Present law provides that pilot pre-K programs by local educational agencies ("LEAs") are voluntary and serve at-risk children, which includes children of low-income families and children whose parent was killed in the line of duty. However, these pre-K programs may enroll non-at-risk students if unfilled seats remain. This bill requires each LEA to provide a pre-K program that provides the number of classrooms necessary to serve all eligible children. An "eligible child" is a child who is four on or before August 15 and resides in the geographic area served by the LEA. Each LEA must establish a pre-K program that is designed to comprehensively address the children's educational needs, including, but not limited to, the child's cognitive, physical, social, and emotional needs. ENROLLMENT This bill requires each LEA to establish an initial enrollment deadline for eligible children. If, in the application period for a school year, the number of program applications received exceeds the number of students the LEA is able to serve, then the LEA must select students for participation in the pre-K program through an enrollment lottery process. CRITERIA FOR A PRE-K PROGRAM Present law requires a voluntary pre-K program to satisfy the following criteria: (1) Consist of a maximum class size of 20 students; (2) Have at least one licensed teacher per classroom who is certified in early childhood education; (3) Have at least one educational assistant per classroom who holds a child development associate credential or associate degree in early childhood education, or who is actively working toward acquiring such credentials. However, if a person with such credentials is unavailable, then educational assistants who hold a high school diploma and who have relevant experience working with children in pre-K or other early childhood programs may be employed to satisfy this requirement; (4) Provide a minimum of five and one-half hours of quality instructional time per day; (5) Use an educational, age-appropriate curriculum that is aligned with the early learning standards approved by the department of education ("department") and that includes, at a minimum, literacy, writing, math, and science skills; (6) Have a developmental learning program that addresses the cognitive, physical, emotional, social, and communication areas of child development; (7) Meet the criteria for a "high quality pre-K program," as identified by the department of education; (8) Comply with the state board of education's rules and policies related to early childhood education and pre-K programs; and (9) Have voluntary enrollment. This bill retains the same criteria. APPLICATION FOR FUNDING AND COLLABORATIVE AGREEMENTS Present law authorizes LEAs to apply to the department for funding and approval of one or more pre-K programs. This bill removes this provision. Present law authorizes an LEA to contract and enter into collaborative agreements for the operation of a pre-K program with non-school system entities in the geographical area served by the LEA, including, but not limited to, nonprofit and for-profit child care providers and Head Start programs. However, an LEA may not contract or collaborate with a child care provider licensed by the department of human services, unless the provider has attained the highest designation under the rated licensing system administered by the department. This bill retains this provision. Present law requires LEAs to use the pre-K/kindergarten growth portfolio model approved by the state board of education, or a comparable alternative measure of student growth approved by the board and adopted by the LEA, in the evaluation of pre-Kindergarten and kindergarten teachers. LEAs must notify evaluated teachers of any training or professional development opportunities available on growth portfolio models. This bill retains this provision. ADVISORY COUNCIL Present law requires each LEA applying for voluntary pre-K programs to appoint a community pre-K advisory council to provide input to the local board of education in creating the board's application for programs. This bill deletes this provision. ANNUAL APPROPRIATIONS Present law requires voluntary pre-K programs that serve at-risk children to be subject to annual appropriations. The commissioner of education must annually recommend a funding amount per classroom for classrooms established under the program. To receive state funds for classrooms, present law requires the LEA to provide a matching amount of funds based on the Tennessee investment in student achievement formula (TISA). Grants, federal funds, and private funds may be used by the LEA to meet the matching funds requirement. The LEA may also meet the matching funds requirement through in-kind matches. Any local funding must be subject to annual appropriations by the local governing body. Present law prohibits a child from being required to pay tuition or fees solely for the purpose of enrolling in or attending a pre-K program. Present law also prohibits state funds received for pre-K programs from being used to supplant any other state or local funds for pre-K programs. This bill deletes the above provisions and, instead, provides the following:  The state must fund 100% of the costs required for an LEA to provide the number of classrooms, and to employ the number of licensed teachers and educational assistants, required for the LEA to comply with the requirements of this bill. Subject to appropriations, the commissioner of education must allocate to each LEA an amount sufficient for the LEA to serve all eligible children in the LEA's pre-K program.  If an LEA receives an allocation pursuant to this bill that is less than the allocation the LEA received for the prior school year, then the local government may appropriate and allocate funds to the LEA to make up for the state cuts without being subject to a continuation of funding effort requirement as to those funds for any year during which the state reinstates the funding or restores the previous cuts, and during any subsequent year should the state fail to restore the funding cuts.  Funds in the universal pre-K fund must be made available for appropriation and expenditure in accordance with this bill.  An eligible child is not required to pay tuition or fees to enroll in, or attend, a pre-K program established by an LEA. However, these provisions do not prohibit an LEA from charging fees for child care provided outside the instructional day of the LEA's pre-K program. TAX IMPOSED This bill requires that a data transaction privilege tax is imposed on a person's annual gross revenues that are derived from data transactions from digital advertising services in this state. As used in this bill, "digital advertising services" means data transactions from advertising services on a digital interface and includes advertisements in the form of banner advertising, search engine advertising, interstitial advertising, and other comparable advertising services that use personal information about the people to whom the ads are being served. This bill requires the portion of a person's annual gross revenues derived from data transactions from digital advertising services in this state be determined using an apportionment factor. The apportionment factor is a fraction, the numerator of which is the person's annual gross revenues derived from data transactions from digital advertising services in this state and the denominator of which is the person's annual gross revenues derived from data transactions from digital advertising services nationwide. TAX RATE The bill provides that the data transaction privilege tax imposed is levied at the rate of 9.5% of the assessable base and applies only to persons with an assessable base of $50 million or more. RETURNS This bill requires each person that, in a calendar year, has an assessable base of at least $50 million to complete and file with the department of revenue a return on or before April 15 of the following year. This bill also requires a person that reasonably expects that the person's assessable base will be $50 million or more to complete and file with the department of revenue a declaration of estimated tax, on or before April 15 of that year. A person required to file a declaration of estimated tax for a taxable year must complete and file with the department of revenue a quarterly estimated tax return on or before June 15, September 15, and December 15 of that year. This bill requires a person required to file a return under this bill to file with the return an attachment that provides any information that the department of revenue requires to determine annual gross revenues derived from data transactions from digital advertising services in this state. A person required to file a return under this bill must maintain records of data transactions from digital advertising services provided in this state and the basis for the calculation of the data transaction privilege tax owed for a minimum of five years. This bill requires the chief executive officer, proprietor, owner, or highest-ranking manager to sign annual and quarterly returns to certify the accuracy of the information under penalty of perjury. TAX PAYMENT This bill requires a person who is required to file a return under this bill to pay the data transaction privilege tax with the return that covers the period for which the tax is due. A person required to file such a return must pay the following: (1) At least 25% of the estimated data transaction privilege tax shown on the declaration or amended declaration for the taxable year with (i) the declaration or amended declaration that covers the year and (ii) each quarterly return for that year; and (2) Any unpaid digital transaction privilege tax for the year shown on the person's return that covers that year with the return. ALLOCATION OF TAX REVENUE This bill requires all revenue from the data transaction privilege tax collected under this bill, including penalties and interest, to be deposited in a special account in the state treasury to be known as the universal pre-K fund. The fund must be administered by the department of education and used exclusively to fund, establish, and maintain a universal pre-K program in each public and public charter elementary school in this state in accordance with this bill. Any balance remaining unexpended at the end of a fiscal year in the fund must not revert to the general fund but must be carried forward into the subsequent fiscal year. However, this bill requires 0.5% of the revenue from the data transaction privilege tax collected under this bill, including penalties and interest, to be paid into the state treasury and earmarked and allocated to the department of revenue for the administration and enforcement of this bill. VIOLATIONS AND PENALTIES This bill provides that it is a crime to commit any of the following offenses:  A person subject to this bill to knowingly (i) fail to file a return, (ii) violate this bill's requirements for filing a return and for making a tax payment, (iii) fail to keep books and records as required by this bill, (iv) file a fraudulent return, or (v) violate a rule promulgated by the department of revenue for the administration and enforcement of this bill.  An officer or agent of a corporation or manager, member, or agent of a limited liability company subject to this bill to knowingly sign a fraudulent return filed on behalf of such corporation or limited liability company.  An accountant or other agent to knowingly enter false information on the return of any taxpayer. This bill provides that if the total amount of the digital transaction privilege tax due for the year is less than $300, then the above offenses are Class E felonies, made punishable by one to six years in prison. In addition, the jury may assess a fine not to exceed $3,000. However, this bill provides that if the total amount of the digital transaction privilege tax due for the year is $300 or more, then the above listed crimes are Class D felonies, made punishable by two to 12 years in prison. In addition, the jury may assess a fine not to exceed $5,000. This bill requires a prosecution for an act in violation of this bill to commence within three years of the commission of the act. RULEMAKING This bill requires the commissioner of education to promulgate rules and forms necessary to implement this bill. APPLICABILITY This bill applies to the 2026-2027 school year and each school year thereafter. Additionally, the data transaction privilege tax imposed on a person's annual gross revenues that are derived from data transactions from digital advertising services takes effect January 1, 2026.

Statutes affected:
Introduced: 49-6-103, 49-6-104, 49-6-105, 49-6-106, 49-6-107, 49-6-108