To repeal section 143.805, RSMo 1994, relating to income taxation, and to enact in lieu thereof six new sections relating to the same subject, with an effective date.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF MISSOURI, AS FOLLOWS:

     Section A. Section 143.805, RSMo 1994, is repealed and six new sections enacted in lieu thereof, to be known as sections 143.805, 1, 2, 3, 4 and 5, to read as follows:

     143.805. 1. Credits granted by other provisions of the statutes shall be applied against the tax imposed by this chapter in the following order:

     (1) Credit for income tax paid to another state authorized in section 143.081;

     (2) New business facility credit authorized in sections 135.100 to 135.160, RSMo;

     (3) Economic development credit authorized in subsection 6 of section 100.286, RSMo;

     (4) Missouri low-income housing tax credit authorized in subsection 2 of section 135.352, RSMo;

     (5) Employment of unemployed agriculture workers tax credit authorized in sections 135.275 to 135.287, RSMo;

     (6) Wood energy producer tax credit authorized in sections 135.300 to 135.311, RSMo;

     (7) Contributions to innovations centers and the corporation for science and technology tax credit authorized in sections 348.300 to 348.318, RSMo;

     (8) Neighborhood assistance credit authorized in sections 32.105 to 32.125, RSMo;

     (9) Special needs child adoption credit authorized in section 135.327, RSMo;

     (10) Enterprise zone credit authorized in sections 135.200 to 135.255, RSMo;

     (11) Senior citizens property tax credit authorized in sections 135.010 to 135.035, RSMo[.];

     (12) Educational expenses and scholarship contributions tax credit authorized in sections 1 to 5 of this act.

     2. The director of revenue may prescribe the priority of any other credit authorized by law.

     Section 1. As used in sections 1 to 5 of this act, the following terms shall mean:

     (1) "Educational expenses", tuition, attendance fees, school supplies, or other educational expenses as defined by regulation of the department of revenue incurred in attending a qualified school;

     (2) "Qualified school", any public or private elementary or secondary school situated in Missouri that is accredited by the Missouri department of elementary and secondary education, the North Central Association of Colleges and Schools, the National Federation of Nonpublic School State Accrediting Association, the Independent Schools Association of the Central States, or the Committee on Accredited Schools - University of Missouri-Columbia, or any adult basic education program situated in Missouri administered by the department of elementary and secondary education or operated by a qualified school situated in Missouri or any public or private post-secondary school situated in Missouri;

     (3) "Qualifying scholarship charity", a charitable organization in Missouri that is exempt from federal taxation pursuant to section 501(c)(3) of the Internal Revenue Code and that allocates at least ninety percent of its annual revenue for educational scholarships or tuition grants to persons to allow them to attend a qualified school.

     Section 2. 1. A resident shall be allowed a credit against the tax imposed by chapter 143, RSMo, pursuant to this section for all educational expenses incurred by such resident in the same taxable year for which the Missouri return is being filed.

     2. Such expenses shall be on behalf of the taxpayer or any other person or persons attending a qualified school.

     3. The allowable credit shall be an amount not to exceed two hundred dollars for each person for which educational expenses are incurred.

     4. The total amount of allowable credit calculated after application of subsection 3 of this section shall be determined by the following table:

If the taxpayer's Missouri                    The total amount of

adjusted gross income is:                    allowable credit is:

Under $25,000 100% of the credit

$25,000 to $35,000 75% of the credit

$35,001 to $45,000 50% of the credit

$45,001 to $55,000 25% of the credit

Over $55,000 0% of the credit.

     5. If the total amount of allowable credit pursuant to this section exceeds the income tax reduced by other credits, then the excess shall be considered an overpayment of the income tax.

     Section 3. 1. A resident shall be allowed a credit against the tax imposed by chapter 143, RSMo, pursuant to this section for all cash contributions to a qualifying scholarship charity made by such resident in the same taxable year for which the Missouri return is being filed.

     2. The allowable credit shall be an amount not to exceed fifty percent of the contribution.

     Section 4. 1. A corporation with a registered agent in this state shall be allowed a credit against the tax imposed by chapter 143, RSMo, pursuant to this section for all educational expenses incurred by such corporation in the same taxable year for which the Missouri return is being filed.

     2. Such expenses shall be on behalf of any person or persons attending a qualified school.

     3. The allowable credit shall be an amount equal to fifty percent of the incurred educational expenses for each person but such amount shall not exceed two hundred dollars per each such person.

     Section 5. 1. A corporation with a registered agent in this state shall be allowed a credit against the tax imposed by chapter 143, RSMo, pursuant to this section for all cash contributions to a qualifying scholarship charity made by such corporation in the same taxable year for which the Missouri return is being filed.

     2. The allowable credit shall be an amount not to exceed fifty percent of the contribution.

     Section B. Section A of this act shall become effective January 1, 1998, and shall apply to all taxable years beginning after December 31, 1997.