2.__Credit allowed.__A resident individual or corporate taxpayer is allowed a credit against the tax otherwise due under this Part in the amount of 10% of the amount contributed in tax year 2002 and in the amount of 50% of the amount contributed in a year after tax year 2002 to a qualified scholarship organization.__ For purposes of this subsection, the contribution provided may not directly benefit a spouse or dependent, as defined by Section 152 of the Code, of an individual taxpayer or of a director, trustee, officer or employee of a corporate taxpayer claiming credit.__The contribution may be made in cash, its equivalent or in stock.__In no case may this credit reduce the tax otherwise due under this Part to less than zero.

3.__Carry over to succeeding years.__A taxpayer entitled to a credit under this section for any taxable year may carry over and apply to the tax liability for any one or more of the next succeeding 5 taxable years the portion, as reduced from year to year, of any unused credits.

4.__Certification of scholarship organizations.__A scholarship organization shall apply to the Secretary of State to be certified as a qualified scholarship organization.__The Secretary of State shall certify a scholarship organization if it files with the Secretary of State a copy of the determination letter of the 501(c)(3) status issued by the Internal Revenue Service and a statement that the purposes outlined in the scholarship organization's articles of incorporation are consistent with the purposes set forth in subsection 1, paragraph B.__After certification, a qualified scholarship organization shall notify the Secretary of State within 10 days if the

Internal Revenue Service revokes its 501(c)(3) status or if it alters its purpose so that contributors to that organization are not eligible for a tax credit under this section.__If the Secretary of State receives notification that a qualified scholarship organization's 501(c)(3) status is revoked by the Internal Revenue Service or its purposes have been altered so that contributors to that organization are not eligible for a tax credit under this section, the Secretary of State shall immediately revoke the organization's certification as a qualified scholarship organization.__A qualified scholarship organization shall pay a penalty to the Secretary of State of $100 for each month that it fails to notify the Secretary of State under this subsection up to a maximum of $1,000.__The Secretary of State and the State Tax Assessor may adopt routine technical rules as defined in Title 5, chapter 375, subchapter II-A to ensure compliance with this section.

5.__Recapture.__In the event that the Secretary of State revokes the certification of a scholarship organization, there must be added to the tax imposed on the contributor to this scholarship organization under this Part for the taxable year in which the revocation occurs an amount equal to the excess of the amount of credit revoked over the amount of credit not yet taken.

6.__Annual filing with Secretary of State.__A qualified scholarship organization shall file with the annual report required by Title 13-B, section 1301 a statement that 95% of the contributions to the qualified scholarship organization eligible for a tax credit under this section was expended for at least one of the purposes set forth in subsection 1, paragraph B.

Sec. 2. Review of policy alternatives available to Legislature in creating endowment fund to provide scholarships. Beginning January 1, 2003 and pursuant to legislation enacted during the Second Regular Session of the 120th Legislature to implement the recommendations of the Blue Ribbon Commission on Postsecondary Educational Attainment, the advisory council established to address policies related to higher education attainment in the State shall review the policy alternatives available to the Legislature in creating an endowment fund for the benefit of eligible residents of the State to meet the high cost of attending an institution of higher education. The advisory council review must include an examination of existing endowment programs in the State as well as endowment programs established in other states to provide financial assistance to eligible residents of the State enrolled at an institution of higher education. The advisory council shall submit a report that includes its findings and recommendations, including any suggested legislation, to the joint standing committee of the Legislature having jurisdiction over education matters and the

Legislative Council no later than December 1, 2003. If the advisory council requires a limited extension of time to complete its report, it may apply to the Legislative Council, which may grant the extension. The advisory council is not authorized to introduce legislation. Following receipt and review of the report, the joint standing committee of the Legislature having jurisdiction over education matters may report out a bill to the Second Regular Session of the 121st Legislature.

This section takes effect only if legislation enacted during the Second Regular Session of the 120th Legislature establishes an advisory council to address policies related to higher education attainment in the State.

Sec. 3. Application. That section of this Act that enacts the Maine Revised Statutes, Title 36, section 5219-U applies to tax years beginning on or after January 1, 2002.

SUMMARY

This bill establishes a tax credit for individuals or corporations that provide a contribution that promotes the postsecondary educational attainment of Maine residents or that promotes the migration of college-educated persons to work in Maine. To accomplish this, the bill proposes the following.

1. It provides that contributions eligible for a tax credit include funds contributed by an individual or corporation to a qualified scholarship organization, which is a 501(c)(3) corporation and is certified by the Secretary of State, whose purpose is to provide 95% of the contribution it receives to award student financial assistance to Maine residents to attend institutions of higher education and to repay educational loans of persons who migrate to the State for employment purposes.

2. It provides that contributions eligible for a tax credit include funds contributed to provide for need-based scholarships and the repayment of postsecondary educational loans for eligible residents of the State, including displaced workers, who are or will be attending a public or private institution of higher education in the State.

3. It also provides that contributions eligible for a tax credit include funds contributed to provide for the repayment of postsecondary education loans for residents of the State who, upon graduation from a public or private institution of higher education outside of the State, return to the State to be employed by a business or organization in the State or to be self-employed in the State or for any person who, upon graduation from an accredited public or private institution of higher

education outside of the State, resides in the State and is employed by a business or organization in the State or resides in the State and is self-employed.

4. It provides that the tax credit is 10% of the amount contributed in tax year 2002 and 50% of the amount contributed in the years after 2002. The credit may not reduce the contributor's Maine income tax to less than zero.

5. It establishes that, beginning January 1, 2003 and pursuant to legislation enacted during the Second Regular Session of the 120th Legislature to implement the recommendations of the Blue Ribbon Commission on Postsecondary Educational Attainment, the advisory council established to address policies related to higher education attainment in the State shall review the policy alternatives available to the Legislature in creating an endowment fund for the benefit of eligible residents of the State to meet the high cost of attending an institution of higher education. The advisory council shall submit a report, including any suggested legislation, by December 1, 2003. Following receipt and review of the report, the joint standing committee of the Legislature having jurisdiction over education matters may report out a bill to the Second Regular Session of the 121st Legislature.