HB2832 - 572R

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

Section 1. Section 15-2402, Arizona Revised Statutes, is amended to read:

START_STATUTE15-2402. Arizona empowerment scholarship accounts; funds

A. Arizona empowerment scholarship accounts are established to provide options for the education of students in this state.

B. To enroll a qualified student for an Arizona empowerment scholarship account, the parent of the qualified student must sign an agreement to do all of the following:

1. Use a portion of the Arizona empowerment scholarship account monies allocated annually to provide an education for the qualified student in at least the subjects of reading, grammar, mathematics, social studies and science, unless the Arizona empowerment scholarship account is allocated monies according to a transfer schedule other than quarterly transfers pursuant to section 15-2403, subsection G.

2. Not enroll the qualified student in a school district or charter school and release the school district from all obligations to educate the qualified student. This paragraph does not:

(a) Relieve the school district or charter school that the qualified student previously attended from the obligation to conduct an evaluation pursuant to section 15-766.

(b) Require the qualified student to withdraw from a school district or charter school before enrolling for an Arizona empowerment scholarship account if the qualified student withdraws from the school district or charter school before receiving any monies in the qualified student's Arizona empowerment scholarship account.

(c) Prevent the qualified student from applying in advance for an Arizona empowerment scholarship account to be funded beginning the following school year, subject to section 15-2403, subsection H.

3. Not accept a scholarship from a school tuition organization pursuant to title 43 concurrently with an Arizona empowerment scholarship account for the qualified student in the same year a parent signs the agreement pursuant to this section.

4. 3. Use monies deposited in the qualified student's Arizona empowerment scholarship account only for the following expenses of the qualified student:

(a) Tuition or fees at a qualified school that requires all teaching staff and school personnel who have unsupervised contact with students to be fingerprinted.

(b) Textbooks required by a qualified school.

(c) If the qualified student meets any of the criteria specified in section 15-2401, paragraph 7, subdivision (a), item (i), (ii) or (iii) as determined by a school district or by an independent third party pursuant to section 15-2403, subsection J, the qualified student may use the following additional services:

(i) Educational therapies from a licensed or accredited practitioner or provider, including and up to any amount not covered by insurance if the expense is partially paid by a health insurance policy for the qualified student.

(ii) A licensed or accredited paraprofessional or educational aide.

(iii) Tuition for vocational and life skills education approved by the department.

(iv) Associated goods and services that include educational and psychological evaluations, assistive technology rentals and braille translation goods and services approved by the department.

(d) Tutoring or teaching services provided by an individual who is not subject to disciplinary action by the state board of education for immoral or unprofessional conduct pursuant to section 15-505 or 15-534.04 or a facility that is accredited by a state, regional or national accrediting organization. The department shall ensure that any individual who provides tutoring or teaching services to one or more qualified students pursuant to this subdivision is not subject to disciplinary action by the state board of education. The department shall also remove any individual who is subject to disciplinary action by the state board of education from all platforms that the department provides to parents and qualified students for the purchase of goods or educational services using account monies.

(e) Curricula and supplementary materials.

(f) Tuition or fees for a nonpublic online learning program.

(g) Fees for a nationally standardized norm-referenced achievement test, an advanced placement examination or any exams related to college or university admission.

(h) Tuition or fees at an eligible postsecondary institution.

(i) Textbooks required by an eligible postsecondary institution.

(j) Fees to manage the Arizona empowerment scholarship account.

(k) Services provided by a public school, including individual classes and extracurricular programs.

(l) Insurance or surety bond payments.

(m) Uniforms purchased from or through a qualified school.

(n) If the qualified student meets the criteria specified in section 15-2401, paragraph 7, subdivision (a), item (i), (ii) or (iii) and if the qualified student is in the second year prior to the final year of a contract executed pursuant to this article, costs associated with an annual education plan conducted by an independent evaluation team. The department shall prescribe minimum qualifications for independent evaluation teams pursuant to this subdivision and factors that teams must use to determine whether the qualified student shall be eligible to continue to receive monies pursuant to this article through the school year in which the qualified student reaches twenty-two years of age. An independent evaluation team that provides an annual education plan pursuant to this subdivision shall submit a written report that summarizes the results of the evaluation to the parent of the qualified student and to the department on or before July 31. The written report submitted by the independent evaluation team is valid for one year. If the department determines that the qualified student meets the eligibility criteria prescribed in the annual education plan, the qualified student is eligible to continue to receive monies pursuant to this article until the qualified student reaches twenty-two years of age, subject to annual review. A parent may appeal the department's decision pursuant to title 41, chapter 6, article 10. As an addendum to a qualified student's final-year contract, the department shall provide the following written information to the parent of the qualified student:

(i) That the qualified student will not be eligible to continue to receive monies pursuant to this article unless the results of an annual education plan conducted pursuant to this subdivision demonstrate that the qualified student meets the eligibility criteria prescribed in the annual education plan.

(ii) That the parent is entitled to obtain an annual education plan pursuant to this subdivision to determine whether the qualified student meets the eligibility criteria prescribed in the annual education plan.

(iii) A list of independent evaluation teams that meet the minimum qualifications prescribed by the department pursuant to this subdivision.

(o) Public transportation services in this state, including a commuter pass for the qualified student, or transportation network services as defined in section 28-9551 between the qualified student's residence and a qualified school in which the qualified student is enrolled.

(p) Computer hardware and technological devices primarily used for an educational purpose. For the purposes of this subdivision, "computer hardware and technological devices":

(i) Includes calculators, personal computers, laptops, tablet devices, microscopes, telescopes and printers.

(ii) Does not include entertainment and other primarily noneducational devices, including televisions, telephones, video game consoles and accessories, and home theatre and audio equipment.

5. 4. Not file an affidavit of intent to homeschool pursuant to section 15-802, subsection B, paragraph 2 or 3.

6. 5. Not use monies deposited in the qualified student's account for any of the following:

(a) Computer hardware or other technological devices, except as otherwise allowed under paragraph 4 3, subdivision (c) or (p) of this subsection.

(b) Transportation of the pupil, except for transportation services described in paragraph 4 3, subdivision (o) of this subsection.

C. In exchange for the parent's agreement pursuant to subsection B of this section, the department shall transfer from the monies that would otherwise be allocated to a recipient's prior school district, or if the child is currently eligible to attend a preschool program for children with disabilities, a kindergarten program or any of grades one through twelve, the monies that the department determines would otherwise be allocated to a recipient's expected school district of attendance, to the treasurer for deposit into an Arizona empowerment scholarship account an amount that is equivalent to ninety percent of the sum of the base support level and additional assistance prescribed in sections 15-185 and 15-943 for that particular student if that student were attending a charter school.

D. The department of education empowerment scholarship account fund is established consisting of monies appropriated by the legislature. The department shall administer the fund. Monies in the fund are subject to legislative appropriation. Monies in the fund shall be used for the department's costs in administering Arizona empowerment scholarship accounts under this chapter. Monies in the fund are exempt from the provisions of section 35-190 relating to lapsing of appropriations. If the number of Arizona empowerment scholarship accounts significantly increases after fiscal year 2020-2021, the department may request an increase in the amount appropriated to the fund in any subsequent fiscal year in the budget estimate submitted pursuant to section 35-113. The department shall list monies in the fund as a separate line item in its budget estimate.

E. The state treasurer empowerment scholarship account fund is established consisting of monies appropriated by the legislature. The state treasurer shall administer the fund. Monies in the fund shall be used for the state treasurer's costs in administering the Arizona empowerment scholarship accounts under this chapter. If the number of Arizona empowerment scholarship accounts significantly increases after fiscal year 2020-2021, the state treasurer may request an increase in the amount appropriated to the fund in any subsequent fiscal year in the budget estimate submitted pursuant to section 35-113. Monies in the fund are subject to legislative appropriation. Monies in the fund are exempt from the provisions of section 35-190 relating to lapsing of appropriations. The state treasurer shall list monies in the fund as a separate line item in its budget estimate.

F. A parent must renew the qualified student's Arizona empowerment scholarship account on an annual basis. The department of education shall verify that the parent's child is a qualified student as defined in section 15-2401 or 15-2401.01 in the year for which the parent seeks to renew the Arizona empowerment scholarship account. This subsection does not require the department to annually verify the child's disability for the purpose of section 15-2401, paragraph 7, subdivision (a), item (i), (ii) or (iii), if applicable.

G. Notwithstanding any changes to the student's multidisciplinary evaluation team plan, a student who has previously qualified for an Arizona empowerment scholarship account remains eligible to apply for renewal until the student finishes high school.

H. If a parent does not renew the qualified student's Arizona empowerment scholarship account for a period of three academic years, the department shall notify the parent that the qualified student's account will be closed in sixty calendar days. The notification must be sent through by certified mail, email and telephone, if applicable. The parent has sixty calendar days to renew the qualified student's Arizona empowerment scholarship account. If the parent chooses not to renew or does not respond in sixty calendar days, the department shall close the account and any remaining monies shall be returned to the this state.

I. A signed agreement under this section constitutes school attendance required by section 15-802.

J. A qualified school or a provider of services purchased pursuant to subsection B, paragraph 4 3 of this section may not share, refund or rebate any Arizona empowerment scholarship account monies with the parent or qualified student in any manner.

K. Notwithstanding subsection H of this section, on the qualified student's graduation from a postsecondary institution or after any period of four consecutive years after high school graduation in which the student is not enrolled in an eligible postsecondary institution, but not before this time as long as the account holder continues using a portion of account monies for allowable expenses each year and is in good standing, the qualified student's Arizona empowerment scholarship account shall be closed and any remaining monies shall be returned to the state.

L. Monies received pursuant to this article do not constitute taxable income to the parent of the qualified student. END_STATUTE

Sec. 2. Section 15-2403, Arizona Revised Statutes, is amended to read:

START_STATUTE15-2403. Arizona empowerment scholarship accounts; administration; appeals; risk-based audits; rules; policy handbook

A. The treasurer may contract with private financial management firms to manage Arizona empowerment scholarship accounts.

B. The department shall conduct or contract for annual audits of Arizona empowerment scholarship accounts to ensure compliance with section 15-2402, subsection B, paragraph 4 3. The department shall also conduct or contract for random, quarterly and annual audits of Arizona empowerment scholarship accounts as needed to ensure compliance with section 15-2402, subsection B, paragraph 4 3. The department, in consultation with the office of the auditor general, shall develop risk-based auditing procedures for audits conducted pursuant to this subsection.

C. The department shall annually review a sample of Arizona empowerment scholarship accounts, selected at random, to determine whether the parent or qualified student is in compliance with the terms of the contract, applicable laws, rules and orders relating to the Arizona empowerment scholarship accounts program. The Arizona empowerment scholarship account of a parent or qualified student who is in good standing may be randomly selected pursuant to this subsection only one time during any five-year period. The department may remove any parent or qualified student from eligibility for an Arizona empowerment scholarship account if the parent or qualified student fails to comply with the terms of the contract or applicable laws, rules or orders or knowingly misuses monies or knowingly fails to comply with the terms of the contract with intent to defraud and shall notify the treasurer. The department shall notify the treasurer to suspend the account of a parent or qualified student and shall notify the parent or qualified student in writing that the account has been suspended and that no further transactions will be allowed or disbursements made. The notification shall specify the reason for the suspension and state that the parent or qualified student has fifteen days, not including weekends, to respond and take corrective action. If the parent or qualified student refuses or fails to contact the department, furnish any information or make any report that may be required for reinstatement within the fifteen-day period, the department may remove the parent or qualified student pursuant to this subsection.

D. A parent may appeal to the state board of education any administrative decision the department makes pursuant to this article, including determinations of allowable expenses, removal from the program or enrollment eligibility. The department shall notify the parent in writing that the parent may appeal any administrative decision under this article and the process by which the parent may appeal at the same time the department notifies the parent of an administrative decision under this article. The state board of education shall establish an appeals process, and the department shall post this information on the department's website in the same location as the policy handbook developed pursuant to subsection K of this section.

E. A parent may represent himself or herself or designate a representative, not necessarily an attorney, before any appeals hearing held pursuant to this section. Any designated representative who is not an attorney admitted to practice may not charge for any services rendered in connection with the hearing. The fact that a representative participated in the hearing or assisted the account holder is not grounds for reversing any administrative decision or order if the evidence supporting the decision or order is substantial, reliable and probative.

F. The state board of education may refer cases of substantial misuse of monies to the attorney general for the purpose of collection or for the purpose of a criminal investigation if the state board of education obtains evidence of fraudulent use of an account.

G. The department shall make quarterly transfers of the amount calculated pursuant to section 15-2402, subsection C to the treasurer for deposit in the Arizona empowerment scholarship account of each qualified student, except the department may make transfers according to another transfer schedule if the department determines a transfer schedule other than quarterly transfers is necessary to operate the Arizona empowerment scholarship account.

H. The department shall accept applications between July 1 and June 30 of each year. The department shall issue an award letter to eligible applicants within thirty days after receipt of a completed application and all required documentation. If an eligible applicant completes an application in advance for an Arizona empowerment scholarship account to be funded beginning on a later date, the department may enroll the eligible applicant on the later date, except that the department may not enroll the applicant more than two fiscal quarters after the fiscal quarter in which the application is completed or on a date that is after March 31 and before July 1. If an eligible applicant completes an application after March 31 and before July 1, the department shall enroll the applicant on or after July 1. The department shall enroll all other eligible applicants when the department issues an award letter pursuant to this subsection. This subsection does not allow a qualified student to receive monies in an Arizona empowerment scholarship account while the qualified student is enrolled in a school district or charter school. On or before September 1 and November 1 of each year, the department shall furnish to the joint legislative budget committee and the governor's office of strategic planning and budgeting an estimate of the amount required to fund Arizona empowerment scholarship accounts for the following fiscal year. The department shall include in its budget request for the following fiscal year the amount estimated pursuant to section 15-2402, subsection C for each qualified student.

I. The state board of education may adopt rules and policies necessary to administer Arizona empowerment scholarship accounts, including rules and policies:

1. For establishing an appeals process pursuant to subsection D of this section.

2. For conducting or contracting for examinations of the use of account monies, consistent with subsection L of this section.

3. For conducting or contracting for random, quarterly and annual reviews of accounts.

4. For establishing or contracting for the establishment of an online anonymous fraud reporting service.

5. For establishing an anonymous telephone hotline for fraud reporting.

6. That require a surety bond or insurance for account holders.

J. The department shall contract with an independent third party for the purposes of determining whether a qualified student is eligible to receive educational therapies or services pursuant to section 15-2402, subsection B, paragraph 4 3, subdivision (c). If during any period on or after January 1, 2023 the department fails to ensure that a contract with an independent third party is in effect, during that period:

1. The county school superintendent of each county may approve a list of independent third parties within the county whose evaluation may be used to determine whether a qualified student who resides within the county is eligible to receive educational therapies or services pursuant to section 15-2402, subsection B, paragraph 4 3, subdivision (c).

2. If the county school superintendent of a county does not provide a list of approved independent third parties within ninety days after the beginning of any period during which the department does not have a contract with an independent third party in effect as described in this subsection, the parent of a qualified student who resides within the county has the right to obtain an independent educational evaluation from a qualified examiner to determine whether the qualified student is eligible to receive educational therapies or services pursuant to section 15-2402, subsection B, paragraph 4 3, subdivision (c). The expense for an educational evaluation undertaken pursuant to this paragraph shall be provided by the school district within which the qualified student resides and that serves the grade level of the qualified student. For the purposes of this paragraph, "qualified examiner" means a licensed physician, psychiatrist or psychologist.

K. On or before July 1 of each year, the department shall develop an applicant and participant handbook that includes information relating to policies and processes of Arizona empowerment scholarship accounts. The policy handbook shall comply with the rules adopted by the state board of education pursuant to this section. The department shall post the handbook on the department's website.

L. The department shall:

1. Establish and maintain an online database of allowable and disallowed categories of expenses and provide a link to the database on the department's website.

2. Allow the use of account monies to reimburse the parent of a qualified student or a qualified student for the purchase of a good or educational service that is an allowable expense pursuant to section 15-2402, subsection B.

M. Except for cases in which the attorney general determines that a parent or account holder has committed fraud, any expenditure from an Arizona empowerment scholarship account for a purchase that the department determines is not an allowable expense pursuant to section 15-2402 and that is subsequently repaid by the parent or account holder shall be credited back to the Arizona empowerment scholarship account balance within thirty days after the receipt of payment.

N. If, in response to an appeal of an administrative decision made by the department, the state board of education issues a stay of an Arizona empowerment scholarship account suspension pursuant to rules adopted by the board, the department may not withhold funding or contract renewal for the account holder because of the appealed administrative decision during the stay unless directed by the board to do so. END_STATUTE

Sec. 3. Section 15-2405, Arizona Revised Statutes, is amended to read:

START_STATUTE15-2405. Arizona empowerment scholarship accounts parent oversight committee; membership; duties

A. The Arizona empowerment scholarship accounts parent oversight committee is established consisting of six members who are parents of qualified students who receive Arizona empowerment scholarship account monies under this chapter. The members shall be appointed as follows:

1. One member who is appointed by the president of the senate.

2. One member who is appointed by the speaker of the house of representatives.

3. One member who is appointed by the minority leader of the senate.

4. One member who is appointed by the minority leader of the house of representatives.

5. Two members who are appointed by the governor.

B. At a minimum, the members appointed pursuant to subsection A, paragraphs 1, 2, 3 and 4 of this section shall be parents of qualified students who both:

1. Meet any of the criteria specified in section 15-2401, paragraph 7, subdivision (a), item (i), (ii) or (iii) as determined by an independent third party pursuant to section 15-2403, subsection I J.

2. Use monies deposited in the qualified student's Arizona empowerment scholarship account for expenses as prescribed in section 15-2402, subsection B, paragraph 4 3, subdivision (c).

C. The members of the committee shall annually elect a chairperson from among its members.

D. The committee shall meet at least once each calendar quarter. A majority of the membership constitutes a quorum for the transaction of business.

E. The committee shall collaborate and interact with the department, the state board of education, the attorney general and, as appropriate, the auditor general to review all of the following:

1. The implementation of policies and procedures relating to the Arizona empowerment scholarship account program under this chapter and the program's effectiveness.

2. The concerns of parents of qualified students who receive Arizona empowerment scholarship account monies under this chapter.

3. The work of the ombudsman-citizens aide on complaints associated with administering the Arizona empowerment scholarship account program.

F. A parent may not serve on the committee if any of the following applies:

1. The parent is an employee or the relative of an employee of the department.

2. The parent receives monies or compensation from or is otherwise associated in any manner with a lobbyist organization, a school choice advocacy group or a private financial management firm that manages Arizona empowerment scholarship accounts pursuant to section 15-2403, subsection A.

3. The parent provides goods or services to qualified students that are purchased pursuant to section 15-2402, subsection B, paragraph 4 3. END_STATUTE

Sec. 4. Section 15-2406, Arizona Revised Statutes, is amended to read:

START_STATUTE15-2406. Arizona empowerment scholarship accounts; quarterly reports

Within sixty days after the last day of each calendar quarter, the department shall submit a report, consistent with federal law, to the governor, the president of the senate, the speaker of the house of representatives, the director of the joint legislative budget committee and the director of the governor's office of strategic planning and budgeting. The report must include all of the following:

1. The number of qualified students disaggregated by:

(a) Eligibility category.

(b) For qualified students who are eligible pursuant to section 15-2401.01, the number of qualified students who attended a public school in this state in the school year immediately preceding the first year of each qualified student's enrollment in the Arizona empowerment scholarship account program.

(d) The school district or charter school that each qualified student attended in the school year immediately preceding the first year of each qualified student's enrollment in the Arizona empowerment scholarship account program, if applicable.

(e) English language learners.

(f) Qualified students who are enrolled in the Arizona empowerment scholarship account program as a student child with a disability.

(g) The zip code of each qualified student's permanent residence.

2. The annual award amount associated with each Arizona empowerment scholarship account.

3. The amount of approved expenses disaggregated by type of expense as described in section 15-2402, subsection B, paragraph 4 3. END_STATUTE

Sec. 5. Section 43-1504, Arizona Revised Statutes, is amended to read:

START_STATUTE43-1504. Special provisions; corporate donations for low-income scholarships; rules

A. A school tuition organization that receives contributions from a corporation for the purposes of section 20-224.06 or 43-1183 must use at least ninety percent of those contributions to provide educational scholarships or tuition grants only to children whose family income does not exceed one hundred eighty-five percent of the income limit required to qualify a child for reduced-price lunches under the national school lunch and child nutrition acts (42 United States Code sections 1751 through 1793) and to whom any of the following applies:

1. Attended a governmental primary or secondary school as a full-time student as defined in section 15-901 or attended a preschool program that offers services to students with disabilities at a governmental school for at least ninety days of the prior fiscal year or one full semester and transferred from a governmental school to a qualified school.

2. Enroll in a qualified school in a kindergarten program or a preschool program that offers services to students with disabilities.

3. Are the dependent of a member of the armed forces of the United States who is stationed in this state pursuant to military orders.

4. Are homeschooled before enrolling in a qualified school.

5. Moved to this state from out of state before enrolling in a qualified school.

6. Participated in an Arizona empowerment scholarship account and did not renew the account or accept the scholarship in order to accept a scholarship or tuition grant under this section.

7. Subject to subsection G of this section, are placed in foster care pursuant to title 8, chapter 4 at any time before the student graduates graduating from high school or obtains obtaining a general equivalency diploma and who meet all of the following criteria:

(a) Are unable to attend a governmental primary or secondary school as a full-time student as defined in section 15-901. For the purposes of this subdivision, "unable to attend" means the student has been expelled or asked not to return due to the student's behavior or the school is not able to provide necessary services to the student.

(b) Have not attended a governmental primary or secondary school as a full-time student as defined in section 15-901 for at least ninety days of the prior fiscal year or one full semester before enrolling in a qualified school.

(c) The qualified school in which the students children are enrolling is only considered because a governmental primary or secondary school cannot meet the students' children's unique needs, such as severe medical or behavioral needs that require specialized programs.

(d) Are unable to receive other scholarships or tuition grants under this chapter or chapter 15 16 of this title in an amount that is equal to the cost of tuition to attend the qualified school.

8. Received an educational scholarship or tuition grant under paragraph 1, 2, 3, 4, 5, 6 or 7 of this subsection or chapter 16, article 1 of this title if the children continue to attend a qualified school in a subsequent year.

B. A child is eligible to receive an educational scholarship or tuition grant under subsection A of this section if the child meets the criteria to receive a reduced-price lunch but does not actually claim that benefit.

C. In 2021, a school tuition organization shall not issue an educational scholarship or a tuition grant for the purposes of section 20-224.06 or 43-1183 in an amount that exceeds $5,600 for students who are in a kindergarten program, a preschool program that offers services to students with disabilities or grades one through eight or $7,500 for students who are in grades nine through twelve. In each year after 2021, the limit amount for a scholarship or a grant under this subsection shall be increased by $200.

D. A school tuition organization shall require that student beneficiaries use the educational scholarships or tuition grants on a full-time basis. If a child leaves the school before completing an entire school year, the school shall refund a prorated amount of the educational scholarship or tuition grant to the school tuition organization that issued the scholarship or grant. The school tuition organization shall allocate any refunds it receives under this subsection for educational scholarships or tuition grants.

E. Students who receive an educational scholarship or tuition grant under this section shall be allowed to attend any qualified school of their parents' choice.

F. The department of revenue, with the cooperation of the department of insurance and financial institutions, shall adopt rules and publish and prescribe forms and procedures necessary to administer this section.

G. If a court of competent jurisdiction issues a final judgment that the aggregate tax credit limit prescribed in section 43-1183, subsection C, paragraph 1 is unenforceable and that judgment is no longer subject to further appeal or review, a school tuition organization shall not issue an educational scholarship or a tuition grant under subsection A, paragraph 7 or 8 of this section for children who received an educational scholarship or a tuition grant under subsection A, paragraph 7 of this section. END_STATUTE

Sec. 6. Section 43-1603, Arizona Revised Statutes, is amended to read:

START_STATUTE43-1603. Operational requirements for school tuition organizations; notice; qualified schools

A. A certified school tuition organization must be established to receive contributions from taxpayers for the purposes of income tax credits under sections 43-1089 and 43-1089.03 and to pay educational scholarships or tuition grants to allow students to attend any qualified school of their parents' choice.

B. To be eligible for certification and retain certification, the school tuition organization:

1. Must allocate at least ninety percent of its annual revenue from contributions made for the purposes of sections 43-1089 and 43-1089.03 for educational scholarships or tuition grants.

2. Shall not limit the availability of educational scholarships or tuition grants to only students of one school.

3. May allow donors to recommend student beneficiaries, but shall not award, designate or reserve scholarships solely on the basis of donor recommendations.

4. Shall not allow donors to designate student beneficiaries as a condition of any contribution to the organization, or facilitate, encourage or knowingly allow the exchange of beneficiary student designations in violation of section 43-1089, subsection F, section 43-1089.03, subsection F and section 43-1089.04, subsection E.

5. Shall include on the organization's website, if one exists, the percentage and total dollar amount of educational scholarships and tuition grants awarded during the previous fiscal year to:

(a) Students whose family income meets the economic eligibility requirements established under the national school lunch and child nutrition acts (42 United States Code sections 1751 through 1793) for free or reduced-price lunches.

(b) Students whose family income exceeds the threshold prescribed by subdivision (a) of this paragraph but does not exceed one hundred eighty-five percent of the economic eligibility requirements established under the national school lunch and child nutrition acts (42 United States Code sections 1751 through 1793) for free or reduced-price lunches.

6. Must not award educational scholarships or tuition grants to students who are simultaneously enrolled in a district school or charter school and a qualified school.

C. A school tuition organization shall include the following notice in any printed materials soliciting donations, in applications for scholarships and on its website, if one exists:

Notice

A school tuition organization cannot award, restrict or reserve scholarships solely on the basis of a donor's recommendation.

A taxpayer may not claim a tax credit if the taxpayer agrees to swap donations with another taxpayer to benefit either taxpayer's own dependent.

D. In evaluating applications and awarding, designating or reserving scholarships, a school tuition organization:

1. Shall not award, designate or reserve a scholarship solely on the recommendation of any person contributing money to the organization, but may consider the recommendation among other factors.

2. Shall consider the financial need of applicants.

E. A taxpayer's contribution to a school tuition organization that exceeds the amount of the credit allowed by section 43-1089 but does not exceed the amount of the credit allowed by section 43-1089.03 is considered a contribution pursuant to section 43-1089.03. A school tuition organization must use at least ninety percent of contributions made pursuant to section 43-1089.03 for educational scholarships or tuition grants for students to whom any of the following applies:

1. Attended a governmental primary or secondary school as a full-time student as defined in section 15-901 or attended a preschool program that offers services to students with disabilities at a governmental school for at least ninety days of the prior fiscal year and transferred from a governmental school to a qualified school.

2. Enroll in a qualified school in a kindergarten program or a preschool program that offers services to students with disabilities.

3. Are the dependent of a member of the armed forces of the United States who is stationed in this state pursuant to military orders.

4. Are homeschooled before enrolling in a qualified school.

5. Moved to this state from out of state before enrolling in a qualified school.

6. Participated in an Arizona empowerment scholarship account and did not renew the account or accept the scholarship in order to accept a scholarship or tuition grant under this section.

7. Subject to subsection H of this section, are placed in foster care pursuant to title 8, chapter 4 at any time before the student graduates from high school or obtains a general equivalency diploma and who meet all of the following criteria:

(c) The qualified school in which the students are enrolling is only considered because a governmental primary or secondary school cannot meet the students' unique needs, such as severe medical or behavioral needs that require specialized programs.

(d) Are unable to receive other scholarships or tuition grants under this chapter or chapter 15 of this title in an amount that is equal to the cost of tuition to attend the qualified school.

8. Received an educational scholarship or tuition grant under paragraph 1, 2, 3, 4, 5, 6 or 7 of this subsection or under chapter 15 of this title if the student continues to attend a qualified school in a subsequent year.

F. In awarding educational scholarships or tuition grants from contributions made pursuant to section 43-1089.03, a school tuition organization shall give priority to students and siblings of students who are on a waiting list for scholarships if the school tuition organization maintains a waiting list.

G. If an individual educational scholarship or tuition grant exceeds the school's tuition, the amount in excess shall be returned to the school tuition organization that made the award or grant. The school tuition organization may allocate the returned monies as a multiyear award for that student and report the award pursuant to section 43-1604, subsection A, paragraph 5, subdivision (b) or may allocate the returned monies for educational scholarships or tuition grants for other students.

H. If a court of competent jurisdiction issues a final judgment that the aggregate tax credit limit prescribed in section 43-1183, subsection C, paragraph 1 is unenforceable and that judgment is no longer subject to further appeal or review, a school tuition organization shall not issue an educational scholarship or a tuition grant under subsection E, paragraph 7 or 8 of this section for children who received an educational scholarship or a tuition grant under subsection E, paragraph 7 of this section. END_STATUTE