Sponsors (92)
Official title: To amend the Internal Revenue Code of 1986 to allow a credit against tax for charitable donations to nonprofit organizations providing education scholarships to qualified elementary and secondary students.
Introduced January 31, 2025 by Adrian Smith · Last progress January 31, 2025
The bill expands tax‑favored private K–12 scholarships and donor credits to increase parental choice and private funding for low- and moderate-income students, at the cost of federal revenue, reduced public-school oversight, capped availability and timing risks, and added administrative and equity concerns.
Low- and moderate-income students and their parents gain increased access to private K–12 scholarships (usable at private, nonprofit, or religious schools) and those awards are excluded from taxable income, effectively increasing the value of aid.
Individual and corporate donors can receive federal tax credits (with carryforward for individuals) that incentivize private contributions to scholarship granting organizations, likely increasing private funding for scholarships, partnerships, and tutoring.
The program establishes a nationwide $10 billion annual cap with guaranteed state reservations (10% evenly divided) plus real-time public tracking of remaining credit capacity, providing predictability and transparency about credit availability.
Public school students and state/local education systems may see resources, influence, and oversight shift to private donors and scholarship organizations, potentially reducing funding and public accountability for public schools.
Taxpayers broadly face increased federal revenue loss from credits and the tax exclusion for scholarships, which could pressure other taxes or reduce funding for federal programs.
Eligible taxpayers and families may be blocked from receiving credits late in the year or in high-demand years because of the fixed $10 billion cap, state allocations, and Treasury allocation processes, creating timing and availability risk.
Based on analysis of 5 sections of legislative text.
Creates federal individual and corporate tax credits for donations to scholarship organizations, a $10B annual cap, an income exclusion for scholarships, and protections for private/religious schools.
Creates new federal tax incentives to expand private K–12 scholarship funding by giving individuals and corporations tax credits for donations to scholarship granting organizations, sets a $10 billion annual national cap with state reservations and a first-come, first-served allocation system, excludes awarded scholarships from recipients’ taxable income, and bars government control or discrimination against participating private and religious schools. It defines eligible students (income-based), allowable K–12 expenses, organizational rules and audit requirements for scholarship organizations, and effective dates after December 31, 2025.