Sponsors (92)
The bill expands privately funded K–12 scholarship access and creates strong tax incentives and legal protections for parental choice (including religious schools), but does so at the cost of federal revenue, increased administrative complexity, and reduced public oversight that could divert resources and protections away from public schools and the neediest students.
Low- and moderate-income K–12 students (households ≤300% AMGI) gain expanded access to private-school scholarships and targeted K–12 services funded by donor contributions.
Individual and corporate donors can receive federal tax credits (with caps and carryforward rules), creating a strong incentive for private funding of scholarships, tutoring, and school partnerships.
Parents and families who receive scholarships can exclude scholarship amounts from taxable income, increasing the after‑tax value of awards to recipients.
Public school systems and students risk losing funding and influence as donor‑directed scholarships shift resources to private schools, potentially weakening public education and reducing public oversight.
Federal revenue will fall due to refundable/claimed credits and the new scholarship exclusion, potentially reducing funds for other programs or creating pressure for higher taxes or spending cuts.
The $10 billion baseline cap, state reservations, and year-end allocation rules create timing and availability risk—donors may be unable to claim credits if the cap is exhausted, limiting the program’s reach.
Based on analysis of 5 sections of legislative text.
Creates federal tax credits for donations to scholarship organizations that fund private K–12 expenses for eligible students, sets a $10B annual cap, and excludes scholarships from taxable income.
Introduced January 31, 2025 by Adrian Smith · Last progress January 31, 2025
Creates new federal tax credits for individuals and corporations that donate to nonprofit scholarship granting organizations (SGOs). The credits fund scholarships for eligible K–12 students (household income up to 300% of area median), can be used for private or religious school tuition and other specified education expenses, and are capped nationally at $10 billion per year with a state-reservation feature. The bill also excludes scholarship amounts from recipients’ taxable income, sets rules and audits for SGOs, prevents donors from claiming both the credit and a charitable deduction, and bars government control or discrimination against participating private or religious schools and SGOs.