Committee backs bill to opt Kentucky into federal educational freedom tax credit

FRANKFORT — The House Appropriations and Revenue Committee on Tuesday adopted a committee substitute and voted to report House Bill 1, which would authorize Kentucky to opt into a federal Educational Freedom Tax Credit program and permit scholarship-granting organizations (SGOs) to operate in the state.

State Rep. Kim Mosher, R-64, presented the bill and told the committee the federal program (created in HR 1) provides a dollar-for-dollar tax credit up to $1,700 for donors to SGOs and does not require state appropriations. Mosher said the substitute removes language that would have created a state tax deduction for donors because the federal credit does not affect state tax liability.

Committee counsel explained that the federal statute referenced in testimony is "26 USC section 25f," and that the federal statute's eligible educational expenditures include public, private and religious schools; sponsors said school districts could form 501(c)(3) SGOs to benefit multiple schools in a district.

Representative Burke asked whether the sponsors would accept an amendment to collect data on students and institutions benefiting from the program; Mosher replied that the Secretary of State would collect data as part of administering SGOs but counsel warned that adding language that expands general-fund spending or creates new state obligations could raise legal challenges.

The committee recorded an abstention by Representative Banta pursuant to constitution 57 and several members 'passed' on the roll call. The clerk reported the committee vote as 16 yes, 1 no, 3 passes and 1 abstention. The clerk said HB 1 would be reported with favorable expression to the House floor.

Next steps: House Bill 1 will be reported to the full House for further consideration and possible floor amendments.

Vote at committee: House Bill 1 as amended by PHS 1 — committee report: 16 yes, 1 no, 3 pass, 1 abstention.