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Citations Affected: IC 6-3; IC 6-3.1; IC 12-7; IC 12-17.3; IC 20-51; noncode.

Effective: January 1, 2013 (retroactive); July 1, 2013.

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Behning, Huston

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    January 15, 2013, read first time and referred to Committee on Education.
    February 11, 2013, amended, reported _ Do Pass. Referred to Committee on Ways and Means pursuant to Rule 127.

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Digest Continued

grade 1 through grade 12 in a public school within or outside Indiana before the first semester for which the individual receives a choice scholarship; (2) is in foster care; (3) is a child with a disability who requires special education; (4) is a sibling of an individual who previously received a choice scholarship or a scholarship from a scholarship granting organization; (5) has a parent who has received an honorable discharge from the armed forces of the United States or national guard or is currently serving in the armed forces of the United States or national guard and is a member of household whose income is not more than 300% of the amount required to qualify for the free and reduced lunch program; or (6) is an individual who is enrolled in an eligible school at the time the individual first meets income requirements. Provides that an eligible choice scholarship student who is initially required to meet an income requirement of being a member of a household with an income that does not exceed 150% of the amount required to qualify for the free and reduced lunch program continues to qualify for the choice scholarship as long as the individual is a member of a household with an income that does not exceed 300% of the amount required to qualify for the free and reduced lunch program. Provides that an individual who: (1) is in foster care; (2) attended a public school the previous year and is a member of a household with an annual income not exceeding the amount necessary to qualify for the free or reduced lunch program; (3) attended an eligible school at the time the individual first met the income requirements and is a member of a household with an annual income not exceeding the amount necessary to qualify for the free or reduced lunch program; (4) is a child with a disability who requires special education; (5) is a sibling of an individual who previously received a choice scholarship or a scholarship from a scholarship granting organization; or (6) has a parent who has received an honorable discharge from the armed forces of the United States or national guard or is currently serving in the armed forces of the United States or national guard; may receive up to 90% of the amount that the state tuition support that the public school in the student's legal settlement would receive for the student if the student attended the public school. Provides that an eligible student who is subject to certain income requirements may receive up to 50% of the amount of state tuition support a public school would receive for the student if the student attended the public school and the student's household has an annual income of not more than 300% of the amount required to qualify for the free or reduced lunch program. Increases the choice scholarship cap for students enrolled in grades 1 through 8. Requires the department to process an application for an eligible school and choice scholarship student within 15 days. Provides that the department must accept applications for choice scholarship students and eligible schools, at a minimum, from March 1 through September 1 for the upcoming school year. Provides that in calculating the amount of a choice scholarship, in addition to a certain percent of state tuition support, the scholarship would include any applicable amount that a school corporation (in which the student has legal settlement) would receive for the student as part of a special education grant. Removes a provision that allows the department to make only a partial choice scholarship grant. Make conforming amendments. Makes technical amendment.

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PRINTING CODE. Amendments: Whenever an existing statute (or a section of the Indiana Constitution) is being amended, the text of the existing provision will appear in this style type, additions will appear in this style type, and deletions will appear in this style type.
Additions: Whenever a new statutory provision is being enacted (or a new constitutional provision adopted), the text of the new provision will appear in this style type. Also, the word NEW will appear in that style type in the introductory clause of each SECTION that adds a new provision to the Indiana Code or the Indiana Constitution.
Conflict reconciliation: Text in a statute in this style type or this style type reconciles conflicts between statutes enacted by the 2012 Regular Session of the General Assembly.

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    A BILL FOR AN ACT to amend the Indiana Code concerning education and tax.

SOURCE: IC 6-3-2-22; (13)HB1003.1.1. -->     SECTION 1. IC 6-3-2-22, AS ADDED BY P.L.229-2011, SECTION 85, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JANUARY 1, 2013 (RETROACTIVE)]: Sec. 22. (a) The following definitions apply throughout this section:
        (1) "Dependent child" means an individual who:
            (A) is eligible to receive a free elementary or high school education in an Indiana school corporation;
            (B) qualifies as a dependent (as defined in Section 152 of the Internal Revenue Code) of the taxpayer; and
            (C) is the natural or adopted child of the taxpayer or, if custody of the child has been awarded in a court proceeding to someone other than the mother or father, the court appointed guardian or custodian of the child.
        If the parents of a child are divorced, the term refers to the parent who is eligible to take the exemption for the child under Section 151 of the Internal Revenue Code.
        (2) "Education expenditure" refers to any expenditures made in

connection with enrollment, attendance, or participation of the taxpayer's dependent child in a private elementary or high school education program. The term includes tuition, fees, computer software, textbooks, workbooks, curricula, school supplies (other than personal computers), and other written materials used primarily for academic instruction or for academic tutoring, or both.
        (3) "Private elementary or high school education program" means attendance at:
            (A) a nonpublic school (as defined in IC 20-18-2-12); or
            (B) an accredited nonpublic school;
        in Indiana that satisfies a child's obligation under IC 20-33-2 for compulsory attendance at a school. The term does not include the delivery of instructional service in a home setting to a dependent child who is enrolled in a school corporation or a charter school.
    (b) This section applies to taxable years beginning after December 31, 2010.
    (c) A taxpayer who makes an unreimbursed education expenditure during the taxpayer's taxable year is entitled to a deduction against the taxpayer's adjusted gross income in the taxable year.
    (d) The amount of the deduction is:
        (1) one three thousand dollars ($1,000); ($3,000); multiplied by
        (2) the number of the taxpayer's dependent children for whom the taxpayer made education expenditures in the taxable year.
A husband and wife are entitled to only one (1) deduction under this section.
    (e) To receive the deduction provided by this section, a taxpayer must claim the deduction on the taxpayer's annual state tax return or returns in the manner prescribed by the department.

SOURCE: IC 6-3.1-30.5-9; (13)HB1003.1.2. -->     SECTION 2. IC 6-3.1-30.5-9, AS ADDED BY P.L.182-2009(ss), SECTION 205, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JANUARY 1, 2013 (RETROACTIVE)]: Sec. 9. (a) This section applies to a taxpayer that is entitled to a tax credit under this chapter for a taxable year beginning before January 1, 2013.
    (b) A taxpayer is not entitled to a carryover, carryback, or refund of an unused credit.
     (c) This section expires January 1, 2017.

SOURCE: IC 6-3.1-30.5-9.5; (13)HB1003.1.3. -->     SECTION 3. IC 6-3.1-30.5-9.5 IS ADDED TO THE INDIANA CODE AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE JANUARY 1, 2013 (RETROACTIVE)]: Sec. 9.5. (a) This section applies to a taxpayer that is entitled to a tax credit under this chapter for a taxable year beginning after December 31,

2012.
    (b) If the credit provided by this chapter exceeds the taxpayer's state tax liability for the taxable year for which the credit is first claimed, the excess may be carried forward to succeeding taxable years and used as a credit against the taxpayer's state tax liability during those taxable years. Each time the credit is carried forward to a succeeding taxable year, the credit is reduced by the amount that was used as a credit during the immediately preceding taxable year. The credit provided by this chapter may be carried forward and applied to succeeding taxable years for nine (9) taxable years following the unused credit year.
    (c) A taxpayer is not entitled to a carryback or refund of any unused credit.

SOURCE: IC 6-3.1-34; (13)HB1003.1.4. -->     SECTION 4. IC 6-3.1-34 IS ADDED TO THE INDIANA CODE AS A NEW CHAPTER TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2013]:
     Chapter 34. Preschool Education Scholarship Tax Credit
    Sec. 1. As used in this chapter, "credit" refers to a credit granted under this chapter.
    Sec. 2. As used in this chapter, "pass through entity" has the meaning set forth in IC 6-3-1-35.
    Sec. 3. As used in this chapter, "preschool scholarship granting organization" has the meaning set forth in IC 12-17.3-1-9.
    Sec. 4. As used in this chapter, "preschool scholarship program" refers to a preschool scholarship program certified by the division of family resources under IC 12-17.3.
    Sec. 5. As used in this chapter, "state tax liability" means a taxpayer's total tax liability that is incurred under:
        (1) IC 6-3-1 through IC 6-3-7 (the adjusted gross income tax);
        (2) IC 6-5.5 (the financial institutions tax); and
        (3) IC 27-1-18-2 (the insurance premiums tax);
as computed after the application of the credits that under IC 6-3.1-1-2 are to be applied before the credit provided by this chapter.
    Sec. 6. As used in this chapter, "taxpayer" means an individual or entity that has any state tax liability.
    Sec. 7. A taxpayer that makes a contribution to a preschool scholarship granting organization for use by the preschool scholarship granting organization in a preschool scholarship program is entitled to a credit against the taxpayer's state tax liability in the taxable year in which the taxpayer makes the contribution.

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    Sec. 8. The amount of a taxpayer's credit is equal to fifty percent (50%) of the amount of the contribution made to the preschool scholarship granting organization for a preschool scholarship program.
    Sec. 9. A taxpayer is not entitled to a carryover, carryback, or refund of an unused credit.
    Sec. 10. If a pass through entity is entitled to a credit under section 7 of this chapter but does not have state tax liability against which the tax credit may be applied, a shareholder, partner, or member of the pass through entity is entitled to a tax credit equal to:
        (1) the tax credit determined for the pass through entity for the taxable year; multiplied by
        (2) the percentage of the pass through entity's distributive income to which the shareholder, partner, or member is entitled.
    Sec. 11. To apply a credit against the taxpayer's state tax liability, a taxpayer must claim the credit on the taxpayer's annual state tax return or returns in the manner prescribed by the department. The taxpayer shall submit to the department the information that the department determines is necessary for the department to determine whether the taxpayer is eligible for the credit.
    Sec. 12. A contribution to a preschool scholarship granting organization shall be treated as having been made for use in a preschool scholarship program if:
        (1) the contribution is made directly to a preschool scholarship granting organization; and
        (2) either:
            (A) not later than the date of the contribution, the taxpayer designates in writing to the preschool scholarship granting organization that the contribution is to be used only for a preschool scholarship program; or
            (B) the preschool scholarship granting organization provides the taxpayer with written confirmation that the contribution will be dedicated solely for use in a preschool scholarship program.
    Sec. 13. The total amount of tax credits awarded under this chapter may not exceed five million dollars ($5,000,000) in a state fiscal year.
    Sec. 14. The department, on an Internet web site used by the department to provide information to the public, shall provide the

following information:
        (1) The application for the credit provided in this chapter.
        (2) A timeline for receiving the credit provided in this chapter.
        (3) The total amount of credits awarded under this chapter during the current state fiscal year.
    Sec. 15. The department shall adopt rules under IC 4-22-2 to implement this chapter.

SOURCE: IC 12-7-2-9.5; (13)HB1003.1.5. -->     SECTION 5. IC 12-7-2-9.5 IS ADDED TO THE INDIANA CODE AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2013]: Sec. 9.5. "Agreement", for purposes of IC 12-17.3, has the meaning set forth in IC 12-17.3-1-2.

SOURCE: IC 12-7-2-42; (13)HB1003.1.6. -->     SECTION 6. IC 12-7-2-42 IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2013]: Sec. 42. "Contribution":
         (1) for purposes of IC 12-17-12, has the meaning set forth in IC 12-17-12-2; and
        (2) for purposes of IC 12-17.3, has the meaning set forth in IC 12-17.3-1-3.

SOURCE: IC 12-7-2-69; (13)HB1003.1.7. -->     SECTION 7. IC 12-7-2-69, AS AMENDED BY P.L.6-2012, SECTION 82, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2013]: Sec. 69. (a) "Division", except as provided in subsections (b) and (c), refers to any of the following:
        (1) The division of disability and rehabilitative services established by IC 12-9-1-1.
        (2) The division of aging established by IC 12-9.1-1-1.
        (3) The division of family resources established by IC 12-13-1-1.
        (4) The division of mental health and addiction established by IC 12-21-1-1.
    (b) The term refers to the following:
        (1) For purposes of the following statutes, the division of disability and rehabilitative services established by IC 12-9-1-1:
            (A) IC 12-9.
            (B) IC 12-11.
            (C) IC 12-12.
            (D) IC 12-12.5.
            (E) IC 12-12.7.
            (F) IC 12-15-46-2.
            (G) IC 12-28-5.
        (2) For purposes of the following statutes, the division of aging established by IC 12-9.1-1-1:
            (A) IC 12-9.1.
            (B) IC 12-10.
        (3) For purposes of the following statutes, the division of family

resources established by IC 12-13-1-1:
            (A) IC 12-13.
            (B) IC 12-14.
            (C) IC 12-15.
            (D) IC 12-16.
            (E) IC 12-17.2.
             (E) IC 12-17.3.
            (F) (F) IC 12-18.
            (G) (G) IC 12-19.
            (H) (H) IC 12-20.
        (4) For purposes of the following statutes, the division of mental health and addiction established by IC 12-21-1-1:
            (A) IC 12-21.
            (B) IC 12-22.
            (C) IC 12-23.
            (D) IC 12-25.
    (c) With respect to a particular state institution, the term refers to the division whose director has administrative control of and responsibility for the state institution.
    (d) For purposes of IC 12-24, IC 12-26, and IC 12-27, the term refers to the division whose director has administrative control of and responsibility for the appropriate state institution.

SOURCE: IC 12-7-2-76.2; (13)HB1003.1.8. -->     SECTION 8. IC 12-7-2-76.2 IS ADDED TO THE INDIANA CODE AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2013]: Sec. 76.2. "Eligible preschool", for purposes of IC 12-17.3, has the meaning set forth in IC 12-17.3-1-4.

SOURCE: IC 12-7-2-76.3; (13)HB1003.1.9. -->     SECTION 9. IC 12-7-2-76.3 IS ADDED TO THE INDIANA CODE AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2013]: Sec. 76.3. "Eligible preschool student", for purposes of IC 12-17.3, has the meaning set forth in IC 12-17.3-1-5.

SOURCE: IC 12-7-2-135.7; (13)HB1003.1.10. -->     SECTION 10. IC 12-7-2-135.7 IS ADDED TO THE INDIANA CODE AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2013]: Sec. 135.7. "Participating preschool", for purposes of IC 12-17.3, has the meaning set forth in IC 12-17.3-1-6.

SOURCE: IC 12-7-2-135.8; (13)HB1003.1.11. -->     SECTION 11. IC 12-7-2-135.8 IS ADDED TO THE INDIANA CODE AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2013]: Sec. 135.8. "Paths to QUALITY program", for purposes of IC 12-17.3, has the meaning set forth in IC 12-17.3-1-7.

SOURCE: IC 12-7-2-144.1; (13)HB1003.1.12. -->     SECTION 12. IC 12-7-2-144.1 IS ADDED TO THE INDIANA CODE AS A NEW SECTION TO READ AS FOLLOWS

[EFFECTIVE JULY 1, 2013]: Sec. 144.1. "Preschool education scholarship", for purposes of IC 12-17.3, has the meaning set forth in IC 12-17.3-1-8.

SOURCE: IC 12-7-2-144.2; (13)HB1003.1.13. -->     SECTION 13. IC 12-7-2-144.2 IS ADDED TO THE INDIANA CODE AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2013]: Sec. 144.2. "Preschool scholarship granting organization", for purposes of IC 12-17.3, has the meaning set forth in IC 12-17.3-1-9.

SOURCE: IC 12-17.3; (13)HB1003.1.14. -->     SECTION 14. IC 12-17.3 IS ADDED TO THE INDIANA CODE AS A NEW ARTICLE TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2013]:
     ARTICLE 17.3. PRESCHOOL EDUCATION SCHOLARSHIPS
    Chapter 1. Definitions
    Sec. 1. The definitions in this chapter apply throughout this article.
    Sec. 2. "Agreement" refers to an agreement between the division and an applicant that applies for certification of a preschool scholarship program.
    Sec. 3. "Contribution" refers to a contribution to a preschool scholarship granting organization for use in a preschool scholarship program.
    Sec. 4. "Eligible preschool" refers to a preschool, including a preschool operated or administered by a school corporation, a charter school, or an accredited nonpublic school, that:
        (1) is located in Indiana;
        (2) is a program of early education services that:
            (A) meets the standards of quality recognized by a Level 3 or Level 4 Paths to QUALITY program rating;
            (B) is nationally accredited by an accrediting body recognized by the division or the state board of education;
             (C) is accredited by the state board of education;
            (D) is provided, before July 1, 2014, by an eligible school (as defined in IC 20-51-1-4.7); or
            (E) is provided, before July 1, 2014, by a participating school (as defined in IC 20-51-1-6);
        (3) requires an eligible individual to pay tuition or fees to attend;
        (4) voluntarily agrees to enroll an eligible preschool student;
        (5) administers a test that measures each eligible preschool student's progress toward kindergarten readiness; and
        (6) submits to the division data required by the division.

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    Sec. 5. "Eligible preschool student" refers to an individual who:
        (1) is a legal resident of Indiana;
        (2) is at least three (3) years of age and less than five (5) years of age on the date in the school year specified in IC 20-33-2-7;
        (3) is a member of a household with an annual income of not more than two hundred percent (200%) of the household income required for the individual to qualify for a free or reduced price lunch under the household income guidelines established under 42 U.S.C. 1758(b) for a child who is school age; and
        (4) meets at least one (1) of the following conditions:
            (A) The individual is enrolling in an eligible preschool for the first time.
            (B) The individual received a preschool education scholarship in the previous year from a nonprofit preschool scholarship granting organization that qualifies for certification as a preschool scholarship program.
    Sec. 6. "Participating preschool" refers to an eligible preschool that:
        (1) an eligible preschool student is required to pay tuition or fees to attend; and
        (2) voluntarily agrees to enroll an eligible preschool student.
    Sec. 7. "Paths to QUALITY program" refers to a voluntary quality rating and improvement system for child care administered:
        (1) statewide by the division; and
        (2) under the trademark "Paths to QUALITY".
    Sec. 8. "Preschool education scholarship" refers to a grant to pay only the cost of preschool education for an eligible preschool student as determined for the school year for which the preschool education scholarship will be granted.
    Sec. 9. "Preschool scholarship granting organization" refers to an organization that:
        (1) is exempt from federal income taxation under Section 501(c)(3) of the Internal Revenue Code; and
        (2) is organized at least in part to grant preschool education scholarships without limiting the availability of preschool education scholarships to students of only one (1) participating preschool.
    Chapter 2. Administrative Provisions
    Sec. 1. The division shall maintain a publicly available list of the preschool scholarship programs certified by the division. The list

must contain names, addresses, and any other information that the division determines is necessary for the public to determine which preschool scholarship granting organizations conduct preschool scholarship programs. A current list must be posted on an Internet web site used by the division to provide information to the public.
    Sec. 2.    The division shall adopt rules under IC 4-22-2 to implement this article.
    Chapter 3. Preschool Scholarship Granting Organizations; Certification; Administration of Contributions
    Sec. 1. A program qualifies for certification as a preschool scholarship program:
        (1) if:
            (A) the program:
                (i) is administered by a preschool scholarship granting organization; and
                (ii) has the primary purpose of providing preschool education scholarships to eligible preschool students; and
            (B) the preschool scholarship granting organization administering the program:
                (i) applies to the division on the form and in the manner prescribed by the division; and
                (ii) enters into an agreement with the division to comply with this article; or
        (2) if the program is certified by the department of education under IC 20-51-3-2 on July 1, 2013.
    Sec. 2. The division shall certify all programs that meet the qualifications under section 1 of this chapter as preschool scholarship programs.
    Sec. 3. An agreement entered into under section 1 of this chapter between the division and a preschool scholarship granting organization must require the preschool scholarship granting organization to do the following:
        (1) Provide a receipt to taxpayers for contributions made to the preschool scholarship granting organization that will be used in a preschool scholarship program. The department of state revenue shall prescribe a standardized form for the receipt issued under this subdivision. The receipt must indicate the value of the contribution and the part of the contribution being designated for use in a preschool scholarship program.
        (2) Allow a taxpayer to designate a participating preschool for

which the taxpayer's contribution must be used as scholarships.
        (3) Use not more than ten percent (10%) of the total amount of contributions for administrative costs.
        (4) Conduct criminal background checks on all the preschool scholarship granting organization's employees and board members and exclude from employment or governance any individual who might reasonably pose a risk to the appropriate use of contributed funds.
        (5) Make the reports required by this chapter.
    Sec. 4. An agreement entered into under section 1 of this chapter may not prohibit a preschool scholarship granting organization from receiving contributions other than contributions used in a preschool scholarship program.
    Sec. 5. (a) An agreement entered into under section 1 of this chapter must prohibit a preschool scholarship granting organization from distributing preschool education scholarships for use by an eligible preschool student to:
        (1) enroll in a preschool that has:
            (A) paid staff or board members; or
            (B) relatives of paid staff or board members;
        in common with the preschool scholarship granting organization; or
        (2) enroll in a preschool that the preschool scholarship granting organization knows does not qualify as a participating preschool.
    (b) An agreement entered into under section 1 of this chapter must prohibit a preschool scholarship granting organization from limiting the availability of preschool education scholarships to students of only one (1) participating preschool.
    Sec. 6. (a) A preschool scholarship granting organization certified under this chapter must report publicly to the division by August 1 of each year the following information regarding the organization's preschool education scholarships that were awarded in the previous school year:
        (1) The name and address of the preschool scholarship granting organization.
        (2) The total number and total dollar amount of contributions received during the previous school year.
        (3) The total number and total dollar amount of preschool education scholarships awarded during the previous school year.

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The report must be certified under penalties of perjury by the chief executive officer of the preschool scholarship granting organization.
    (b) A preschool scholarship granting organization certified under this chapter shall contract with an independent certified public accountant for an annual financial audit of the preschool scholarship granting organization. The preschool scholarship granting organization shall provide a copy of the annual financial audit to the division and shall make the annual financial audit available to a member of the public upon request.
    Sec. 7. The division shall prescribe a standardized form for preschool scholarship granting organizations to report information required under this chapter.
    Sec. 8. The division may, in a proceeding under IC 4-21.5, suspend or terminate the certification of an organization as a preschool scholarship granting organization if the division establishes that the preschool scholarship granting organization has intentionally and substantially failed to comply with the requirements of this article or an agreement entered into under this article.
    Sec. 9. If the division suspends or terminates the certification of an organization as a preschool scholarship granting organization, the division shall notify affected eligible preschool students and their parents of the decision as quickly as possible. An eligible preschool student affected by a suspension or termination of a preschool scholarship granting organization's certification remains an eligible preschool student under this article until the end of the school year in which the preschool scholarship granting organization's certification is suspended or terminated, regardless of whether the preschool scholarship student meets the definition of an eligible preschool student at the time the preschool scholarship granting organization's certification was suspended or terminated.
    Sec. 10. The division may conduct either a financial review or an audit of a preschool scholarship granting organization certified under this chapter if the department of state revenue has evidence of fraud.

SOURCE: IC 20-51-1-4.3; (13)HB1003.1.15. -->     SECTION 15. IC 20-51-1-4.3 IS ADDED TO THE INDIANA CODE AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2013]: Sec. 4.3. "Eligible choice scholarship student" refers to an individual who:
        (1) has legal settlement in Indiana;

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        (2) is at least five (5) years of age and less than twenty-two (22) years of age on the date in the school year specified in IC 20-33-2-7; and
        (3) meets at least one (1) of the following conditions:
            (A) The individual is a child with a disability who requires special education under IC 20-35.
            (B) The individual is in foster care (as defined in IC 31-9-2-46.7).
            (C) The individual is a member of a household with an annual income of not more than three hundred percent (300%) of the amount required for the individual to qualify for the federal free or reduced lunch program, and the individual's parent:
                (i) has served in the armed forces of the United States or national guard and has received an honorable discharge; or
                (ii) is currently serving on active duty service in the armed forces of the United States or national guard.
            (D) The individual:
                (i) was enrolled in grade 1 through grade 12 in a public school within or outside Indiana before the first semester for which the individual receives a choice scholarship under IC 20-51-4; and
                 (ii) except as provided in IC 20-51-4-2.5, is a member of a household with an annual income of not more than one hundred fifty percent (150%) of the amount required for the individual to qualify for the federal free or reduced price lunch program.
            (E) The individual or a sibling of the individual:
                (i) received a scholarship from a scholarship granting organization under IC 20-51-3 or a choice scholarship under IC 20-51-4 in a preceding school year, including a school year that does not immediately precede a school year in which the individual receives a scholarship from a scholarship granting organization under IC 20-51-3 or a choice scholarship under IC 20-51-4; and
                (ii) except as provided in IC 20-51-4-2.5, is a member of a household with an annual income of not more than one hundred fifty percent (150%) of the amount required for the individual to qualify for the federal free or reduced price lunch program.
             (F) The individual:

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                (i) is enrolled in an eligible school at the time the individual first meets the income requirements set forth in item (ii); and
                 (ii) except as provided in IC 20-51-4-2.5, is a member of a household with an annual income of not more than one hundred fifty percent (150%) of the amount required for the individual to qualify for the federal free or reduced price lunch program.

SOURCE: IC 20-51-1-4.5; (13)HB1003.1.16. -->     SECTION 16. IC 20-51-1-4.5 IS REPEALED [EFFECTIVE JULY 1, 2013]. Sec. 4.5. "Eligible individual" refers to an individual who:
        (1) has legal settlement in Indiana;
        (2) is at least five (5) years of age and less than twenty-two (22) years of age on the date in the school year specified in IC 20-33-2-7;
        (3) either has been or is currently enrolled in an accredited school;
        (4) is a member of a household with an annual income of not more than one hundred fifty percent (150%) of the amount required for the individual to qualify for the federal free or reduced price lunch program; and
        (5) either:
            (A) was enrolled in grade 1 through 12 in a school corporation that did not charge the individual transfer tuition for at least two (2) semesters immediately preceding the first semester for which the individual receives a choice scholarship under IC 20-51-4; or
            (B) received a scholarship from a scholarship granting organization under IC 20-51-3 or a choice scholarship under IC 20-51-4 in a preceding school year, including a school year that does not immediately precede a school year in which the individual receives a scholarship from a scholarship granting organization under IC 20-51-3 or a choice scholarship under IC 20-51-4.

SOURCE: IC 20-51-1-4.7; (13)HB1003.1.17. -->     SECTION 17. IC 20-51-1-4.7, AS ADDED BY P.L.92-2011, SECTION 6, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2013]: Sec. 4.7. "Eligible school" refers to a public or nonpublic elementary school or high school that:
        (1) is located in Indiana;
        (2) requires an eligible individual choice scholarship student to pay tuition or transfer tuition to attend;
        (3) voluntarily agrees to enroll an eligible individual; choice scholarship student;
        (4) is accredited by either the state board or a national or regional

accreditation agency that is recognized by the state board;
        (5) administers the Indiana statewide testing for educational progress (ISTEP) program under IC 20-32-5;
        (6) is not a charter school or the school corporation in which an eligible individual choice scholarship student has legal settlement under IC 20-26-11; and
        (7) submits to the department only the student performance data required for a category designation under IC 20-31-8-3.

SOURCE: IC 20-51-1-5; (13)HB1003.1.18. -->     SECTION 18. IC 20-51-1-5, AS AMENDED BY P.L.129-2012, SECTION 1, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2013]: Sec. 5. "Eligible student" refers to an individual who:
        (1) has legal settlement in Indiana;
        (2) is at least five (5) years of age and less than twenty-two (22) years of age on the date in the school year specified in IC 20-33-2-7;
        (3) either has been or is currently enrolled in a participating school; and
        (4) is a member of a household with an annual income of not more than two hundred percent (200%) of the amount required for the individual to qualify for the federal free or reduced price lunch program. and
        (5) meets at least one (1) of the following conditions:
            (A) The individual is enrolling in kindergarten.
            (B) The individual was enrolled in a public school during the school year preceding the first school year for which a scholarship granting organization provides a scholarship to the individual.
            (C) The individual received a scholarship in the previous year from a nonprofit scholarship granting organization that qualifies for certification as a school scholarship program.
            (D) The individual received a school scholarship from a scholarship granting organization in a preceding year, including a school year that does not immediately precede a school year in which the individual receives a scholarship from a scholarship granting organization.

SOURCE: IC 20-51-3-3; (13)HB1003.1.19. -->     SECTION 19. IC 20-51-3-3, AS ADDED BY P.L.182-2009(ss), SECTION 364, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2013]: Sec. 3. An agreement entered into under section 1 of this chapter between the department and a scholarship granting organization must require the scholarship granting organization to do the following:
        (1) Provide a receipt to taxpayers for contributions made to the

scholarship granting organization that will be used in a school scholarship program. The department of state revenue shall prescribe a standardized form for the receipt issued under this subdivision. The receipt must indicate the value of the contribution and part of the contribution being designated for use in a school scholarship program.
         (2) Allow a taxpayer to designate a participating school for which the taxpayer's contribution must be used as scholarships.
        (2) Distribute at least ninety percent (90%) of the total amount of contributions as school scholarships to eligible students.
         (3) Use not more than ten percent (10%) of the total amount of contributions for administrative costs.
        (3) (4) Distribute one hundred percent (100%) of any income earned on contributions as school scholarships to eligible students.
        (4) (5) Conduct criminal background checks on all the scholarship granting organization's employees and board members and exclude from employment or governance any individual who might reasonably pose a risk to the appropriate use of contributed funds.
        (5) (6) Make the reports required by this chapter.

SOURCE: IC 20-51-4-2; (13)HB1003.1.20. -->     SECTION 20. IC 20-51-4-2, AS ADDED BY P.L.92-2011, SECTION 10, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2013]: Sec. 2. (a) Subject to subsection (b), an eligible individual choice scholarship student is entitled to a choice scholarship under this chapter for each school year beginning after June 30, 2011, that the eligible choice scholarship student enrolls in an eligible school.
    (b) The department may not award more than:
        (1) seven thousand five hundred (7,500) choice scholarships for the school year beginning July 1, 2011, and ending June 30, 2012; and
        (2) fifteen thousand (15,000) choice scholarships for the school year beginning July 1, 2012, and ending June 30, 2013.
The department shall establish the standards used to allocate choice scholarships among eligible choice scholarship students.

SOURCE: IC 20-51-4-2.5; (13)HB1003.1.21. -->     SECTION 21. IC 20-51-4-2.5 IS ADDED TO THE INDIANA CODE AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2013]: Sec. 2.5. Notwithstanding IC 20-51-1-4.3(3)(D)(ii), IC 20-51-1-4.3(3)(E)(ii), or IC 20-51-1-4.3(3)(F)(ii), an individual who initially meets the

income requirements under IC 20-51-1-4.3(3)(D)(ii), IC 20-51-1-4.3(3)(E)(ii), or IC 20-51-1-4.3(3)(F)(ii) and is a member of a household whose income subsequently increases is considered to meet the income requirements for as long as the individual is enrolled in a participating school and is a member of a household with an annual income of not more than three hundred percent (300%) of the amount required for the individual to qualify for the federal free or reduced price lunch program.

SOURCE: IC 20-51-4-4; (13)HB1003.1.22. -->     SECTION 22. IC 20-51-4-4, AS ADDED BY P.L.92-2011, SECTION 10, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2013]: Sec. 4. The maximum amount to which an eligible individual choice scholarship student is entitled to receive under this chapter for a school year is equal to the least of the following:
        (1) The sum of the tuition, transfer tuition, and fees required for enrollment or attendance of the eligible choice scholarship student at the eligible school selected by the eligible individual choice scholarship student for a school year that the eligible individual (or the parent of the eligible individual) choice scholarship student (or the parent of the eligible choice scholarship student) would otherwise be obligated to pay to the eligible school.
        (2) An amount equal to:
            (A) ninety percent (90%) of the state tuition support amount determined under section 5 of this chapter and, if applicable, any amount that a school corporation in which the student has legal settlement would receive under IC 20-43-7 for the student if the student attended the school corporation if the eligible individual choice scholarship student is:
                 (i) an eligible choice scholarship student described in IC 20-51-1-4.3(3)(A) through IC 20-51-1-4.3(3)(C); or
                 (ii) for an individual described in IC 20-51-1-4.3(3)(D) through IC 20-51-1-4.3(3)(F), a member of a household with an annual income of not more than the amount required for the individual eligible choice scholarship student to qualify for the federal free or reduced price lunch program; and
            (B) for an eligible choice scholarship student described in IC 20-51-1-4.3(3)(D) through IC 20-51-1-4.3(3)(F), fifty percent (50%) of the state tuition support amount determined under section 5 of this chapter and, if applicable, any amount that a school corporation in which the student has legal settlement would receive under IC 20-43-7 for the student

if the student attended the school corporation if the eligible individual choice scholarship student is a member of a household with an annual income of not more than one hundred fifty percent (150%) three hundred percent (300%) of the amount required for the individual eligible choice scholarship student to qualify for the federal free or reduced price lunch program.
        (3) If the eligible individual choice scholarship student is enrolled in grade 1 through 8, the maximum choice scholarship that the eligible individual choice scholarship student may receive for a school year:
             (A) for a school year beginning before July 1, 2013, is four thousand five hundred dollars ($4,500);
             (B) for a school year beginning after June 30, 2013, and before July 1, 2014, five thousand five hundred dollars ($5,500); or
            (C) for a school year beginning after June 30, 2014, six thousand five hundred dollars ($6,500).

SOURCE: IC 20-51-4-5; (13)HB1003.1.23. -->     SECTION 23. IC 20-51-4-5, AS AMENDED BY P.L.6-2012, SECTION 145, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2013]: Sec. 5. The state tuition support amount to be used in section 4(2) of this chapter for an eligible individual choice scholarship student is the amount determined under the last STEP of the following formula:
        STEP ONE: Determine the school corporation in which the eligible individual choice scholarship student has legal settlement.
        STEP TWO: Determine the amount of state tuition support that the school corporation identified under STEP ONE is eligible to receive under IC 20-43 for the calendar year in which the current school year begins, excluding amounts provided for special education grants under IC 20-43-7 and career and technical education grants under IC 20-43-8.
        STEP THREE: Determine the result of:
            (A) the STEP TWO amount; divided by
            (B) the current ADM (as defined in IC 20-43-1-10) for the school corporation identified under STEP ONE for the calendar year used in STEP TWO.

SOURCE: IC 20-51-4-6; (13)HB1003.1.24. -->     SECTION 24. IC 20-51-4-6, AS ADDED BY P.L.92-2011, SECTION 10, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2013]: Sec. 6. (a) If an eligible individual choice scholarship student enrolls in an eligible school for less than an entire school year,

the choice scholarship provided under this chapter for that school year shall be reduced on a prorated basis to reflect the shorter school term.
    (b) An eligible individual choice scholarship student is entitled to only one (1) choice scholarship for each school year. If the eligible individual choice scholarship student leaves the eligible school for which the eligible individual choice scholarship student was awarded a choice scholarship and enrolls in another eligible school, the eligible individual choice scholarship student is responsible for the payment of any tuition required for the remainder of that school year.

SOURCE: IC 20-51-4-7; (13)HB1003.1.25. -->     SECTION 25. IC 20-51-4-7, AS ADDED BY P.L.92-2011, SECTION 10, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2013]: Sec. 7. (a) The department shall administer this chapter.
     (b) The department shall approve an application for an eligible school within fifteen (15) days after the date the school requests to participate in the choice scholarship program.
    (c) The department shall approve an application for a choice scholarship student within fifteen (15) days after the date the student requests to participate in the choice scholarship program.
     (d) Each year, at a minimum, the department shall accept applications from March 1 through September 1 for:
        (1) choice scholarship students; or
        (2) eligible schools;
for the upcoming school year.
    (b) (e) The department shall adopt rules under IC 4-22-2 to implement this chapter.
    (c) (f) The department may adopt emergency rules under IC 4-22-2-37.1 to implement this chapter.

SOURCE: IC 20-51-4-10; (13)HB1003.1.26. -->     SECTION 26. IC 20-51-4-10, AS ADDED BY P.L.92-2011, SECTION 10, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2013]: Sec. 10. The department may distribute any part of a the choice scholarship to the eligible individual (or the parent of the eligible individual) choice scholarship student (or the parent of the eligible choice scholarship student) for the purpose of paying the educational costs described in section 4(1) of this chapter. For the distribution to be valid, the distribution must be endorsed by both the eligible individual (or the parent of the eligible individual) choice scholarship student (or the parent of the eligible choice scholarship student) and the eligible school providing educational services to the eligible individual. choice scholarship student. The choice scholarship shall be distributed in the same manner that state tuition support is distributed under IC 20-43-2-1.

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SOURCE: IC 20-51-4-11; (13)HB1003.1.27. -->     SECTION 27. IC 20-51-4-11, AS ADDED BY P.L.92-2011, SECTION 10, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2013]: Sec. 11. The amount of a choice scholarship provided to an eligible individual choice scholarship student shall not be treated as income or a resource for the purposes of qualifying for any other federal or state grant or program administered by the state or a political subdivision.

SOURCE: ; (13)HB1003.1.28. -->     SECTION 28. [EFFECTIVE JANUARY 1, 2013 (RETROACTIVE)] (a) IC 6-3-2-22, as amended by this act, applies to a taxable year beginning after December 31, 2013.
    (b) This SECTION expires January 1, 2015.

SOURCE: ; (13)HB1003.1.29. -->     SECTION 29. An emergency is declared for this act.