exempt from the provisions of Section 250 of the Illinois Income Tax Act.

Section 70. Inseverability. The provisions of this Act are mutually dependent and inseverable. If any provision is held invalid other than as applied to a particular person or circumstance, then this entire Act is invalid.

Section 75. Saving clause. Any repeal or amendment made by this Act shall not affect or impair any of the following: suits pending or rights existing at the time this Act takes effect; any grant or conveyance made or right acquired or cause of action now existing under any Section, Article, or Act repealed or amended by this Act; the validity of any bonds or other obligations issued or sold and constituting valid obligations of the issuing authority at the time this Act takes effect; the validity of any contract; the validity of any tax levied under any law in effect prior to the effective date of this Act; or any offense committed, act done, penalty, punishment, or forfeiture incurred or any claim, right, power, or remedy accrued under any law in effect prior to the effective date of this Act.

Section 900. The Illinois Income Tax Act is amended by adding Section 241 as follows:

(35 ILCS 5/241 new)

Sec. 241. Investing in Tomorrow's Workforce Act.

(a) For taxable years beginning on or after January 1, 2025, each taxpayer for whom a tax credit has been awarded by the Department under the Investing in Tomorrow's Workforce Act is entitled to a credit against the tax imposed under subsections (a) and (b) of Section 201 as provided in that Act.

(b) Partners and shareholders of subchapter S corporations are entitled to a credit under this Section as provided in Section 251.

(c) This Section is exempt from the provisions of Section 250.

Section 999. Effective date. This Act takes effect upon becoming law.