House Bill No. 433

Introduced By _______________________________________________________________________________

A Bill for an Act entitled: "An Act providing an individual tax credit for qualifying elementary and secondary education expenses by an individual for a dependent minor by providing a 100 percent credit for qualifying education expenses for the first child, a 70 percent credit for qualifying education expenses for the second child, and a 50 percent credit for qualifying education expenses for the third and any subsequent child; requiring a declaration of intent to claim a tax credit; amending sections 20-9-161, 20-9-162, 20-9-163, and 20-9-311, MCA; and providing an immediate effective date and a retroactive applicability date."

WHEREAS, Article X, section 1(1), of the Montana Constitution guarantees equality of educational opportunity to each person of the state; and

WHEREAS, the Legislature finds that allowing lower-income parents the same ability that wealthy parents now have in selecting the school of their choice enhances equality of educational opportunity; and

WHEREAS, the Legislature strongly supports the rights of parents to choose the way in which their children are educated, consistent with their academic expectations and personal values; and

WHEREAS, the Legislature believes that competition in the educational marketplace has a strengthening effect on both public and private education and serves the long-term best interests of all students; and

WHEREAS, the Legislature supports an education policy that fosters the free movement of educational consumers to the schools of their choice; and

WHEREAS, the Legislature finds that it is fiscally and educationally prudent to have the private sector absorb a portion of the ever-increasing number of students that are overcrowding our public schools and costing taxpayers tens of millions of dollars of capital construction costs; and

WHEREAS, the Legislature finds that parental choice in education can reduce the Montana property and income tax burdens and increase the amount of money available to educate each child in the public schools.

Be it enacted by the Legislature of the State of Montana:

NEW SECTION. Section 1. Elementary and secondary education expense tax credit. (1) There is a credit against the taxes otherwise due under this chapter for qualified elementary and secondary education expenses paid by an individual for a dependent who is a minor during the tax year. In order to claim the credit, the individual must have a completed intent form to claim an education tax credit on file with the state pursuant to [section 2].

(2) (a) Education expenses that qualify for the credit under this section are amounts paid as tuition and fees by an individual for a dependent who is in compliance with Title 20, chapter 5, part 1.

(b) Qualifying education expenses do not include amounts paid to a governmental entity as property taxes, assessments, or fees.

(3) The amount of the credit for qualifying education expenses is as follows:

(a) for the tax year beginning January 1, 1997, but only for the amount by which those expenses have increased from the previous tax year:

(i) up to $375 for the first child;

(ii) 70% of $375 for the second child; and

(iii) 50% of $375 for the third and any subsequent child;

(b) for the tax year beginning January 1, 1998, as applied against the first $375 of qualifying education expenses for attendance from January 1, 1998, to June 30, 1998, and against the first $375 of qualifying education expenses for attendance from July 1, 1998, to December 31, 1998:

(i) up to $750 for the first child;

(ii) 70% of $750 for the second child; and

(iii) 50% of $750 for the third and any subsequent child; and

(i) up to $1,000 for the first child;

(ii) 70% of $1,000 for the second child; and

(iii) 50% of $1,000 for the third and any subsequent child.

(4) A deduction or credit is not allowed under any other provision of this chapter with respect to any amount for which a credit is allowed under this section. Any amount of the credit allowed under this section that is in excess of an individual's tax liability must be refunded to the individual.

(5) In the case of a married individual filing a separate return, the amount of the credit under subsection (3) is limited to one-half of the applicable amount.

NEW SECTION. Section 2. Intent to claim education tax credit -- form. (1) The superintendent of public instruction shall provide a form on which to declare the intent to claim an education tax credit. The form must outline the tax credit provided for in [section 1] and must contain an affidavit that the individual completing the form intends to enroll a dependent minor in a school other than a public school in the district of residence during the following school year. The form must be distributed to each student attending public school. Forms must also be provided to and be available from each county superintendent of schools.

(2) In order to be eligible for the tax credit provided for in [section 1], an individual shall annually complete the form provided for in subsection (1) and return the form to an official of the individual's district of residence by May 10. Each district shall forward the forms to the county superintendent, who shall then forward the forms to the superintendent of public instruction. The number of eligible dependent minors indicated on the forms who were enrolled during that year must be excluded from ANB calculations for the ensuing school year.

(3) The superintendent of public instruction shall forward a copy of each form to the department of revenue for use in determining eligibility for the tax credit provided for in [section 1].

Section 3. Section 20-9-161, MCA, is amended to read:

"20-9-161. Definition of budget amendment for budgeting purposes. As used in this title, unless the context clearly indicates otherwise, the term "budget amendment" for the purpose of school budgeting means an amendment to an adopted budget of the district for the following reasons:

(1) an increase in the enrollment of an elementary or high school district that is:

(a) beyond what could reasonably have been anticipated at the time of the adoption of the budget for the current school fiscal year whenever, because of the enrollment increase, the district's budget for any or all of the regularly budgeted funds does not provide sufficient financing to properly maintain and support the district for the entire current school fiscal year; or

(b) because of enrollment of students for whom a form to declare the intent to claim an education tax credit was filed as provided in [section 2];

(2) the destruction or impairment of any school property necessary to the maintenance of the school, by fire, flood, storm, riot, insurrection, or act of God, to an extent rendering school property unfit for its present school use;

(3) a judgment for damages against the district issued by a court after the adoption of the budget for the current year;

(4) an enactment of legislation after the adoption of the budget for the current year that imposes an additional financial obligation on the district;

(5) the receipt of:

(a) a settlement of taxes protested in a prior school fiscal year;

(b) taxes from a prior school fiscal year as the result of a tax audit by the department of revenue or its agents;

(d) local government severance tax payments for calendar year 1995 production as provided in 15-36-325(7); and

(e) a determination by the trustees that it is necessary to expend all or a portion of the taxes received under subsection (5)(a), (5)(b), (5)(c), or (5)(d) for a project or projects that were deferred from a previous budget of the district as a result of the protested taxes; or

(6) any other unforeseen need of the district that cannot be postponed until the next school year without dire consequences affecting the safety of the students and district employees or the educational functions of the district."

Section 4. Section 20-9-162, MCA, is amended to read:

"20-9-162. Authorization for budget amendment adoption. (1) (a) Notwithstanding the provisions of subsections (2) and (3), a budget amendment may be adopted at any time of the school fiscal year, except that a budget amendment required by an enrollment increase as provided in 20-9-161(1)(a) may not be adopted until after October 1.

(b) The trustees may approve a budget amendment pursuant to 20-9-161(2) through (6) by a resolution.

(c) Whenever the trustees of a district decide that a budget amendment is necessary, they may proclaim the need for the budget amendment by a majority vote of the trustees. The proclamation must state the facts constituting the need for the budget amendment, the funds affected by the budget amendment, the anticipated source of financing, the estimated amount of money required to finance the budget amendment, and the time and place the trustees will meet for the purpose of considering and adopting the budget amendment for the current school fiscal year.

(2) The trustees shall send a copy of the proclamation to the county superintendent and to the board of county commissioners of the county.

(3) The trustees shall submit a budget amendment for an enrollment increase to the superintendent of public instruction for approval in the manner provided in 20-9-163."

Section 5. Section 20-9-163, MCA, is amended to read:

"20-9-163. Resolution for budget amendment -- petition to superintendent of public instruction. (1) Whenever the trustees of a district decide that a budget amendment is necessary because of an enrollment increase, they may petition the superintendent of public instruction to adopt a resolution for the budget amendment. The petition must be signed by a majority of the trustees.

(2) The petition must state the facts constituting the need for the budget amendment, the estimated amount of money required to fund the budget amendment, the funds affected by the budget amendment, the anticipated source of financing for the budget amendment, and the current year enrollment.

(3) The superintendent of public instruction shall promptly approve or disapprove the petition requesting approval to adopt a resolution for a budget amendment because of increased enrollment. If the petition is for a budget amendment for an enrollment increase as provided in 20-9-161(1)(a), the superintendent of public instruction shall adjust the district's maximum general fund budget based on the approved enrollment increase. Upon approval, a district may not adopt a budget amendment if the amount will cause the district to exceed the district's adjusted maximum general fund budget. If the petition is approved, the trustees may adopt a resolution for a budget amendment and take all other steps required for the adoption of a budget amendment. Approval of a petition by the superintendent of public instruction authorizes the board of trustees to initiate a budget amendment by resolution and does not relieve the trustees of the necessity of complying with the requirements of the school budgeting laws. Approval of the petition may not be construed as approval of any subsequent application for increased state aid on account of the budget amendment."

Section 6. Section 20-9-311, MCA, is amended to read:

"20-9-311. Calculation of average number belonging (ANB). (1) Average number belonging (ANB) must be computed as follows:

(a) compute an average enrollment by:

(i) adding a count of regularly enrolled full-time pupils who were enrolled as of the first Monday in October of the prior school fiscal year to a count of regularly enrolled pupils on February 1 of the prior school fiscal year, or the nearest school day if those dates do not fall on a school day,; ~~and~~

(ii) divide the sum by two; and

(iii) subtract the number of students who were enrolled during the prior school fiscal year as indicated on the forms provided for in [section 2]; and

(b) multiply the average enrollment calculated in subsection (1)(a) by the sum of the pupil-instruction and the approved pupil-instruction-related days for the current school fiscal year and divide by 180.

(2) For the purpose of calculating ANB under subsection (1), up to 7 approved pupil-instruction-related days may be included in the calculation.

(3) When a school district has approval to operate less than 180 school days under 20-9-804, the total ANB must be calculated in accordance with the provisions of 20-9-805.

(4) Enrollment for a part of a morning session or a part of an afternoon session by a pupil must be counted as enrollment for one-half day.

(5) In calculating the ANB for pupils enrolled in a program established under 20-7-117(1), enrollment at a regular session of the program for at least 2 hours of either a morning or an afternoon session must be counted as one-half pupil for ANB purposes. If a variance has been granted as provided in 20-1-302, ANB must be computed in a manner prescribed by the superintendent of public instruction, but the ANB for a kindergarten student may not exceed one-half for each kindergarten pupil.

(6) When any pupil has been absent, with or without excuse, for more than 10 consecutive school days, the pupil may not be included in the enrollment count used in the calculation of the ANB unless the pupil resumes attendance prior to the day of the enrollment count.

(7) The enrollment of prekindergarten pupils, as provided in 20-7-117, may not be included in the ANB calculations.

(8) The average number belonging of the regularly enrolled, full-time pupils for the public schools of a district must be based on the aggregate of all the regularly enrolled, full-time pupils attending the schools of the district, except that when:

(a) (i) a school of the district is located more than 20 miles beyond the incorporated limits of a city or town located in the district and at least 20 miles from any other school of the district, the number of regularly enrolled, full-time pupils of the school must be calculated separately for ANB purposes and the district must receive a basic entitlement for the school calculated separately from the other schools of the district;

(ii) a school of the district is located more than 20 miles from any other school of the district and no incorporated territory is involved in the district, the number of regularly enrolled, full-time pupils of the school must be calculated separately for ANB purposes and the district must receive a basic entitlement for the school calculated separately from the other schools of the district; or

(iii) the superintendent of public instruction approves an application not to aggregate when conditions exist affecting transportation, such as poor roads, mountains, rivers, or other obstacles to travel, or when any other condition exists that would result in an unusual hardship to the pupils of the school if they were transported to another school, the number of regularly enrolled, full-time pupils of the school must be calculated separately for ANB purposes and the district must receive a basic entitlement for the school calculated separately from the other schools of the district;

(b) a junior high school has been approved and accredited as a junior high school, all of the regularly enrolled, full-time pupils of the junior high school must be considered as high school district pupils for ANB purposes;

(c) a middle school has been approved and accredited, all pupils below the 7th grade must be considered elementary school pupils for ANB purposes and the 7th and 8th grade pupils must be considered high school pupils for ANB purposes; or

(d) a school has not been accredited by the board of public education, the regularly enrolled, full-time pupils attending the nonaccredited school are not eligible for average number belonging calculation purposes, nor will an average number belonging for the nonaccredited school be used in determining the BASE funding program for the district.

(9) When 11th or 12th grade students are regularly enrolled on a part-time basis, high schools may calculate the ANB to include an "equivalent ANB" for those students. The method for calculating an equivalent ANB must be determined in a manner prescribed by the superintendent of public instruction.

(10) For average daily attendance reporting purposes, districts shall provide the superintendent of public instruction with annual reports of school attendance for regularly enrolled students and special education students, using a format determined by the superintendent."

NEW SECTION. Section 7. Codification instruction. (1) [Section 1] is intended to be codified as an integral part of Title 15, chapter 30, part 1, and the provisions of Title 15, chapter 30, part 1, apply to [section 1].

(2) [Section 2] is intended to be codified as an integral part of Title 20, chapter 3, part 1, and the provisions of Title 20, chapter 3, part 1, apply to [section 2].

NEW SECTION. Section 8. Severability. If a part of [this act] is invalid, all valid parts that are severable from the invalid part remain in effect. If a part of [this act] is invalid in one or more of its applications, the part remains in effect in all valid applications that are severable from the invalid applications.

NEW SECTION. Section 9. Effective date -- applicability. [This act] is effective on passage and approval and applies retroactively, within the meaning of 1-2-109, to tax years beginning after December 31, 1996.

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