To amend chapter 173, RSMo, by adding thereto one new section relating to the challenge scholarship program for higher education, with penalty provisions.

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

     Section A. Chapter 173, RSMo, is amended by adding thereto one new section, to be known as section 173.740, to read as follows:

     173.740. 1. As used in this section, the following words and terms shall mean:

     (1) "Challenge scholarship", a reimbursement for post-secondary education expenses, as calculated pursuant to this section, to be claimed on Missouri state individual income tax returns by, or on behalf of, an eligible student who has enrolled in and completed credit hours in an eligible institution of postsecondary education pursuant to the provisions of this section;

     (2) "Eligible institution of postsecondary education", any approved public or private postsecondary education institution, as defined in section 173.205, or any other Missouri private institution that:

     (a) Is required by statute to be certified to operate by the coordinating board for higher education;

     (b) Is institutionally accredited by a United States Department of Education recognized accrediting commission;

     (c) Has operated continuously in the state of Missouri for at least five years;

     (d) Has no more than fifty percent of its students in correspondence programs;

     (e) Offers a two-year certificate or an associate or higher degree program;

     (f) Has at least one articulation agreement relating to a degree program with another institution approved by the coordinating board for higher education; and

     (g) Is approved for participation in the challenge scholarship program by the coordinating board for higher education;

     (3) "Credit hour", the standard academic measurement of attendance based on a semester term, or its equivalent, in trimester, quarter or clock hour terms;

     (4) "Resident of the state of Missouri", a resident of this state as determined under standards promulgated pursuant to section 173.005;

     (5) "Eligible claimant", an eligible student claiming a challenge scholarship or another person, such as a parent, claiming a challenge scholarship on behalf of an eligible student under this section, which student or other person satisfies the following conditions throughout the period for which the challenge scholarship is being claimed:

     (a) The claimant is a citizen or a permanent resident of the United States; and

     (b) The claimant is a resident of the state of Missouri, as defined in this section;

     (6) "Eligible student", an individual who is enrolled in an eligible institution of postsecondary education and has been in compliance with the eligibility requirements set forth in subsection 1 of section 173.215, throughout the period for which the challenge scholarship is being claimed, excluding the requirements of full-time enrollment and financial need, and in addition, meets the following requirements:

     (a) Has received a high school diploma, general educational development certificate (GED) or equivalent;

     (b) Is enrolled in and has maintained satisfactory academic progress in a program leading to a certificate, or an associate or baccalaureate degree;

     (c) Has yet to complete sixty semester hours, or equivalent, of postsecondary course credit, with the exception of students participating in the A+ schools program as provided in subdivision (4) of subsection 2 of this section;

     (d) Does not have a delinquent debt with an institution of higher education exceeding the amount of the challenge scholarship; and

     (e) Has not already claimed, or had claimed on the individual's behalf, the maximum allowable cumulative challenge scholarship as defined in subdivision (3) of subsection 2 of this section.

     2. (1) The actual amount of allowable challenge scholarship shall be the lesser of:

     (a) The number of credit hours completed in that calendar year times the per credit hour allowance, as provided in subdivision (2) of this subsection; or

     (b) The maximum allowable challenge scholarship, as provided in subdivision (2) of this subsection.

     (2) For calendar year 1998, the per credit hour allowance shall be seventeen dollars and the maximum allowable challenge scholarship shall be five hundred dollars. For calendar year 1999, the per credit hour allowance shall be thirty-three dollars and the maximum allowable challenge scholarship shall be one thousand dollars. For calendar year 2000 and each subsequent calendar year, the per credit hour allowance shall be fifty dollars and the maximum allowable challenge scholarship shall be fifteen hundred dollars.

     (3) No student may claim, or have claimed on the student's behalf, more than three thousand dollars of cumulative challenge scholarship.

     (4) No student may claim, or have claimed on the student's behalf, a challenge scholarship for credit hours earned after that student has successfully completed sixty credit hours or equivalent of postsecondary work, except for students who participate in the A+ schools program as established in section 160.545, RSMo. Students who participate in the A+ schools program may use the challenge scholarship for the sixty credit hours or equivalent following the exhaustion of financial benefits under the A+ schools program.

     (5) The provisions of section 143.811, RSMo, to the contrary notwithstanding, no interest shall be paid on the challenge scholarship provided for in this section.

     (6) Nothing in this section shall be construed to limit the actual scholarship amount to the amount of the claimant's Missouri income tax liability.

     3. Every eligible institution of postsecondary education shall furnish to each eligible student enrolled at such institution who is a resident of Missouri, a written statement in a form prescribed by the director of revenue showing the credit hours completed by that student for the calendar year and other such information as the director of revenue shall prescribe. This form shall be furnished to each eligible student on or before January thirty-first of the succeeding year, and claims for the challenge scholarship shall be filed with the department of revenue by December thirty-first of such succeeding year.

     4. The coordinating board for higher education shall provide to the director of revenue a list of eligible institutions of postsecondary education as determined pursuant to subdivision (2) of subsection 1 of this section for the calendar year. This list shall be provided on or before December thirty-first of that calendar year or by such other, earlier date as specified by the director and agreed to by the coordinating board. The director of revenue shall also provide annually to the coordinating board for higher education a report showing how many eligible students claimed a challenge scholarship, the dollar amount of such scholarships and other information requested by the coordinating board for higher education.

     5. Challenge scholarship claims may only be filed for the calendar years beginning on or after January 1, 1998.

     6. The coordinating board for higher education, in conjunction with the director of revenue, shall prescribe such rules and regulations as are necessary to carry out the provisions of this section.

     7. (1) Fraudulent claims under the provisions of this section shall be subject to the same penalties and under the same conditions as are provided by sections 143.911 to 143.951, RSMo, relating to fraudulent claims for income taxes.

     (2) Any repayment of a fraudulent challenge scholarship claim collected by the director of revenue shall include full repayment plus interest thereon at the rate determined by section 32.065, RSMo, from the date the fraudulent claim was filed until such repayment is made.

     (3) No challenge scholarship may be sold or assigned to a third party.

     8. This section shall only apply to credit hours accrued after January 1, 1998.