1Amending the act of March 4, 1971 (P.L.6, No.2), entitled "An
2act relating to tax reform and State taxation by codifying
3and enumerating certain subjects of taxation and imposing
4taxes thereon; providing procedures for the payment,
5collection, administration and enforcement thereof; providing
6for tax credits in certain cases; conferring powers and
7imposing duties upon the Department of Revenue, certain
8employers, fiduciaries, individuals, persons, corporations
9and other entities; prescribing crimes, offenses and
10penalties," in educational improvement tax credit, further
11providing for definitions and for qualification and
12application; and, in educational opportunity scholarship tax
13credit, further providing for definitions and for
14qualification and application.

15The General Assembly of the Commonwealth of Pennsylvania
16hereby enacts as follows:

17Section 1.  The definitions of "educational improvement
18organization," "pre-kindergarten scholarship organization" and
19"scholarship organization" in section 1702-F of the act of March
204, 1971 (P.L.6, No.2), known as the Tax Reform Code of 1971,
21amended or added October 9, 2009 (P.L.451, No.48) and July 2,
222012 (P.L.751, No.85), are amended to read:

23Section 1702-F.  Definitions.

24The following words and phrases when used in this article

1shall have the meanings given to them in this section unless the
2context clearly indicates otherwise:

3* * *

4"Educational improvement organization."  A nonprofit entity
5which:

6(1)  is exempt from Federal taxation under section 501(c)
7(3) of the Internal Revenue Code of 1986 (Public Law 99-514, 
826 U.S.C. § 1 et seq.); and

9(2)  contributes [at least 80%] a minimum percentage of
10its annual receipts as grants to a public school, a chartered 
11school as defined in section 1376.1 of act of March 10, 1949 
12(P.L.30, No.14), known as the Public School Code of 1949, or 
13a private school approved under section 1376 of the Public 
14School Code of 1949, for innovative educational programs in 
15accordance with section 1703-F(b.1).

16For purposes of this definition, a nonprofit entity
17"contributes" its annual cash receipts when it expends or
18otherwise irrevocably encumbers those funds for expenditure
19during the then current fiscal year of the nonprofit entity or
20during the next succeeding fiscal year of the nonprofit entity.
21A nonprofit entity shall include a school district foundation, 
22public school foundation, charter school foundation or cyber 
23charter school foundation.

24* * *

25"Pre-kindergarten scholarship organization."  A nonprofit
26entity which:

27(1)  is exempt from Federal taxation under section 501(c)
28(3) of the Internal Revenue Code of 1986 (Public Law 99-514, 
2926 U.S.C. § 1 et seq.) or is operated as a separate 
30segregated fund by a scholarship organization that has been 

1qualified under section 1703-F; and

2(2)  contributes [at least 80%] a minimum percentage of
3its annual cash receipts to a pre-kindergarten scholarship
4program, in accordance with section 1703-F(b.1) by expending
5or otherwise irrevocably encumbering those funds for
6distribution during the then current fiscal year of the
7organization or during the next succeeding fiscal year of the
8organization.

9* * *

10"Scholarship organization."  A nonprofit entity which:

11(1)  is exempt from Federal taxation under section 501(c)
12(3) of the Internal Revenue Code of 1986 (Public Law 99-514, 
1326 U.S.C. § 1 et seq.); and

14(2)  contributes [at least 80%] a minimum percentage of
15its annual cash receipts to a scholarship program, in 
16accordance with section 1703-F(b.1).

17For purposes of this definition, a nonprofit entity
18"contributes" its annual cash receipts to a scholarship program
19when it expends or otherwise irrevocably encumbers those funds
20for distribution during the then current fiscal year of the
21nonprofit entity or during the next succeeding fiscal year of
22the nonprofit entity.

23* * *

24Section 2.  Section 1703-F of the act is amended by adding a
25subsection to read:

26Section 1703-F.  Qualification and application.

27* * *

28(b.1)  Annual cash receipts.--

29(1)  For fiscal years 2012-2013 and 2013-2014, a
30scholarship organization, a pre-kindergarten scholarship

1organization or an educational improvement organization must
2contribute at least 80% of its annual cash receipts in
3accordance with section 1702-F.

4(2)  For fiscal years 2014-2015 and 2015-2016, a
5scholarship organization, a pre-kindergarten scholarship
6organization or an educational improvement organization must
7contribute at least 82.5% of its annual cash receipts in
8accordance with section 1702-F.

9(3)  For fiscal years 2016-2017 and 2017-2018, a
10scholarship organization, a pre-kindergarten scholarship
11organization or an educational improvement organization must
12contribute at least 85% of its annual cash receipts in
13accordance with section 1702-F.

14(4)  For fiscal years 2018-2019 and 2019-2020, a
15scholarship organization, a pre-kindergarten scholarship
16organization or an educational improvement organization must
17contribute at least 87.5% of its annual cash receipts in
18accordance with section 1702-F.

19(5)  For fiscal year 2020-2021 and each fiscal year
20thereafter, a scholarship organization, a pre-kindergarten
21scholarship organization or an educational improvement
22organization must contribute at least 90% of its annual cash
23receipts in accordance with section 1702-F.

24* * *

25Section 3.  Sections 1702-G.1 and 1703-G.1 of the act, added
26July 2, 2012 (P.L.751, No.85), are amended to read:

27Section 1702-G.1.  Definitions.

28The following words and phrases when used in this article
29shall have the meanings given to them in this section unless the
30context clearly indicates otherwise:

1"Applicant."  An eligible student who applies for a
2scholarship.

3"Assessment."  The Pennsylvania System of School Assessment
4test, the Keystone Exam, an equivalent local assessment or
5another test established by the State Board of Education to meet
6the requirements of section 2603-B(d)(10)(i) of the Public
7School Code of 1949 and required under the No Child Left Behind
8Act of 2001 (Public Law 107-110, 115 Stat. 1425) or its
9successor statute or any other test required to achieve other
10standards established by the Department of Education for the
11public school or school district under 22 Pa. Code § 403.3
12(relating to single accountability system).

13"Attendance boundary."  A geographic area of residence used
14by a school district to assign a student to a public school.

15"Average daily membership."  As defined in section 2501(3) of
16the Public School Code of 1949.

17"Business firm."  An entity authorized to do business in this
18Commonwealth and subject to a tax under Article XVI of the act
19of May 17, 1921 (P.L.682, No.284), known as The Insurance
20Company Law of 1921, or taxes imposed under Article III, IV, VI,
21VII, VIII, IX or XV. The term includes a pass-through entity.

22"Contribution."  A donation of cash, personal property or
23services, the value of which is the net cost of the donation to
24the donor or the pro rata hourly wage, including benefits, of
25the individual performing the services.

26"Department."  The Department of Community and Economic
27Development of the Commonwealth.

28"Elementary school."  A school which is not a secondary
29school.

30"Eligible student."  A student or a student with a disability

1who:

2(1)  resides within the attendance boundary of a low-
3achieving school as of the first day of classes of the school
4year; and

5(2)  is a member of a household which has a household
6income no greater than the maximum annual household income
7allowance.

8"Household."  An individual who lives alone or with the
9following: a spouse, parent and their unemancipated minor
10children, other unemancipated minor children who are related by
11blood or marriage or other adults or unemancipated minor
12children living in the household who are dependent upon the
13individual.

14"Household income."  All moneys or property received by a
15household of whatever nature and from whatever source derived.
16The term does not include the following:

17(1)  Periodic payments for sickness and disability other
18than regular wages received during a period of sickness or
19disability.

20(2)  Disability, retirement or other payments arising
21under workers' compensation acts, occupational disease acts
22and similar legislation by any government.

23(3)  Payments commonly recognized as old-age or
24retirement benefits paid to persons retired from service
25after reaching a specific age or after a stated period of
26employment.

27(4)  Payments commonly known as public assistance or
28unemployment compensation payments by a governmental agency.

29(5)  Payments to reimburse actual expenses.

30(6)  Payments made by employers or labor unions for

1programs covering hospitalization, sickness, disability or
2death, supplemental unemployment benefits, strike benefits,
3Social Security and retirement.

4(7)  Compensation received by United States servicemen
5serving in a combat zone.

6"Income allowance."

7(1)  The following shall apply:

8(i)  After June 30, 2012, and through June 30, 2013,
9$12,000 for each dependent member of the household.

10(ii)  After June 30, 2013, and through June 30, 2014,
11$15,000 for each dependent member of the household.

12(2)  Beginning July 1, 2014, the Department of Community
13and Economic Development shall annually adjust the income
14allowance amounts under paragraph (1) to reflect any upward
15changes in the Consumer Price Index for All Urban Consumers
16for the Pennsylvania, New Jersey, Delaware and Maryland area
17in the preceding 12 months and shall immediately submit the
18adjusted amounts to the Legislative Reference Bureau for
19publication as a notice in the Pennsylvania Bulletin.

20"Kindergarten."  A one-year formal educational program that
21occurs during the school year immediately prior to first grade.
22The term includes a part-time and a full-time program.

23"Low-achieving school."  A public school that ranked in the
24lowest 15% of its designation as an elementary school or a
25secondary school based on combined mathematics and reading
26scores from the annual assessment administered in the previous
27school year and for which the Department of Education has posted
28results on its publicly accessible Internet website. The term
29does not include a charter school, cyber charter school or area
30vocational-technical school.

1"Maximum annual household income allowance."

2(1)  Except as stated in paragraph (2) and subject to
3adjustment under paragraph (3), the sum of:

4(i)  Either:

5(A)  after June 30, 2012, and through June 30,
62013, not more than $60,000; or

7(B)  after June 30, 2013, not more than $75,000.

8(ii)  The applicable income allowance.

9(2)  With respect to a student with a disability, as
10calculated by multiplying:

11(i)  the applicable amount under paragraph (1); by

12(ii)  the applicable support level factor according
13to the following table:

14Support Level	Support Level Factor
151	1.50
162	2.993

17(3)  Beginning July 1, 2014, the Department of Community
18and Economic Development shall annually adjust the income
19amounts under paragraphs (1) and (2) to reflect any upward
20changes in the Consumer Price Index for All Urban Consumers
21for the Pennsylvania, New Jersey, Delaware and Maryland area
22in the preceding 12 months and shall immediately submit the
23adjusted amounts to the Legislative Reference Bureau for
24publication as a notice in the Pennsylvania Bulletin.

25"Nonpublic school."  A school which is a nonprofit
26organization and which is located in the Commonwealth. The term
27does not include a public school.

28"Parent."  An individual who:

29(1)  is a resident of the Commonwealth; and

30(2)  either:

1(i)  has legal custody or guardianship of a student;
2or

3(ii)  keeps in his home a student and supports the
4student gratis as if the student were a lineal descendant
5of the individual.

6"Participating nonpublic school."  A nonpublic school which
7notifies the Department of Education under section 1710-G.1 that
8it wishes to participate in the program.

9"Participating public school."  A public school in a school
10district which notifies the Department of Education under
11section 1710-G.1(b) that it wishes to participate in the
12program. The term shall not include a low-achieving school.

13"Pass-through entity."  A partnership as defined in section
14301(n.0), a single-member limited liability company treated as a
15disregarded entity for Federal income tax purposes or a
16Pennsylvania S corporation as defined in section 301(n.1).

17"Public School Code of 1949."  The act of March 10, 1949
18(P.L.30, No.14), known as the Public School Code of 1949.

19"Program."  The Educational Opportunity Scholarship Tax
20Credit Program established under this article.

21"Recipient."  An applicant who receives a scholarship.

22"Scholarship."  An award given to an applicant for the
23recipient to pay tuition and school-related fees necessary to
24attend a participating nonpublic school or a participating
25public school located in a school district which is not the
26recipient's school district of residence.

27"Scholarship organization."  A nonprofit entity which:

28(1)  is exempt from Federal taxation under section 501(c)
29(3) of the Internal Revenue Code of 1986 (Public Law 99-514,
3026 U.S.C. § 1 et seq.); and

1(2)  contributes [at least 80%] a minimum percentage of
2its annual cash receipts to a scholarship program in 
3accordance with section 1703-G.1(b.1).

4For purposes of this definition, a nonprofit entity
5"contributes" its annual cash receipts to a scholarship program
6when it expends or otherwise irrevocably encumbers those funds
7for distribution during the then current fiscal year of the
8nonprofit entity or during the next succeeding fiscal year of
9the nonprofit entity.

10"School."  An elementary school or a secondary school at
11which the compulsory attendance requirements of the Commonwealth
12may be met and which meets the applicable requirements of Title
13VI of the Civil Rights Act of 1964 (Public Law 88-352, 78 Stat.
14241).

15"School age."  The age of an individual from the earliest
16admission age to a school's kindergarten or, when no
17kindergarten is provided, the school's earliest admission age
18for beginners, until the end of the school year the individual
19attains 21 years of age or graduation from high school,
20whichever occurs first.

21"School district of residence."  The school district in which
22the student's primary domicile is located.

23"School-related fees."  Fees charged by a school to all
24students for books, instructional materials, technology
25equipment and services, uniforms and activities.

26"Secondary school."  A school with an eleventh grade.

27"Special education school."  A school or program within a
28school that is designated specifically and exclusively for
29students with any of the disabilities listed in 34 CFR § 300.8
30(relating to child with a disability) and meets one of the

1following:

2(1)  is licensed under the act of January 28, 1988
3(P.L.24, No.11), known as the Private Academic Schools Act;

4(2)  is accredited by an accrediting association approved
5by the State Board of Education;

6(3)  is a school for the blind or deaf receiving
7Commonwealth appropriations; or

8(4)  is operated by or under the authority of a bona fide
9religious institution or by the Commonwealth or any political
10subdivision thereof.

11"Student."  An individual who meets all of the following:

12(1)  Is school age.

13(2)  Is a resident of this Commonwealth.

14(3)  Attends or is about to attend a school.

15"Student with a disability."  A student who meets all of the
16following:

17(1)  Is either enrolled in a special education school or
18has otherwise been identified, in accordance with 22 Pa. Code
19Ch. 14 (relating to special education services and programs),
20as a "child with a disability," as defined in 34 CFR § 300.8
21(relating to child with a disability).

22(2)  Needs special education and related services.

23"Support level."  The level of support needed by an eligible
24student with a disability, as provided in the following matrix:

25Support Level 1 - The student is not enrolled in a
26special education school.

27Support Level 2 - The student is enrolled as a student in
28a special education school.

29Section 1703-G.1.  Qualification and application.

30(a)  Establishment.--The Educational Opportunity Scholarship

1Tax Credit Program is established. The program shall provide tax
2credits to entities that provide contributions to scholarship
3organizations. The scholarship organizations must enhance the
4educational opportunities available to students in this
5Commonwealth by providing scholarships to eligible students who
6reside within the attendance boundary of low-achieving schools
7to attend schools which are not low-achieving schools and which
8are not a public school within the school district of residence.

9(b)  Information.--In order to qualify under this article, a
10scholarship organization must submit information to the
11department that enables the department to confirm that the
12scholarship organization is exempt from taxation under section
13501(c)(3) of the Internal Revenue Code of 1986 (Public Law 99-
14514, 26 U.S.C. § 1 et seq.).

15(b.1)  Annual cash receipts.--

16(1)  For fiscal years 2012-2013 and 2013-2014, a
17scholarship organization must contribute at least 80% of its
18annual cash receipts in accordance with section 1702-G.1.

19(2)  For fiscal years 2014-2015 and 2015-2016, a
20scholarship organization must contribute at least 82.5% of
21its annual cash receipts, in accordance with section
221702-G.1.

23(3)  For fiscal years 2016-2017 and 2017-2018, a
24scholarship organization must contribute at least 85% of its
25annual cash receipts in accordance with section 1702-G.1.

26(4)  For fiscal years 2018-2019 and 2019-2020, a
27scholarship organization must contribute at least 87.5% of
28its annual cash receipts in accordance with section 1702-G.1.

29(5)  For fiscal year 2020-2021 and each each fiscal year 
30thereafter, a scholarship organization must contribute at 

1least 90% of its annual cash receipts in accordance with 
2section 1702-G.1.

3(c)  Annual certification of eligibility.--By August 15,
42012, and by February 15, 2013, and each February 15 thereafter,
5a scholarship organization must certify to the department that
6the organization is eligible to participate in the program.

7(d)  Report.--

8(1)  A scholarship organization must agree to report the
9following information on a form provided by the department by
10September 1, 2013, and each September 1 thereafter:

11(i)  The total number of applications for
12scholarships received during the immediately preceding
13school year from eligible students in grades kindergarten
14through eight.

15(ii)  The number of scholarships awarded during the
16immediately preceding school year to eligible students in
17grades kindergarten through eight.

18(iii)  The total and average amounts of the
19scholarships awarded during the immediately preceding
20school year to eligible students in grades kindergarten
21through eight.

22(iv)  The total number of applications for
23scholarships received during the immediately preceding
24school year from eligible students in grades 9 through
2512.

26(v)  The number of scholarships awarded during the
27immediately preceding school year to eligible students in
28grades 9 through 12.

29(vi)  The total and average amounts of the
30scholarships awarded during the immediately preceding

1school year to eligible students in grades 9 through 12.

2(vii)  Where the scholarship organization collects
3information on a county-by-county basis, the total number
4and the total amount of scholarships awarded during the
5immediately preceding school year to residents of each
6county in which the scholarship organization awarded
7scholarships.

8(viii)  The number of scholarships awarded during the
9immediately preceding school year to applicants with a
10household income that does not exceed 185% of the Federal
11poverty level.

12(ix)  The total and average amounts of the
13scholarships awarded during the immediately preceding
14school year to applicants with a household income that
15does not exceed 185% of the Federal poverty level.

16(x)  The number of scholarships awarded during the
17immediately preceding school year to applicants with a
18household income that does not exceed 185% of the Federal
19poverty level and who reside within a first class school
20district.

21(xi)  The total and average amounts of the
22scholarships awarded during the immediately preceding
23school year to applicants with a household income that
24does not exceed 185% of the Federal poverty level and who
25reside within a first class school district.

26(xii)  The number of scholarships awarded during the
27immediately preceding school year to applicants with a
28household income that does not exceed 185% of the Federal
29poverty level and who reside within a school district
30with an average daily membership greater than 7,500 and

1that receives an advance of its basic education subsidy
2at any time.

3(xiii)  The total and average amounts of the
4scholarships awarded during the immediately preceding
5school year to applicants with a household income that
6does not exceed 185% of the Federal poverty level and who
7reside within a school district with an average daily
8membership greater than 7,500 and that receives an
9advance of its basic education subsidy at any time.

10(xiv)  The number of scholarships awarded during the
11immediately preceding school year to applicants with a
12household income that does not exceed 185% of the Federal
13poverty level and who reside within a school district
14that receives an advance of its basic education subsidy
15at any time and is either subject to a declaration of
16financial distress under section 691 of the Public School
17Code of 1949 or engaged in litigation against the
18Commonwealth in which the school district seeks financial
19assistance from the Commonwealth to allow the school
20district to continue to operate.

21(xv)  The total and average amounts of the
22scholarships awarded during the immediately preceding
23school year to applicants with a household income that
24does not exceed 185% of the Federal poverty level and who
25reside within a school district that receives an advance
26of its basic education subsidy at any time and is either
27subject to a declaration of financial distress under
28section 691 of the Public School Code of 1949 or is
29engaged in litigation against the Commonwealth in which
30the school district seeks financial assistance from the

1Commonwealth to allow the school district to continue to
2operate.

3(xvi)  The total number of scholarship applications
4processed and the amounts of any application fees charged
5either per scholarship application or in the aggregate
6through a third-party processor.

7(xvii)  The scholarship organization's Federal Form
8990 or other Federal form indicating the tax status of
9the scholarship organization for Federal tax purposes, if
10any, and a copy of a compilation, review or audit of the
11scholarship organization's financial statements conducted
12by a certified public accounting firm.

13(2)  No later than May 1, 2013, and each May 1
14thereafter, the department shall annually distribute such
15sample forms, together with the forms on which the reports
16are required to be made, to each listed scholarship
17organization.

18(3)  The department may not require any other information
19to be provided by scholarship organizations, except as
20expressly authorized in this article.

21(e)  Notification.--The department shall notify a scholarship
22organization that it meets the requirements of this article for
23that fiscal year no later than 60 days after the scholarship
24organization submits the information required under this
25section.

26(f)  Publication.--The department shall annually publish a
27list of each scholarship organization qualified under this
28section in the Pennsylvania Bulletin and shall post and update
29the list as necessary on the publicly accessible Internet
30website of the department.

1Section 4.  This act shall take effect in 60 days.