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 postsecondary 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 of at least twenty-four years of age 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 following the date of earning a high school diploma, GED certificate or equivalent, with the exception of students participating in the A+ schools program as provided in subdivision (4) of subsection 2 of this section; and

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

     2. (1) The amount of allowable eligible expenses shall be the lesser of:

     (a) The actual costs of tuition, books and fees incurred by the eligible student and attributable to earning credit hours for which a scholarship may be claimed pursuant to this section; or

     (b) Five thousand dollars.

     (2) The amount of scholarship, subject to further proration under subdivision (4) of this subsection, shall be the difference of the amount of eligible expenses determined pursuant to subdivision (1) of this subsection minus any federal or state financial aid received by or on behalf of the eligible student during the year for which a scholarship is claimed and which aid may be used for tuition, fees or books multiplied by the applicable scholarship fraction determined pursuant to subdivision (3) of this subsection.

     (3) The scholarship fraction used to determine the amount of scholarship pursuant to subdivision (2) of this subsection shall be determined by the following table:

If the claimant's Missouri                         The scholarship

adjusted gross income is:                     fraction shall be:

Under $25,000 100%

$25,000 to $35,000 90%

$35,001 to $45,000 80%

$45,001 to $55,000 70%

$55,001 to $65,000 60%

$65,001 to $75,000 50%

$75,001 to $85,000 40%

$85,001 to $95,000 . . . 30%

$95,001 to $105,000 20%

Over $105,000 10%.

     (4) The actual amount of the scholarship provided under this section shall be one-third of the amount of scholarship determined pursuant to subdivision (2) of this subsection for calendar year 1998, two-thirds of the amount of scholarship determined pursuant to subdivision (2) of this subsection for calendar year 1999 and the full amount of scholarship determined pursuant to subdivision (2) of this subsection for calendar year 2000 and thereafter.

     (5) No student may claim, or have claimed on the student's behalf, a challenge scholarship on the basis of credit hours earned after that student has successfully completed sixty credit hours or equivalent of postsecondary work following the date of earning a high school diploma, GED certificate or equivalent, 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 earned following the exhaustion of financial benefits under the A+ schools program.

     (6) 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.

     (7) 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, the age of the student 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. Claims for the challenge scholarship shall be filed with the department of revenue with the filing of the Missouri income tax return of the claimant for the year the scholarship is being claimed and shall be accompanied by a copy of the form provided to the eligible student by the institution pursuant to this subsection. All claims for the challenge scholarship for a particular tax year shall be filed by December thirty-first of the 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.