Summary

Creates a refundable retention tax credit for qualifying early childhood, elementary, and secondary school employees and school-based service providers that grows with continuous years of service in schools serving high-need students. It requires employers to report the credit on W–2s, prevents state or local education agencies from reducing pay or loan-forgiveness because of the credit, and takes effect for taxable years beginning after December 31, 2025. The bill also directs the Department of Labor, with Treasury, Education, and HHS, to publish an annual Bureau of Labor Statistics series showing K–12 teacher base salaries by Title I status and region and early childhood educator salaries by highest degree.

Key Points

• Establishes a refundable retention tax credit for qualifying K–12 and early childhood educators and school-based service providers.
• Credit amounts increase with continuous years of school employment (schedule set in the bill).
• Employers must report the credit on W–2 forms; state and local agencies may not reduce pay or loan forgiveness because of the credit.
• Credit is refundable — eligible individuals can receive payment even if they owe no income tax.
• Effective for taxable years beginning after December 31, 2025.
• Requires an annual BLS data series showing K–12 teacher base pay by Title I status and region and early childhood educator pay by highest degree.
• Creates new administrative duties for employers, IRS/Treasury, and BLS/agency partners.
• Aims to target retention where shortages are worst (high-poverty and early childhood settings).
• Does not designate specific appropriations; primary fiscal impact is through reduced federal revenue via refundable credits.

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