Sponsors (2)
The bill expands federally-subsidized K–12 scholarship access and parental choice through substantial donor incentives, tax-free scholarships, and administrative rules that increase transparency and protect religious schooling, while shifting public resources and oversight away from public schools and increasing federal budget costs and distribution inequities.
Donors (individuals and corporations) receive new, sizable federal tax incentives for contributions to K–12 scholarship organizations (individual credit up to the greater of 10% of AGI or $5,000 and a corporate credit capped at a share of taxable income), making philanthropy for scholarships more financially attractive.
Low- and middle-income students and their parents can get additional tax-free scholarship funds that cover a broad set of K–12 expenses (tuition, tutoring, curricula, therapies, transportation, dual enrollment, homeschool costs), increasing affordability and access to private, specialized, or home-based schooling.
States and scholarship organizations gain more predictable funding signals and administrative controls (annual state allocations announced in advance, binding distribution-state designations, a national $10B cap with reallocation rules, and Treasury tracking) that improve planning, reduce over-allocation risk, and increase transparency.
Federal taxpayers face reduced federal revenue and larger long-term budget exposures because new donor tax credits, a corporate credit, and tax-exempt scholarships lower receipts and could increase deficits or crowd out other federal spending.
Public students and public school systems risk losing enrollment and state/local funding if scholarship dollars primarily shift students to private schools, increasing financial pressure on public education.
State-level volume caps, priority rules, and guaranteed minimum allocations to each state can produce unequal outcomes: needy students in high-poverty states may receive less per-capita aid and some eligible low-income students may be shut out if caps fill quickly.
Based on analysis of 5 sections of legislative text.
Creates federal tax credits for donations to scholarship organizations, funds broad K–12 scholarship expenses, and excludes scholarship amounts from recipients' federal taxable income under a $10B annual cap.
Official title: Amend the Internal Revenue Code of 1986 to allow a credit against tax for charitable donations to nonprofit organizations providing education scholarships to qualified elementary and secondary students.
Introduced May 20, 2025 by Rafael Edward Cruz · Last progress May 20, 2025
Creates new federal tax credits for individuals and corporations that contribute to scholarship-granting organizations (SGOs), funds scholarships for K–12 private, religious, home, and other qualifying elementary and secondary education expenses, and excludes scholarships from recipients' gross income for federal tax purposes. Establishes a $10 billion annual national cap allocated to states, rules for SGO operations and reporting, and legal protections preventing government control or discrimination against SGOs and private or religious schools. The tax changes and income exclusion take effect for taxable years ending after December 31, 2025.