Sponsors (4)
The bill uses large federal tax credits and clearer rules to channel private support toward high-performing charter schools and reduce legal risk for operators, but it concentrates benefits, limits overall credit availability, removes certain donor deductions, and raises accountability, administrative, and equity concerns.
Taxpayers who make qualifying contributions can substantially lower their federal income tax liability through a new credit (up to 75% of eligible contributions) funded from a $5 billion annual pool with $10M minimum state allocations and a mechanism to grow the pool if demand is high.
Top-performing charter schools (roughly top 10% by state selection) will receive earmarked, segregated contributions to support creation or expansion, directing new private support to high-performing charters.
Eligible organizations will be required to obtain and certify annual independent CPA audits, which can improve financial transparency and accountability for receiving charter-related contributions.
Not all contributors will receive the credit because the program is limited by an overall $5 billion annual pool and state allocations; credits are effectively first-come, first-served and donations beyond caps may not qualify, risking wasted donor support.
Directing incentives largely to the top 10% of charter schools risks widening funding and opportunity gaps by steering private (and potentially public) support away from lower-performing charters and many traditional public schools.
Taxpayers who claim the new credit cannot also claim a charitable deduction under section 170 for the same contribution, reducing other tax advantages for donors and changing the net incentive calculus for giving.
Based on analysis of 6 sections of legislative text.
Creates a new individual tax credit equal to 75% of qualifying donations to top-performing charter school organizations, with per-taxpayer caps and a $5 billion annual national limit.
Introduced May 20, 2025 by Tim Scott · Last progress May 20, 2025
Creates a new individual tax credit that pays 75% of eligible cash or marketable security donations to qualifying charter school organizations, with annual per-taxpayer limits and a $5 billion yearly national cap. The law sets rules for which charter organizations qualify, requires financial audits, establishes a state allocation process and a federal real-time tracking system, and takes effect for tax years beginning on or after January 1, 2026. Donors cannot also claim a charitable deduction for contributions used for the credit; unused credits can be carried forward up to five years. The Treasury must allocate credits among states, track contributions, and administer first-come, first-served awards until the annual cap is reached.