119-hr833

[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[H.R. 833 Introduced in House

    (IH) ]

<DOC>

119th CONGRESS
 1st Session
 H. R. 833

 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 HOUSE OF REPRESENTATIVES

 January 31, 2025

 Mr. Smith of Nebraska (for himself, Mr. Owens, Mr. Walberg, Mr. Kelly 
of Pennsylvania, Mr. Yakym, Mr. LaHood, Ms. Letlow, Mrs. Miller-Meeks, 
 Mr. Donalds, Ms. Tenney, Mr. Moore of Utah, Mr. Feenstra, Ms. 
Malliotakis, Mr. Hern of Oklahoma, Mr. Lawler, Mr. Fong, Mr. Carey, Mr. 
 Hudson, Ms. Salazar, Mr. Scott Franklin of Florida, Mr. Crenshaw, Mr. 
Wilson of South Carolina, Mr. Rose, Mr. Weber of Texas, Mr. Ciscomani, 
 Mr. Moolenaar, Mr. Allen, Mr. Dunn of Florida, Mr. Murphy, Mr. Cline, 
 Mr. Meuser, Mr. Timmons, and Mr. Bergman) introduced the following 
 bill; which was referred to the Committee on Ways and Means, and in 
 addition to the Committee on Education and Workforce, for a period to 
 be subsequently determined by the Speaker, in each case for 
consideration of such provisions as fall within the jurisdiction of the 
 committee concerned

_______________________________________________________________________

 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 (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).
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