Failure of eligible charter school organization to make expenditures

(a) In general Chapter 42 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subchapter: I Eligible Charter School Organizations Sec. 4969. Failure to expend receipts. 4969. Failure to expend receipts (a) In general In the case of any eligible charter school organization (as defined in section 25F(c)(2)) which has been determined by the Secretary to have failed to satisfy the requirement under subsection (b) for any taxable year, any contribution made to such organization during the first taxable year beginning after the date of such determination shall not be treated as a qualified contribution (as defined in section 25F(c)(3)) for purposes of section 25F. (b) Requirement The requirement described in this subsection is that the amount of qualified contributions of the eligible charter school organization for the taxable year which are expended before the expenditure deadline with respect to such receipts shall not be less than the required expenditure amount with respect to such taxable year. (c) Definitions For purposes of this section— (1) Required expenditure amount (A) In general The required expenditure amount with respect to a taxable year is the amount equal to 100 percent of qualified contributions for such taxable year— (i) reduced by the sum of such qualified contributions that are retained for reasonable administrative expenses for the taxable year or are carried to the succeeding taxable year under subparagraph (C), and (ii) increased by the amount of the carryover under subparagraph (C) from the preceding taxable year. (B) Safe harbor for reasonable administrative expenses For purposes of subparagraph (A)(i), if the percentage of total qualified contributions to an eligible charter school organization for a taxable year which are used for administrative purposes related to activities for the creation or expansion of charter schools (as defined in section 25F(c)(1)) operated or managed by such organization is equal to or less than 10 percent, such expenses shall be deemed to be reasonable for purposes of such subparagraph. (C) Carryover With respect to the amount of the total qualified contributions to an eligible charter school organization with respect to any taxable year, an amount not greater than 15 percent of such amount may, at the election of such organization or school, be carried to the succeeding taxable year. (2) Expenditures The term expenditures includes amounts which are formally committed but not expended. A formal commitment described in the preceding sentence may include qualified contributions set aside for the creation or expansion of charter schools operated or managed by such organization for more than one year. (3) Expenditure deadline The expenditure deadline with respect to qualified contributions for a taxable year is the first day of the fifth taxable year following the taxable year in which such qualified contributions are received by the eligible charter school organization. (4) Qualified contributions The term qualified contributions means contributions eligible for the credit under section 25F.. (b) Clerical amendment The table of subchapters for chapter 42 of such Code is amended by adding at the end the following new item: Subchapter I. Eligible Charter School Organizations.