Sponsors (28)
The bill expands tax-advantaged scholarships and legal protections for private and religious K–12 school choice—benefiting low- and moderate-income families and incenting donors—while reducing federal revenue and raising risks to public-school funding, oversight, and equity.
Low- and moderate-income families (≤300% AMGI) and their students gain taxpayer-funded K–12 scholarships that can be used for a wide range of qualified education expenses (tuition, materials, tutoring, therapies, dual enrollment), expanding financial access to private and alternative schooling options.
Individual donors and recipient households receive tax advantages—donors get a dollar-for-dollar federal credit (subject to caps) and families can exclude scholarship amounts from student gross income—reducing net costs and increasing the value of private K–12 scholarships.
The bill protects and promotes parental school choice and religious-school access by ensuring scholarships can be used at private and faith-based K–12 schools and by giving parents standing to defend program access in court.
Public school districts and students could face reduced enrollment and funding pressure if taxpayer-backed scholarships shift students and resources to private schools, potentially lowering resources for remaining public-school students.
Restrictions on oversight and limits on conditions for private/faith-based participation may reduce accountability for how taxpayer-funded scholarships are used and could increase church–state legal disputes over funding to religious schools.
The tax exclusion for scholarship recipients and the federal credit reduce federal revenue (and the credit disallows a duplicate charitable deduction), which could modestly increase deficits or reduce funding available for other federal programs.
Based on analysis of 4 sections of legislative text.
Creates a federal tax credit for donations to K–12 scholarship organizations, excludes scholarships from income, and limits government control over participating private/religious schools.
Introduced January 28, 2025 by Adrian Smith · Last progress January 28, 2025
Creates a new federal tax credit for individuals who give cash or marketable securities to nonprofit scholarship-granting organizations that provide K–12 scholarships, and excludes those scholarships from the recipient’s taxable income. Sets eligibility limits for students based on household income, defines qualifying expenses, requires scholarship organizations to meet nonprofit and accounting rules, and bars government officials from controlling or disfavoring private or religious schools that accept these scholarships. The credit is nonrefundable and capped per taxpayer (the greater of 10% of AGI or $5,000, subject to an overall volume cap), is reduced by any state tax credit for the same donation, and applies to scholarship amounts received after Dec. 31, 2024. The law also creates an income exclusion for scholarship amounts and gives parents the right to intervene in litigation defending the law’s constitutionality.