; and (II) any funds described in clause (ii). (ii) Local funds In the case of a State that includes, as part of the State share under section 499B(b)(2)(B) for an award year, funds provided to community colleges by local governments in such State for the purpose of carrying out this subpart, local funds provided to community colleges operated or controlled by such State for operating expenses (excluding capital expenses and research and development costs) shall be included in the calculation of the State fiscal support for higher education for such award year under clause (i). (B) Exclusions State fiscal support for higher education for a State for a fiscal year shall not include— (i) funds described in subparagraph (A)(i) that are returned to the State; (ii) State-appropriated funds derived from Federal sources, including funds provided under section 499B(b) and section 499J(b); (iii) funds that are included in the State share under section 499B(b) (except as provided in subparagraph (A)(ii) of this paragraph), including funds included in the State share in accordance with paragraph (2)(A) of such section; (iv) amounts that are portions of multiyear appropriations to be distributed over multiple years that are not to be spent for the year for which the calculation under this paragraph is being made, subject to subparagraph (C); (v) tuition, fees, or other educational charges paid directly by a student to a public institution of higher education or to the State; (vi) funds for— (I) financial aid to students attending, or operating expenses of— (aa) out-of-State institutions of higher education; (bb) proprietary institutions of higher education (as defined in section 102(b)); or (cc) institutions of higher education not accredited by an agency or association recognized by the Secretary pursuant to section 496; (II) financial aid to students awarded predominantly on the basis of merit, including programs awarded on the basis of predicted or actual academic performance or assessment; (III) research and development