(a) Grants to eligible entities and other organizations
(1) In general
Not less than 90 percent of the funds made available to a State under section
9906 of this title shall be used by the State to make grants for the purposes described in section
9901 of this title to eligible entities.
(2) Obligational authority
Funds distributed to eligible entities through grants made in accordance with paragraph (1) for a fiscal year shall be available for obligation during that fiscal year and the succeeding fiscal year, subject to paragraph (3).
(3) Recapture and redistribution of unobligated funds
Beginning on October 1, 2000, a State may recapture and redistribute funds distributed to an eligible entity through a grant made under paragraph (1) that are unobligated at the end of a fiscal year if such unobligated funds exceed 20 percent of the amount so distributed to such eligible entity for such fiscal year.
In redistributing funds recaptured in accordance with this paragraph, States shall redistribute such funds to an eligible entity, or require the original recipient of the funds to redistribute the funds to a private, nonprofit organization, located within the community served by the original recipient of the funds, for activities consistent with the purposes of this chapter.
(b) Statewide activities
(1) Use of remainder
If a State uses less than 100 percent of the grant or allotment received under section
9906 of this title to make grants under subsection (a) of this section, the State shall use the remainder of the grant or allotment under section
9906 of this title (subject to paragraph (2)) for activities that may include—
(A)providing training and technical assistance to those entities in need of such training and assistance;
(B)coordinating State-operated programs and services, and at the option of the State, locally-operated programs and services, targeted to low-income children and families with services provided by eligible entities and other organizations funded under this chapter, including detailing appropriate employees of State or local agencies to entities funded under this chapter, to ensure increased access to services provided by such State or local agencies;
(C)supporting statewide coordination and communication among eligible entities;
(D)analyzing the distribution of funds made available under this chapter within the State to determine if such funds have been targeted to the areas of greatest need;
(E)supporting asset-building programs for low-income individuals, such as programs supporting individual development accounts;
(F)supporting innovative programs and activities conducted by community action agencies or other neighborhood-based organizations to eliminate poverty, promote self-sufficiency, and promote community revitalization;
(G)supporting State charity tax credits as described in subsection (c) of this section; and
(H)supporting other activities, consistent with the purposes of this chapter.
(2) Administrative cap
No State may spend more than the greater of $55,000, or 5 percent, of the grant received under section
9905 of this title or State allotment received under section
9906 of this title for administrative expenses, including monitoring activities. Funds to be spent for such expenses shall be taken from the portion of the grant under section
9905 of this title or State allotment that remains after the State makes grants to eligible entities under subsection (a) of this section. The cost of activities conducted under paragraph (1)(A) shall not be considered to be administrative expenses. The startup cost and cost of administrative activities conducted under subsection (c) of this section shall be considered to be administrative expenses.
(c) Charity tax credit
(1) In general
Subject to paragraph (2), if there is in effect under State law a charity tax credit, the State may use for any purpose the amount of the allotment that is available for expenditure under subsection (b) of this section.
The aggregate amount a State may use under paragraph (1) during a fiscal year shall not exceed 100 percent of the revenue loss of the State during the fiscal year that is attributable to the charity tax credit, as determined by the Secretary of the Treasury without regard to any such revenue loss occurring before January 1, 1999.
(3) Definitions and rules
In this subsection:
(A) Charity tax credit
The term “charity tax credit” means a nonrefundable credit against State income tax (or, in the case of a State that does not impose an income tax, a comparable benefit) that is allowable for contributions, in cash or in kind, to qualified charities.
(B) Qualified charity
The term “qualified charity” means any organization—
(aa)described in section
501(c)(3) of title
26 and exempt from tax under section 501(a) of such title;
(bb)an eligible entity; or
(cc)a public housing agency as defined in section
1437a(b)(6) of this title;
(II)that is certified by the appropriate State authority as meeting the requirements of clauses (iii) and (iv); and
(III)if such organization is otherwise required to file a return under section 6033 of such title, that elects to treat the information required to be furnished by clause (v) as being specified in section 6033(b) of such title.
(ii)Certain contributions to collection organizations treated as contributions to qualified charity
A contribution to a collection organization shall be treated as a contribution to a qualified charity if the donor designates in writing that the contribution is for the qualified charity.
The term “collection organization” means an organization described in section 501(c)(3) of such title and exempt from tax under section 501(a) of such title—
(aa)that solicits and collects gifts and grants that, by agreement, are distributed to qualified charities;
(bb)that distributes to qualified charities at least 90 percent of the gifts and grants the organization receives that are designated for such qualified charities; and
(cc)that meets the requirements of clause (vi).
(iii)Charity must primarily assist poor individuals
An organization meets the requirements of this clause only if the appropriate State authority reasonably expects that the predominant activity of such organization will be the provision of direct services within the United States to individuals and families whose annual incomes generally do not exceed 185 percent of the poverty line in order to prevent or alleviate poverty among such individuals and families.
(II)No recordkeeping in certain cases
An organization shall not be required to establish or maintain records with respect to the incomes of individuals and families for purposes of subclause (I) if such individuals or families are members of groups that are generally recognized as including substantially only individuals and families described in subclause (I).
(III)Food aid and homeless shelters
Except as otherwise provided by the appropriate State authority, for purposes of subclause (I), services to individuals in the form of—
(aa)donations of food or meals; or
(bb)temporary shelter to homeless individuals;
shall be treated as provided to individuals described in subclause (I) if the location and provision of such services are such that the service provider may reasonably conclude that the beneficiaries of such services are predominantly individuals described in subclause (I).
(iv)Minimum expense requirement
An organization meets the requirements of this clause only if the appropriate State authority reasonably expects that the annual poverty program expenses of such organization will not be less than 75 percent of the annual aggregate expenses of such organization.
(II)Poverty program expense
For purposes of subclause (I)—
The term “poverty program expense” means any expense in providing direct services referred to in clause (iii).
Such term shall not include any management or general expense, any expense for the purpose of influencing legislation (as defined in section
4911(d) of title
26), any expense for the purpose of fundraising, any expense for a legal service provided on behalf of any individual referred to in clause (iii), any expense for providing tuition assistance relating to compulsory school attendance, and any expense that consists of a payment to an affiliate of the organization.
The information required to be furnished under this clause about an organization is—
(I)the percentages determined by dividing the following categories of the organization’s expenses for the year by the total expenses of the organization for the year: expenses for direct services, management expenses, general expenses, fundraising expenses, and payments to affiliates; and
(II)the category or categories (including food, shelter, education, substance abuse prevention or treatment, job training, or other) of services that constitute predominant activities of the organization.
(vi)Additional requirements for collection organizations
The requirements of this clause are met if the organization—
(I)maintains separate accounting for revenues and expenses; and
(II)makes available to the public information on the administrative and fundraising costs of the organization, and information as to the organizations receiving funds from the organization and the amount of such funds.
(vii)Special rule for States requiring tax uniformity
In the case of a State—
(I)that has a constitutional requirement of tax uniformity; and
(II)that, as of December 31, 1997, imposed a tax on personal income with—
(aa)a single flat rate applicable to all earned and unearned income (except insofar as any amount is not taxed pursuant to tax forgiveness provisions); and
(bb)no generally available exemptions or deductions to individuals;
the requirement of paragraph (2) shall be treated as met if the amount of the credit described in paragraph (2) is limited to a uniform percentage (but not greater than 25 percent) of State personal income tax liability (determined without regard to credits).
(4) Limitation on use of funds for startup and administrative activities
Except to the extent provided in subsection (b)(2) of this section, no part of the aggregate amount a State uses under paragraph (1) may be used to pay for the cost of the startup and administrative activities conducted under this subsection.
(5) Prohibition on use of funds for legal services or tuition assistance
No part of the aggregate amount a State uses under paragraph (1) may be used to provide legal services or to provide tuition assistance related to compulsory education requirements (not including tuition assistance for tutoring, camps, skills development, or other supplemental services or training).
(6) Prohibition on supplanting funds
No part of the aggregate amount a State uses under paragraph (1) may be used to supplant non-Federal funds that would be available, in the absence of Federal funds, to offset a revenue loss of the State attributable to a charity tax credit.
The table below lists the classification updates, since Jan. 3, 2012, for this section. Updates to a broader range of sections may be found at the update page for containing chapter, title, etc.
The most recent Classification Table update that we have noticed was Tuesday, August 13, 2013
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