AB941: Bill Text

2009 Assembly BILL 941

April 7, 2010 - Introduced by Representatives Davis, Vos, Brooks, Huebsch, Lothian, Newcomer and Spanbauer, cosponsored by Senators Darling and Schultz. Referred to Joint Committee on Finance.

AB941,1,8 An Act to amend 71.05 (6) (a) 15., 71.21 (4), 71.26 (2) (a) 4., 71.34 (1k) (g), 71.45 (2) (a) 10. and 77.92 (4); and to create 71.07 (5n), 71.07 (8m), 71.10 (4) (cs), 71.10 (4) (ct), 71.28 (5n), 71.30 (3) (dq), 71.47 (5n) and 71.49 (1) (dq) of the statutes; relating to: creating an income and franchise tax credit for businesses that contribute to a scholarship-granting organization or to an educational improvement organization and a nonrefundable individual income tax credit for education expenses paid for dependents who attend elementary and secondary schools.

Analysis by the Legislative Reference Bureau

This bill creates an income and franchise tax credit for businesses that contribute to a scholarship-granting organization or to an educational improvement organization. The amount of the credit is equal to 75 percent of the contribution, but the amount of the credit may not exceed $200,000 in any taxable year. The total amount of the credit that all businesses may claim in any taxable year is $12,000,000. Under the bill, a scholarship-granting organization is a nonprofit entity that contributes at least 80 percent of its annual receipts to scholarship programs for pupils in grades kindergarten to 12 at private or public schools in this state. Under the bill, an educational improvement organization is a nonprofit entity that contributes at least 80 percent of its annual receipts as grants to public schools for innovative educational programs.

This bill also creates a nonrefundable individual income tax credit for amounts spent by a claimant, for the claimant's dependent child, on eligible education expenses at public schools, private schools, or charter schools for grades kindergarten to 12. Because the credit is nonrefundable, no refund is paid if the amount of the credit exceeds the taxpayer's tax liability.

Under the bill, education expenses include amounts that are spent for tuition, books, and other educational materials or supplies that are purchased by a claimant in the year to which the claim relates and that are related to the pupil's curricular activities and attendance at an eligible institution.

The maximum credit that may be claimed under the bill is $2,500 per year if the claimant files as a single individual, head of household, or married person filing separately. The maximum credit that may be claimed under the bill is $5,000 per year if the claimant is a married person filing a joint return. The amount of credit that may be claimed by a nonresident or part-year resident of this state is modified based on the ratio of the claimant's Wisconsin adjusted gross income (AGI) to his or her federal AGI.

For further information see the state fiscal estimate, which will be printed as an appendix to this bill.

The people of the state of Wisconsin, represented in senate and assembly, do enact as follows:

AB941, s. 1 Section 1. 71.05 (6) (a) 15. of the statutes, as affected by 2009 Wisconsin Act 28, is amended to read:

AB941,2,8 71.05 (6) (a) 15. The amount of the credits computed under s. 71.07 (2dd), (2de), (2di), (2dj), (2dL), (2dm), (2dr), (2ds), (2dx), (2dy), (3g), (3h), (3n), (3p), (3q), (3r), (3s), (3t), (3w), (5e), (5f), (5h), (5i), (5j), (5k), (5n), and (8r) and not passed through by a partnership, limited liability company, or tax-option corporation that has added that amount to the partnership's, company's, or tax-option corporation's income under s. 71.21 (4) or 71.34 (1k) (g).

AB941, s. 2 Section 2. 71.07 (5n) of the statutes is created to read:

AB941,2,11 71.07 (5n) Educational improvement credit. (a) Definitions. In this subsection:

AB941,3,3 1. "Claimant" means a sole proprietor, a partner, a member of a limited liability company, or a shareholder of a tax-option corporation who files a claim under this subsection.

AB941,3,4 2. "Contribution" means a donation of cash, personal property, or services.

AB941,3,6 3. "Dependent" means a dependent as defined in section 152 of the Internal Revenue Code.

AB941,3,11 4. "Educational improvement organization" means an entity described in section 501 (c) (3) of the Internal Revenue Code that is exempt from federal income tax under section 501 (a) of the Internal Revenue Code and that spends at least 80 percent of its annual receipts as grants to public schools for innovative educational programs.

AB941,3,12 5. "Eligible pupil" means any pupil to whom all of the following apply:

AB941,3,13 a. The pupil has not attained the age of 21 or been graduated from high school.

AB941,3,17 b. At the time the pupil first receives a scholarship from a scholarship-granting organization, he or she is a member of a household whose total annual household income during the year before the receipt of the scholarship does not exceed an amount equal to $40,000 plus $10,000 for each dependent.

AB941,3,20 6. "Household" means an individual and his or her spouse and dependents who all have the same principal abode for more than 6 months during the year to which a claim under this subsection relates.

AB941,3,22 7. "Household income" means all income received by all members of a household.

AB941,3,25 8. "Innovative educational program" means an advanced academic or similar program that is not part of the regular academic program of a public school in this state, but that enhances the curriculum or academic program of the public school.

AB941,4,1 9. "Private school" has the meaning given in s. 115.001 (3r).

AB941,4,3 10. "Qualified school" means any public, private, or other school or program that provides elementary or secondary education, including kindergarten.

AB941,4,7 11. "Scholarship-granting organization" means an entity described in section 501 (c) (3) of the Internal Revenue Code that is exempt from federal income tax under section 501 (a) of the Internal Revenue Code and that contributes at least 80 percent of its annual receipts to scholarship programs.

AB941,4,9 12. "Scholarship program" means a program to provide tuition for eligible students to attend a qualified school in this state.

AB941,4,14 (b) Filing claims. Subject to the limitations provided in this subsection, a claimant may claim as a credit against the tax imposed under s. 71.02, up to the amount of those taxes, an amount that is equal to 75 percent of any contribution made by the claimant during the taxable year to an educational improvement organization or to a scholarship-granting organization.

AB941,4,16 (c) Limitations. 1. The amount of a credit that a claimant may receive under this subsection may not exceed $200,000 in a taxable year.

AB941,4,18 2. The maximum amount of the credits that all claimants may receive under this subsection and ss. 71.28 (5n) and 71.47 (5n) in a taxable year is $12,000,000.

AB941,4,21 3. The total amount of all credits awarded under this subsection and ss. 71.28 (5n) and 71.47 (5n) for contributions to scholarship-granting organizations shall not exceed $30,000,000 for all taxable years.

AB941,4,24 4. The total amount of all credits awarded under this subsection and ss. 71.28 (5n) and 71.47 (5n) for contributions to educational improvement organizations shall not exceed $20,000,000 for all taxable years.

AB941,5,5 5. No claimant may claim a credit under this subsection unless the claimant first files an application for the credit with the department, in the manner prescribed by the department. The department shall allocate the credits claimed under this subsection and ss. 71.28 (5n) and 71.47 (5n) in the order in which the applications for such credits are received.

AB941,5,9 6. For purposes of determining the amount of any credit claimed under this subsection, the value of a contribution is equal to the net cost of the claimant's donation of cash or personal property or to the proportionate share of any wage paid by the claimant that is directly related to donating a service.

AB941,5,17 7. Partnerships, limited liability companies, and tax-option corporations may not claim the credit under this subsection, but the eligibility for, and the amount of, the credit are based on their payment of amounts under par. (b). A partnership, limited liability company, or tax-option corporation shall compute the amount of credit that each of its partners, members, or shareholders may claim and shall provide that information to each of them. Partners, members of limited liability companies, and shareholders of tax-option corporations may claim the credit in proportion to their ownership interests.

AB941,5,19 (d) Administration. Section 71.28 (4) (e) to (h), as it applies to the credit under s. 71.28 (4), applies to the credit under this subsection.

AB941, s. 3 Section 3. 71.07 (8m) of the statutes is created to read:

AB941,5,21 71.07 (8m) Education expenses credit. (a) Definitions. In this subsection:

AB941,5,23 1. "Claimant" means an individual who claims a pupil as a dependent under section 151 (c) of the Internal Revenue Code, on his or her tax return.

AB941,6,2 2. "Education supplies" means tuition, books, and other educational materials or supplies that are purchased by a claimant in the year to which the claim relates and that are related to the pupil's curricular activities and attendance at an eligible institution.

AB941,6,5 3. "Eligible institution" means a private school, as defined in s. 115.001 (3r), or a charter school, as defined in s. 115.001 (1), that meets all of the criteria under s. 118.165 (1) or a public school.

AB941,6,8 4. "Pupil" means an individual who is enrolled in kindergarten or grades one to 12 at an eligible institution and who is a dependent of the claimant under section 151 (c) of the Internal Revenue Code.

AB941,6,12 (b) Filing claims. Subject to the limitations provided in this subsection, a claimant may claim as a credit against the tax imposed under s. 71.02, up to the amount of those taxes, an amount equal to any amount paid for education supplies in the year to which the claim relates.

AB941,6,15 (c) Limitations. 1. Subject to subd. 4., the maximum credit that may be claimed under this subsection by a claimant who files as a single individual or head of household is $2,500 in each year to which the claim relates.

AB941,6,18 2. Subject to subd. 4., the maximum credit that may be claimed under this subsection by claimants who are a married couple and file a joint return is a total of $5,000 in each year to which the claim relates.

AB941,6,21 3. Subject to subd. 4., the maximum credit that may be claimed by each spouse of a married couple that files separately is 50 percent of the amount specified in subd. 2.

AB941,7,4 4. If a part-year resident or a nonresident of this state files a claim under this subsection, the maximum credit amount in subd. 1., 2., or 3. shall be multiplied by a fraction, the numerator of which is the individual's and his or her spouse's Wisconsin adjusted gross income and the denominator of which is the individual's and his or her spouse's federal adjusted gross income. In this subdivision, for married persons filing separately "adjusted gross income" means the separate adjusted gross income of each spouse, and for married persons filing jointly "adjusted gross income" means the total adjusted gross income of both spouses.

AB941,7,6 5. No credit may be allowed under this subsection unless it is claimed within the time period under s. 71.75 (2).

AB941,7,9 6. No credit may be allowed under this subsection for a taxable year covering a period of less than 12 months, except for a taxable year closed by reason of the death of the taxpayer.

AB941,7,14 (d) Administration. The department may enforce the credit under this subsection and may take any action, conduct any proceeding, and proceed as it is authorized in respect to taxes under this chapter. The income tax provisions in this chapter relating to assessments, refunds, appeals, collection, interest, and penalties apply to the credit under this subsection.

AB941, s. 4 Section 4. 71.10 (4) (cs) of the statutes is created to read:

AB941,7,16 71.10 (4) (cs) Education expenses credit under s. 71.07 (8m).

AB941, s. 5 Section 5. 71.10 (4) (ct) of the statutes is created to read:

AB941,7,18 71.10 (4) (ct) Educational improvement credit under s. 71.07 (5n).

AB941, s. 6 Section 6. 71.21 (4) of the statutes, as affected by 2009 Wisconsin Act 28, is amended to read:

AB941,7,24 71.21 (4) Credits computed by a partnership under s. 71.07 (2dd), (2de), (2di), (2dj), (2dL), (2dm), (2ds), (2dx), (2dy), (3g), (3h), (3n), (3p), (3q), (3r), (3s), (3t), (3w), (5e), (5f), (5g), (5h), (5i), (5j), (5k), (5n), and (8r) and passed through to partners shall be added to the partnership's income.

AB941, s. 7 Section 7. 71.26 (2) (a) 4. of the statutes, as affected by 2009 Wisconsin Act 28, is amended to read:

AB941,8,8 71.26 (2) (a) 4. Plus the amount of the credit computed under s. 71.28 (1dd), (1de), (1di), (1dj), (1dL), (1dm), (1ds), (1dx), (1dy), (3g), (3h), (3n), (3p), (3q), (3r), (3t), (3w), (5e), (5f), (5g), (5h), (5i), (5j), (5k), (5n), and (8r) and not passed through by a partnership, limited liability company, or tax-option corporation that has added that amount to the partnership's, limited liability company's, or tax-option corporation's income under s. 71.21 (4) or 71.34 (1k) (g).

AB941, s. 8 Section 8. 71.28 (5n) of the statutes is created to read:

AB941,8,11 71.28 (5n) Educational improvement credit. (a) Definitions. In this subsection:

AB941,8,12 1. "Claimant" means a person who files a claim under this subsection.

AB941,8,13 2. "Contribution" means a donation of cash, personal property, or services.

AB941,8,15 3. "Dependent" means a dependent as defined in section 152 of the Internal Revenue Code.

AB941,8,20 4. "Educational improvement organization" means an entity described in section 501 (c) (3) of the Internal Revenue Code that is exempt from federal income tax under section 501 (a) of the Internal Revenue Code and that spends at least 80 percent of its annual receipts as grants to public schools for innovative educational programs.

AB941,8,21 5. "Eligible pupil" means any pupil to whom all of the following apply:

AB941,8,22 a. The pupil has not attained the age of 21 or been graduated from high school.

AB941,9,2 b. At the time the pupil first receives a scholarship from a scholarship-granting organization, he or she is a member of a household whose total annual household income during the year before the receipt of the scholarship does not exceed an amount equal to $40,000 plus $10,000 for each dependent.

AB941,9,5 6. "Household" means an individual and his or her spouse and dependents who all have the same principal abode for more than 6 months during the year to which a claim under this subsection relates.

AB941,9,7 7. "Household income" means all income received by all members of a household.

AB941,9,10 8. "Innovative educational program" means an advanced academic or similar program that is not part of the regular academic program of a public school in this state, but that enhances the curriculum or academic program of the public school.

AB941,9,11 9. "Private school" has the meaning given in s. 115.001 (3r).

AB941,9,13 10. "Qualified school" means any public, private, or other school or program that provides elementary or secondary education, including kindergarten.

AB941,9,17 11. "Scholarship-granting organization" means an entity described in section 501 (c) (3) of the Internal Revenue Code that is exempt from federal income tax under section 501 (a) of the Internal Revenue Code and that contributes at least 80 percent of its annual receipts to scholarship programs.

AB941,9,19 12. "Scholarship program" means a program to provide tuition for eligible students to attend a qualified school in this state.

AB941,9,24 (b) Filing claims. Subject to the limitations provided in this subsection, a claimant may claim as a credit against the tax imposed under s. 71.23, up to the amount of those taxes, an amount that is equal to 75 percent of any contribution made by the claimant during the taxable year to an educational improvement organization or to a scholarship-granting organization.

AB941,10,2 (c) Limitations. 1. The amount of a credit that a claimant may receive under this subsection may not exceed $200,000 in a taxable year.

AB941,10,4 2. The maximum amount of the credits that all claimants may receive under this subsection and ss. 71.07 (5n) and 71.47 (5n) in a taxable year is $12,000,000.

AB941,10,7 3. The total amount of all credits awarded under this subsection and ss. 71.07 (5n) and 71.47 (5n) for contributions to scholarship-granting organizations shall not exceed $30,000,000 for all taxable years.

AB941,10,10 4. The total amount of all credits awarded under this subsection and ss. 71.07 (5n) and 71.47 (5n) for contributions to educational improvement organizations shall not exceed $20,000,000 for all taxable years.

AB941,10,15 5. No claimant may claim a credit under this subsection unless the claimant first files an application for the credit with the department, in the manner prescribed by the department. The department shall allocate the credits claimed under this subsection and ss. 71.07 (5n) and 71.47 (5n) in the order in which the applications for such credits are received.

AB941,10,19 6. For purposes of determining the amount of any credit claimed under this subsection, the value of a contribution is equal to the net cost of the claimant's donation of cash or personal property or to the proportionate share of any wage paid by the claimant that is directly related to donating a service.

AB941,11,2 7. Partnerships, limited liability companies, and tax-option corporations may not claim the credit under this subsection, but the eligibility for, and the amount of, the credit are based on their payment of amounts under par. (b). A partnership, limited liability company, or tax-option corporation shall compute the amount of credit that each of its partners, members, or shareholders may claim and shall provide that information to each of them. Partners, members of limited liability companies, and shareholders of tax-option corporations may claim the credit in proportion to their ownership interests.