No official summary available for this bill.
[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[S. 292 Introduced in Senate (IS)]
<DOC>
119th CONGRESS
1st Session
S. 292
To 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.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
January 29, 2025
Mr. Cassidy (for himself, Mr. Scott of South Carolina, Mr. Cornyn, Mr.
Daines, Mr. Thune, Mrs. Hyde-Smith, Mr. Schmitt, Mr. Sheehy, Mr. Budd,
Mr. Cotton, Mr. Kennedy, Mr. Tuberville, Mr. Justice, Mr. Risch, Mr.
Barrasso, Mr. Tillis, Mr. Marshall, Mr. Young, Mr. Hawley, Mrs. Britt,
Mrs. Blackburn, Mr. McCormick, Mr. Cramer, Mr. Wicker, Ms. Lummis, Mr.
Ricketts, and Mr. Husted) introduced the following bill; which was read
twice and referred to the Committee on Finance
_______________________________________________________________________
A BILL
To 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.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Educational Choice for Children Act
of 2025''.
SEC. 2. TAX CREDIT FOR CONTRIBUTIONS TO SCHOLARSHIP GRANTING
ORGANIZATIONS.
(a) Credit for Individuals.--
(1) In general.--Subpart A of part IV of subchapter A of
chapter 1 of the Internal Revenue Code of 1986 is amended by
inserting after section 25E the following new section:
``SEC. 25F. QUALIFIED ELEMENTARY AND SECONDARY EDUCATION SCHOLARSHIPS.
``(a) Allowance of Credit.--In the case of an individual who is a
citizen or resident of the United States (as defined in section
7701(a)(9)), there shall be allowed as a credit against the tax imposed
by this chapter for the taxable year an amount equal to the aggregate
amount of qualified contributions made by the taxpayer during the
taxable year.
``(b) Limitations.--
``(1) In general.--The credit allowed under subsection (a)
to any taxpayer for any taxable year shall not exceed an amount
equal to the greater of--
``(A) 10 percent of the adjusted gross income of
the taxpayer for the taxable year, or
``(B) $5,000.
``(2) Allocation of volume cap.--The credit allowed under
subsection (a) to any taxpayer for any taxable year shall not
exceed the amount of the volume cap allocated by the Secretary
to such taxpayer under section 3 of the Educational Choice for
Children Act of 2025 with respect to qualified contributions
made by the taxpayer during the taxable year.
``(3) Reduction based on state credit.--The amount allowed
as a credit under subsection (a) for a taxable year shall be
reduced by the amount allowed as a credit on any State tax
return of the taxpayer for qualified contributions made by the
taxpayer during the taxable year.
``(c) Definitions.--For purposes of this section--
``(1) Eligible student.--The term `eligible student' means
an individual who--
``(A) is a member of a household with an income
which is not greater than 300 percent of the area
median gross income (as such term is used in section
42), and
``(B) is eligible to enroll in a public elementary
or secondary school.
``(2) Qualified contribution.--The term `qualified
contribution' means a charitable contribution (as defined by
section 170(c)) to a scholarship granting organization in the
form of cash or marketable securities.
``(3) Qualified elementary or secondary education
expense.--The term `qualified elementary or secondary education
expense' means the following expenses in connection with
enrollment or attendance at, or for students enrolled at or
attending, a public or private elementary or secondary school
(including a religious elementary or secondary school):
``(A) Tuition.
``(B) Curricula and curricular materials.
``(C) Books or other instructional materials.
``(D) Online educational materials.
``(E) Tuition for tutoring or educational classes
outside of the home, including at a tutoring facility,
but only if the tutor or instructor is not related to
the student and--
``(i) is licensed as a teacher in any
State,
``(ii) has taught at--
``(I) a public or private
elementary or secondary school, or
``(II) an institution of higher
education (as defined in section 101(a)
of the Higher Education Act of 1965 (20
U.S.C. 1001(a))), or
``(iii) is a subject matter expert in the
relevant subject.
``(F) Fees for a nationally standardized norm-
referenced achievement test, an advanced placement
examination, or any examinations related to admission
to an institution of higher education.
``(G) Fees for dual enrollment in an institution of
higher education.
``(H) Educational therapies for students with
disabilities provided by a licensed or accredited
practitioner or provider, including occupational,
behavioral, physical, and speech-language therapies.
Such term shall include expenses for the purposes described in
subparagraphs (A) through (H) in connection with a home school
(whether treated as a home school or a private school for
purposes of applicable State law).
``(4) Scholarship granting organization.--The term
`scholarship granting organization' means any organization--
``(A) which--
``(i) is described in section 501(c)(3) and
exempt from tax under section 501(a), and
``(ii) is not a private foundation,
``(B) substantially all of the activities of which
are providing scholarships for qualified elementary or
secondary education expenses of eligible students,
``(C) which prevents the co-mingling of qualified
contributions with other amounts by maintaining one or
more separate accounts exclusively for qualified
contributions, and
``(D) which either--
``(i) meets the requirements of subsection
(d), or
``(ii) pursuant to State law, was able (as
of the date of the enactment of this section)
to receive contributions that are eligible for
a State tax credit if such contributions are
used by the organization to provide
scholarships to individual elementary and
secondary students, including scholarships for
attending private schools.
``(d) Requirements for Scholarship Granting Organizations.--
``(1) In general.--An organization meets the requirements
of this subsection if--
``(A) such organization provides scholarships to 2
or more students, provided that not all such students
attend the same school,
``(B) such organization does not provide
scholarships for any expenses other than qualified
elementary or secondary education expenses,
``(C) such organization provides a scholarship to
eligible students with a priority for--
``(i) students awarded a scholarship the
previous school year, and
``(ii) after application of clause (i), any
such students who have a sibling who was
awarded a scholarship from such organization,
``(D) such organization does not earmark or set
aside contributions for scholarships on behalf of any
particular student,
``(E) such organization takes appropriate steps to
verify the annual household income and family size of
eligible students to whom it awards scholarships, and
limits them to a member of a household for which the
income does not exceed the amount established under
subsection (c)(1)(A),
``(F) such organization--
``(i) obtains from an independent certified
public accountant annual financial and
compliance audits, and
``(ii) certifies to the Secretary (at such
time, and in such form and manner, as the
Secretary may prescribe) that the audit
described in clause (i) has been completed, and
``(G) no officer or board member of such
organization has been convicted of a felony.
``(2) Income verification.--For purposes of paragraph
(1)(E), review of all of the following (as applicable) shall be
treated as satisfying the requirement to take appropriate steps
to verify annual household income:
``(A) Federal and State income tax returns or tax
return transcripts with applicable schedules for the
taxable year prior to application.
``(B) Income reporting statements for tax purposes
or wage and income transcripts from the Internal
Revenue Service.
``(C) Notarized income verification letter from
employers.
``(D) Unemployment or workers compensation
statements.
``(E) Budget letters regarding public assistance
payments and Supplemental Nutrition Assistance Program
(SNAP) payments including a list of household members.
``(3) Independent certified public accountant.--For
purposes of paragraph (1)(F), the term `independent certified
public accountant' means, with respect to an organization, a
certified public accountant who is not a person described in
section 465(b)(3)(A) with respect to such organization or any
employee of such organization.
``(4) Prohibition on self-dealing.--
``(A) In general.--A scholarship granting
organization may not award a scholarship to any
disqualified person.
``(B) Disqualified person.--For purposes of this
paragraph, a disqualified person shall be determined
pursuant to rules similar to the rules of section 4946.
``(e) Denial of Double Benefit.--Any qualified contribution for
which a credit is allowed under this section shall not be taken into
account as a charitable contribution for purposes of section 170.
``(f) Carryforward of Unused Credit.--
``(1) In general.--If the credit allowable under subsection
(a) for any taxable year exceeds the limitation imposed by
section 26(a) for such taxable year reduced by the sum of the
credits allowable under this subpart (other than this section,
section 23, and section 25D), such excess shall be carried to
the succeeding taxable year and added to the credit allowable
under subsection (a) for such taxable year.
``(2) Limitation.--No credit may be carried forward under
this subsection to any taxable year following the fifth taxable
year after the taxable year in which the credit arose. For
purposes of the preceding sentence, credits shall be treated as
used on a first-in first-out basis.''.
(2) Conforming amendments.--
(A) Section 25(e)(1)(C) of such Code is amended by
striking ``and 25D'' and inserting ``25D, and 25F''.
(B) The table of sections for subpart A of part IV
of subchapter A of chapter 1 of such Code is amended by
inserting after the item relating to section 25E the
following new item:
``Sec. 25F. Qualified elementary and secondary education
scholarships.''.
(b) Credit for Corporations.--
(1) In general.--Subpart D of part IV of subchapter A of
chapter 1 of the Internal Revenue Code of 1986 is amended by
adding after section 45AA the following:
``SEC. 45BB. CONTRIBUTIONS TO SCHOLARSHIP GRANTING ORGANIZATIONS.
``(a) General Rule.--For purposes of section 38, in the case of a
corporation, the education scholarship credit determined under this
section for the taxable year is the aggregate amount of qualified
contributions for the taxable year.
``(b) Amount of Credit.--The credit allowed under subsection (a)
for any taxable year shall not exceed 5 percent of the taxable income
(as defined in section 170(b)(2)(D)) of the corporation for such
taxable year.
``(c) Qualified Contributions.--For purposes of this section, the
term `qualified contribution' has the meaning given such term under
section 25F.
``(d) Denial of Double Benefit.--No deduction shall be allowed
under any provision of this chapter for any expense for which a credit
is allowed under this section.
``(e) Application of Volume Cap.--A qualified contribution shall be
taken into account under this section only if such contribution is not
in excess of the volume cap established under section 3 of the
Educational Choice for Children Act of 2025.''.
(2) Conforming amendments.--Section 38(b) of such Code is
amended by striking ``plus'' at the end of paragraph (40), by
striking the period and inserting ``, plus'' at the end of
paragraph (41), and by adding at the end the following new
paragraph:
``(42) the education scholarship credit determined under
section 45BB(a).''.
(3) Clerical amendment.--The table of sections for subpart
D of part IV of subchapter A of chapter 1 of such Code is
amended by adding at the end the following new item:
``Sec. 45BB. Contributions to scholarship granting organizations.''.
(c) Failure of Scholarship Granting Organizations To Make
Distributions.--
(1) In general.--Chapter 42 of such Code is amended by
adding at the end the following new subchapter:
``Subchapter I--Scholarship Granting Organizations
``Sec. 4969. Failure to distribute receipts.
``SEC. 4969. FAILURE TO DISTRIBUTE RECEIPTS.
``(a) In General.--In the case of any scholarship granting
organization (as defined in section 25F) which has been determined by
the Secretary to have failed to satisfy the requirement under
subsection (b) for any taxable year, any contribution made to such
organization during the first taxable year beginning after the date of
such determination shall not be treated as a qualified contribution (as
defined in section 25F(c)(2)) for purposes of sections 25F and 45BB.
``(b) Requirement.--The requirement described in this subsection is
that the amount of receipts of the scholarship granting organization
for the taxable year which are distributed before the distribution
deadline with respect to such receipts shall not be less than the
required distribution amount with respect to such taxable year.
``(c) Definitions.--For purposes of this section--
``(1) Required distribution amount.--
``(A) In general.--The required distribution amount
with respect to a taxable year is the amount equal to
100 percent of the total receipts of the scholarship
granting organization for such taxable year--
``(i) reduced by the sum of such receipts
that are retained for reasonable administrative
expenses for the taxable year or are carried to
the succeeding taxable year under subparagraph
(C), and
``(ii) increased by the amount of the
carryover under subparagraph (C) from the
preceding taxable year.
``(B) Safe harbor for reasonable administrative
expenses.--For purposes of subparagraph (A)(i), if the
percentage of total receipts of a scholarship granting
organization for a taxable year which are used for
administrative purposes is equal to or less than 10
percent, such expenses shall be deemed to be reasonable
for purposes of such subparagraph.
``(C) Carryover.--With respect to the amount of the
total receipts of a scholarship granting organization
with respect to any taxable year, an amount not greater
than 15 percent of such amount may, at the election of
such organization, be carried to the succeeding taxable
year.
``(2) Distributions.--The term `distribution' includes
amounts which are formally committed but not distributed. A
formal commitment described in the preceding sentence may
include contributions set aside for eligible students for more
than one year.
``(3) Distribution deadline.--The distribution deadline
with respect to receipts for a taxable year is the first day of
the third taxable year following the taxable year in which such
receipts are received by the scholarship granting
organization.''.
(2) Clerical amendment.--The table of subchapters for
chapter 42 of such Code is amended by adding at the end the
following new item:
``subchapter i. scholarship granting organizations''.
(d) Effective Date.--The amendments made by this section shall
apply to taxable years ending after December 31, 2025.
SEC. 3. VOLUME CAP.
(a) In General.--For purposes of sections 25F(b)(2) and 45BB(e) of
the Internal Revenue Code of 1986 (as added by this Act), the volume
cap applicable under this section shall be $10,000,000,000 for calendar
year 2026 and each subsequent year thereafter. Such amount shall be
allocated by the Secretary as provided in subsection (b) to taxpayers
with respect to qualified contributions made by such taxpayers, except
that 10 percent of such amount shall be divided evenly among the
States, and shall be available with respect to--
(1) individuals residing in such States to claim the credit
allowed under section 25F of the Internal Revenue Code of 1986,
and
(2) corporations created or organized in such State to
claim the credit determined under section 45BB of such Code.
(b) First-Come, First-Serve.--For purposes of applying the volume
cap under this section, such volume cap for any calendar year shall be
allocated by the Secretary on a first-come, first-serve basis, as
determined based on the time (during such calendar year) at which the
taxpayer made the qualified contribution with respect to which the
allocation is made. The Secretary shall not make any allocation of
volume cap for any calendar year after December 31 of such calendar
year.
(c) Real-Time Information.--For purposes of this section, the
Secretary shall develop a system to track the amount of qualified
contributions made during the calendar year for which a credit may be
claimed under section 25F or 45BB of the Internal Revenue Code of 1986,
with such information to be updated in real time.
(d) Annual Increases.--
(1) In general.--In the case of the calendar year after a
high use calendar year, the dollar amount otherwise in effect
under subsection (a) for such calendar year shall be equal to
105 percent of the dollar amount in effect for such high use
calendar year.
(2) High use calendar year.--For purposes of this
subsection, the term ``high use calendar year'' means any
calendar year for which 90 percent or more of the volume cap in
effect for such calendar year under subsection (a) is allocated
to taxpayers.
(3) Prevention of decreases in annual volume cap.--The
volume cap in effect under subsection (a) for any calendar year
shall not be less than the volume cap in effect under such
subsection for the preceding calendar year.
(4) Publication of annual volume cap.--The Secretary shall
make publicly available the dollar amount of the volume cap in
effect under subsection (a) for each calendar year.
(e) States.--For purposes of this section, the term ``State''
includes the District of Columbia.
SEC. 4. EXEMPTION FROM GROSS INCOME FOR SCHOLARSHIPS FOR QUALIFIED
ELEMENTARY OR SECONDARY EDUCATION EXPENSES OF ELIGIBLE
STUDENTS.
(a) In General.--Part III of subchapter B of chapter 1 of the
Internal Revenue Code of 1986 is amended by inserting before section
140 the following new section:
``SEC. 139J. SCHOLARSHIPS FOR QUALIFIED ELEMENTARY OR SECONDARY
EDUCATION EXPENSES OF ELIGIBLE STUDENTS.
``(a) In General.--In the case of an individual, gross income shall
not include any amounts provided to any dependent of such individual
pursuant to a scholarship for qualified elementary or secondary
education expenses of an eligible student which is provided by a
scholarship granting organization.
``(b) Definitions.--In this section, the terms `qualified
elementary or secondary education expense', `eligible student', and
`scholarship granting organization' have the same meaning given such
terms under section 25F(c).''.
(b) Conforming Amendment.--The table of sections for part III of
subchapter B of chapter 1 of the Internal Revenue Code of 1986 is
amended by inserting before the item relating to section 140 the
following new item:
``Sec. 139J. Scholarships for qualified elementary or secondary
education expenses of eligible students.''.
(c) Effective Date.--The amendments made by this section shall
apply to amounts received after December 31, 2025, in taxable years
ending after such date.
SEC. 5. ORGANIZATIONAL AND PARENTAL AUTONOMY.
(a) Prohibition of Control Over Scholarship Organizations.--
(1) In general.--
(A) Treatment.--A scholarship granting organization
shall not, by virtue of participation under any
provision of this Act or any amendment made by this
Act, be regarded as acting on behalf of any
governmental entity.
(B) No governmental control.--Nothing in this Act,
or any amendment made by this Act, shall be construed
to permit, allow, encourage, or authorize any Federal,
State, or local government entity, or officer or
employee thereof, to mandate, direct, or control any
aspect of any scholarship granting organization.
(C) Maximum freedom.--To the extent permissible by
law, this Act, and any amendment made by this Act,
shall be construed to allow scholarship granting
organizations maximum freedom to provide for the needs
of the participants without governmental control.
(2) Prohibition of control over non-public schools.--
(A) No governmental control.--Nothing in this Act,
or any amendment made by this Act, shall be construed
to permit, allow, encourage, or authorize any Federal,
State, or local government entity, or officer or
employee thereof, to mandate, direct, or control any
aspect of any private or religious elementary or
secondary education institution.
(B) No exclusion of private or religious schools.--
No Federal, State, or local government entity, or
officer or employee thereof, shall impose or permit the
imposition of any conditions or requirements that would
exclude or operate to exclude educational expenses at
private or religious elementary and secondary education
institutions from being considered qualified elementary
or secondary education expenses.
(C) No exclusion of qualified expenses due to
institution's religious character or affiliation.--No
Federal, State, or local government entity, or officer
or employee thereof, shall exclude, discriminate
against, or otherwise disadvantage any elementary or
secondary education institution with respect to
qualified elementary or secondary education expenses at
that institution based in whole or in part on the
institution's religious character or affiliation,
including religiously based or mission-based policies
or practices.
(3) Parental rights to use scholarships.--No Federal,
State, or local government entity, or officer or employee
thereof, shall disfavor or discourage the use of scholarships
granted by participating scholarship granting organizations for
qualified elementary or secondary education expenses at private
or nonprofit elementary and secondary education institutions,
including faith-based schools.
(4) Parental right to intervene.--In any action filed in
any State or Federal court which challenges the
constitutionality (under the constitution of such State or the
Constitution of the United States) of any provision of this Act
(or any amendment made by this Act), any parent of an eligible
student who has received a scholarship from a scholarship
granting organization shall have the right to intervene in
support of the constitutionality of such provision or
amendment. To avoid duplication of efforts and reduce the
burdens placed on the parties to the action, the court in any
such action may require interveners taking similar positions to
file joint papers or to be represented by a single attorney at
oral argument, provided that the court does not require such
interveners to join any brief filed on behalf of any State
which is a defendant in such action.
(b) Definitions.--For purposes of this section, the terms
``eligible student'', ``scholarship granting organization'', and
``qualified elementary or secondary education expense'' shall have the
same meanings given such terms under section 25F(c) of the Internal
Revenue Code of 1986 (as added by section 2(a) of this Act).
<all>
Introduced in Senate
Read twice and referred to the Committee on Finance.
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