Credit for contributions to a trust used to provide need-based college scholarships

(a)

In general

Subpart B of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to other credits) is amended by adding at the end the following new section:

30E.

Contributions to trust used to provide need-based college scholarships

(a)

Allowance of credit

In addition to any deduction allowable under this title, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to 50 percent of designated qualified college scholarship funding contributions made by the taxpayer during the taxable year. (b)

Designated qualified college scholarship funding contribution

For purposes of this section— (1)

In general

The term designated qualified college scholarship funding contribution means any charitable contribution (as defined in section 170(c))— (A)which is paid in cash by the taxpayer to a qualified scholarship funding trust, and (B)which is designated by the trust for purposes of this section. (2)

Qualified scholarship funding trust

The term qualified scholarship funding trust means a trust— (A)which is established and maintained in the United States by an organization— (i)described in section 501(c)(3) and exempt from tax under section 501(a), and (ii)organized primarily for educational purposes, (B)which is part of a plan of one or more local education agencies (as defined in section 9101 of the Elementary and Secondary Education Act of 1965) of the State in which such trust is established and maintained to provide scholarships to children of such agencies, and (C)the written governing instrument of which— (i)requires that the income of the trust be used exclusively to provide qualified scholarships (as defined in section 117(b)) to individuals who— (I)are candidates for a degree at an institution of higher education (within the meaning given such term by section 101 of the Higher Education Act of 1965 (20 U.S.C. 1001)), and (II)have demonstrated financial need in accordance with section 471 of such Act (20 U.S.C. 1087kk), and (ii)requires that the assets of the trust not be distributed for any purpose. (c)

Limitations

(1)

In general

There is a national qualified college scholarship funding contribution limitation of $1,000,000,000. (2)

Allocation of limitation

(A)

In general

Such national limitation shall be allocated by the Secretary among the qualified scholarship funding trusts which have registered with the Secretary on or before the 180th day after the date of the enactment of this section. Each trust’s share of such national limitation shall be the amount which bears the same ratio to such limitation as the number of school age children of such trust’s sponsoring agencies bears to the aggregate number of school age children of the sponsoring agencies of all trusts which have so registered with the Secretary. (B)

School age children of sponsoring agencies

For purposes of subparagraph (A), the number of school age children of a trust’s sponsoring agencies is the number of children of the local education agencies referred to in subsection (b)(2)(B) who have attained age 5 but not age 18 for the most recent fiscal year ending before the date the allocations under this paragraph are made. (3)

Designation subject to allocated limitation amount

The amount of contributions made to a qualified scholarship funding trust which may be designated by such trust for purposes of this section shall not exceed the limitation amount allocated to such trust under paragraph (2). (4)

Maximum allocation per trust

The maximum qualified college scholarship funding contribution limitation which may be allocated to each trust is $200,000,000. An amount which may not be allocated to a trust by reason of the preceding sentence shall be allocated as provided in paragraph (2) among registered qualified scholarship funding trusts whose allocated limitation (without regard to this sentence) does not exceed $200,000,000. (d)

Application with other credits

(1)

Business credit treated as part of general business credit

So much of the credit which would be allowed under subsection (a) for any taxable year (determined without regard to this subsection) to a taxpayer engaged in a trade or business shall be treated as a credit listed in section 38(b) for such taxable year (and not allowed under subsection (a)). (2)

Personal credit

(A)

In general

For purposes of this title, the credit allowed under subsection (a) for any taxable year (determined after application of paragraph (1)) shall be treated as a credit allowable under subpart A for such taxable year. (B)

Limitation based on amount of tax

In the case of a taxable year to which section 26(a)(2) does not apply, the credit allowed under subsection (a) for any taxable year (determined after application of paragraph (1)) shall not exceed the excess of— (i)the sum of the regular tax liability (as defined in section 26(b)) plus the tax imposed by section 55, over (ii)the sum of the credits allowable under subpart A (other than this section and sections 23 and 25D) and section 27 for the taxable year. (e)

Application of section

This section shall apply only to contributions made during the 3-year period beginning on the 180th day after the date of the enactment of this section.

(b)

Conforming amendments

(1)Section 23(b)(4)(B) of such Code is amended by inserting and 30E after section 25D. (2)Sections 24(b)(3)(B), 25A(i)(5)(B), 25B(g)(2), 26(a)(1), 30(c)(2)(B)(ii), 30B(g)(2)(B)(ii), 904(i), and 1400C(d)(2) of such Code are each amended by striking and 30D and inserting 30D, and 30E. (3)Section 25(e)(1)(C)(ii) of such Code is amended by inserting 30E, after 30D,. (4)Section 30D(c)(2)(B)(ii) of such Code is amended by striking and 25D and inserting , 25D, and 30E. (5)Section 38(b) of such Code is amended by striking plus at the end of paragraph (35), by striking the period at the end of paragraph (36) and inserting , plus, and by adding at the end the following new paragraph:

(37)the portion of the credit to which section 30E(d)(1) applies.

(6)The table of sections for subpart B of part IV of subchapter A of chapter 1 of such Code is amended by adding at the end the following new item:

Sec. 30E. Contributions to trust used to provide need-based college scholarships.

(c)

Effective date

The amendments made by this section shall apply to contributions made on or after the 180th day after the date of the enactment of this Act in taxable years ending after such date.