Sponsors (4)
The bill creates a large federal tax credit to incentivize donations to charter schools—guaranteeing state-level access and funding top-performing charters—while concentrating benefits, risking diversion of support from traditional public schools, and introducing caps, administrative complexity, and accountability trade-offs.
Taxpayers who make qualifying contributions can substantially reduce their federal income tax liability by claiming a credit equal to 75% of eligible contributions (subject to per-donor limits and an annual $5 billion pool).
Residents in every State are guaranteed access to at least $10,000,000 in credits annually, improving geographic access to the credit and reducing purely location-based exclusion.
Top-performing charter schools (top 10% by state selection) will receive new, earmarked funding for creation or expansion through segregated contributions.
Taxpayers who claim the new credit cannot also claim a charitable deduction under section 170 for the same contribution, reducing some donors' overall tax advantages.
A $5 billion annual pool and first-come, first-served allocation mean many donors who make qualifying contributions will not receive credits if the cap is exhausted.
Directing incentives only to the top 10% of charter schools risks widening funding disparities and leaving lower-performing public and charter schools (and their students) with fewer resources.
Based on analysis of 6 sections of legislative text.
Creates a new individual tax credit covering 75% of donations to eligible high-performing charter school organizations, subject to per-taxpayer and annual national/State caps.
Official title: Amend the Internal Revenue Code of 1986 to allow a credit against tax for charitable donations for the creation or expansion of charter schools.
Introduced May 20, 2025 by Tim Scott · Last progress May 20, 2025
Creates a new nonrefundable individual tax credit that covers 75% of contributions to eligible high-performing charter schools or charter management organizations, subject to per-taxpayer and annual national and State caps. Sets rules for which charter organizations qualify, requires audited segregated funds for creation/expansion gifts, establishes a $5 billion annual credit volume cap with State allocations and real-time tracking, and takes effect for tax years beginning on or after January 1, 2026. Limits the credit to cash or marketable securities used for creation or expansion (not general operating support) and disallows a charitable deduction for amounts claimed; unused credits can be carried forward up to five years. The bill also adds a placeholder for a new Chapter 42 enforcement provision in the Internal Revenue Code and clarifies that eligible charter organizations are not treated as acting on behalf of government solely because they participate under the law.