119-s370

[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[S. 370 Introduced in Senate

    (IS) ]

<DOC>

119th CONGRESS
 1st Session
 S. 370

To amend the Internal Revenue Code of 1986 to establish tax credits to 
 encourage individual and corporate taxpayers to contribute to 
 scholarships for students through eligible scholarship-granting 
 organizations and eligible workforce training organizations, and for 
 other purposes.

_______________________________________________________________________

 IN THE SENATE OF THE UNITED STATES

 February 3, 2025

Mr. Cruz (for himself and Mr. Lankford) 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 establish tax credits to 
 encourage individual and corporate taxpayers to contribute to 
 scholarships for students through eligible scholarship-granting 
 organizations and eligible workforce training organizations, and for 
 other purposes.

 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 ``Education Freedom Scholarships and 
Opportunity Act''.

SEC. 2. PURPOSE.

 The purpose of this Act is to encourage individual and corporate 
taxpayers to contribute to scholarships for individual students through 
eligible scholarship-granting organizations and eligible workforce 
training organizations, as identified by States.

 TITLE I--AMENDMENTS TO THE INTERNAL REVENUE CODE OF 1986

SEC. 101. REFERENCES TO THE INTERNAL REVENUE CODE OF 1986.

 Except as otherwise expressly provided, whenever in this title an 
amendment or repeal is expressed in terms of an amendment to, or repeal 
of, a section or other provision, the reference shall be considered to 
be made to a section or other provision of the Internal Revenue Code of 
1986.

SEC. 102. TAX CREDITS FOR CONTRIBUTIONS TO ELIGIBLE SCHOLARSHIP-
 GRANTING ORGANIZATIONS AND ELIGIBLE WORKFORCE TRAINING 
 ORGANIZATIONS.

    (a) Credit for Individuals.--

    (1) In general.--Subpart A of part IV of subchapter A of 
 chapter 1 is amended by adding after 

section 25E the following 
 new section:

``

SEC. 25F. CONTRIBUTIONS TO ELIGIBLE SCHOLARSHIP-GRANTING 
 ORGANIZATIONS AND ELIGIBLE WORKFORCE TRAINING 
 ORGANIZATIONS.

 ``

    (a) Allowance of Credit.--In the case of an individual, there 
shall be allowed as a credit against the tax imposed by this chapter 
for the taxable year an amount equal to the sum of any qualified 
contributions made by the taxpayer during the taxable year.
 ``

    (b) Amount of Credit.--The credit allowed under subsection

    (a) in 
any taxable year shall not exceed 10 percent of the taxpayer's adjusted 
gross income for the taxable year.
 ``
            (c) === Definitions. ===
-For purposes of this section--
 ``

    (1) Qualified contribution.--The term `qualified 
 contribution' means a contribution of cash to any eligible 
 scholarship-granting organization or eligible workforce 
 training organization.
 ``

    (2) Qualified expense.--The term `qualified expense' 
 means any educational expense that is--
 ``
        (A) for an individual student's elementary or 
 secondary education, as recognized by the State,
 ``
        (B) for the secondary education component of an 
 individual elementary or secondary student's career and 
 technical education, as defined by 

section 3

    (5) of the 
 Carl D. Perkins Career and Technical Education Act of 
 2006 (20 U.S.C. 2302

    (5) ), or
 ``
            (C) for the purpose of providing eligible 
 individual participants with scholarships for secondary 
 or postsecondary vocational education and training, 
 workforce development, or apprenticeship training, 
 including preparation and examination costs relating to 
 portable certificates or credentials, or industry 
 recognized certification or credentialing programs.
 ``

    (3) Eligible scholarship-granting organization.--The term 
 `eligible scholarship-granting organization' means--
 ``
        (A) an organization that--
 ``
            (i) is described in 

section 501
            (c) (3) and 
 exempt from taxation under 

section 501

    (a) ,
 ``
            (ii) provides qualifying scholarships for 
 qualified expenses to only individual 
 elementary and secondary students who--
 ``
            (I) reside in the State in which 
 the eligible scholarship-granting 
 organization is recognized, or
 ``
            (II) in the case of the Bureau of 
 Indian Education, are members of a 
 federally recognized tribe,
 ``
            (iii) a State reports to the Secretary of 
 Education as an eligible scholarship-granting 
 organization pursuant to 

section 201
            (c) (5)
        (B) of the Education Freedom Scholarships and 
 Opportunity Act,
 ``
            (iv) allocates at least 90 percent of 
 qualified contributions to qualifying 
 scholarships for qualified expenses, and
 ``
            (v) provides scholarships to--
 ``
            (I) more than 1 eligible student,
 ``
            (II) more than 1 eligible family, 
 and
 ``
            (III) different eligible students 
 attending more than one education 
 provider, or
 ``
        (B) an organization that--
 ``
            (i) is described in 

section 501
            (c) (3) and 
 exempt from taxation under 

section 501

    (a) , and
 ``
            (ii) pursuant to State law, was able, as 
 of the date of the enactment of the Education 
 Freedom Scholarships and Opportunity Act, 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.
 ``

    (4) Eligible workforce training organization.--
 ``
        (A) In general.--The term `eligible workforce 
 training organization' means any organization--
 ``
            (i) which is--
 ``
            (I) described in 

section 501
            (c) (3) and exempt from taxation 
 under 

section 501

    (a) , and
 ``
            (II) not a private foundation (as 
 defined in 

section 509),
 ``
            (ii) whose purpose is to provide 
 vocational education and training, workforce 
 development, or apprenticeship training to 
 eligible potential secondary or postsecondary 
 students, including organizations whose purpose 
 is to provide scholarships for portable 
 certificates or credentials, or industry 
 recognized certifications or credentialing 
 programs, including preparation and examination 
 costs,
 ``
            (iii) which is in compliance with 
 applicable State laws,
 ``
            (iv) which a State has reported to the 
 Secretary of Education as an eligible workforce 
 training organization pursuant to 

section 201
            (c) (5)
        (B) of the Education Freedom 
 Scholarships and Opportunity Act, and
 ``
            (v) which satisfies the requirements 
 described in clauses
            (iv) and
            (v) of paragraph

    (3)
        (A) .
 ``
        (B) Potential eligible workforce training 
 organizations.--Eligible workforce training 
 organizations may include, but are not limited to, 
 organizations such as the following (provided that such 
 organizations satisfy the requirements under 
 subparagraph
        (A) ):
 ``
            (i) Community colleges.
 ``
            (ii) Workforce training programs (as 
 defined by the applicable State workforce 
 agency).
 ``
            (iii) Organizations which provide--
 ``
            (I) career and technical 
 education, or
 ``
            (II) training or apprenticeships, 
 including, but not limited to, training 
 or apprenticeships operated by a 
 collective bargaining organization or 
 that provide industry recognized 
 certifications or credentials.
 ``
            (iv) Community organizations that provide 
 training that results in a certification.
 ``

    (5) Qualifying scholarship.--The term `qualifying 
 scholarship' means--
 ``
        (A) a scholarship granted by an eligible 
 scholarship-granting organization to an individual 
 elementary or secondary student, or
 ``
        (B) a scholarship granted by an eligible 
 workforce training organization as a scholarship to a 
 secondary or postsecondary student for the purpose of 
 vocational education and training, workforce 
 development, obtaining portable certificates or 
 credentials, or industry recognized certification or 
 credentialing programs, including preparation and 
 examination costs,
 under this section.
 ``

    (6) State.--The term `State' means each of the 50 States, 
 the District of Columbia, the Commonwealth of Puerto Rico, 
 American Samoa, Guam, the Commonwealth of the Northern Mariana 
 Islands, the United States Virgin Islands, and the Department 
 of the Interior (acting through the Bureau of Indian 
 Education).
 ``
            (d) Rules of Construction.--
 ``

    (1) In general.--A scholarship awarded to a student from 
 the proceeds of a qualified contribution under this section or 
 

section 45BB shall not be considered assistance to the school, 
 eligible workforce training organization, or other educational 
 provider that enrolls, or provides educational services to, the 
 student or the student's parents.
 ``

    (2) Not treated as income.--The amount of any such 
 scholarship shall not be treated as income of the student or 
 their parents for purposes of Federal tax laws or for 
 determining eligibility for any other Federal program.
 ``

    (3) Prohibition of control over nonpublic education 
 providers.--
 ``
        (A) Nothing in this Act shall be construed to 
 permit, allow, encourage, or authorize any Federal 
 control over any aspect of any private, religious, or 
 home education provider, whether or not a home 
 education provider is treated as a private school or 
 home school under State law. This Act shall not be 
 construed to exclude private, religious, or home 
 education providers from participation in programs or 
 services under this Act.
 ``
        (B) Nothing in this Act shall be construed to 
 permit, allow, encourage, or authorize an entity 
 submitting a list of eligible scholarship-granting 
 organizations or eligible workforce training 
 organizations on behalf of a State to mandate, direct, 
 or control any aspect of a private or home education 
 provider, regardless of whether or not a home education 
 provider is treated as a private school under State 
 law.
 ``
            (C) No participating State or entity acting on 
 behalf of a State shall exclude, discriminate against, 
 or otherwise disadvantage any education provider with 
 respect to programs or services under this Act based in 
 whole or in part on the provider's religious education 
 character or affiliation, including religiously or 
 mission-based policies or practices.
 ``

    (4) Parental rights to use scholarships.--No 
 participating State or entity acting on behalf of a State shall 
 disfavor or discourage the use of such scholarships for the 
 purchase of elementary and secondary or workforce training 
 education services, including those services provided by 
 private or nonprofit entities, such as faith-based providers.
 ``

    (5) State and local authority.--Nothing in this section 
 or 

section 45BB shall be construed to modify a State or local 
 government's authority and responsibility to fund education.
 ``

    (e) Limitations.--
 ``

    (1) Tax liability.--No credit allowed under this section 
 or 

section 45BB shall exceed the taxpayer's Federal income tax 
 liability for the taxable year.
 ``

    (2) Prohibitions.--A taxpayer is prohibited from selling 
 or transferring any portion of a tax credit allowed under this 
 section or 

section 45BB.
 ``

    (3) Denial of double benefit.--The Secretary shall 
 prescribe such regulations or other guidance to ensure that the 
 sum of the tax benefits provided by Federal, State, or local 
 law for a qualified contribution receiving a Federal tax credit 
 in any taxable year shall not exceed the sum of the qualified 
 contributions made by the taxpayer for the taxable year.
 ``

    (f) Carryover of Credit.--If a tax credit allowed under this 
section or 

section 45BB is not fully used within the applicable taxable 
year because of insufficient tax liability on the part of the taxpayer, 
the unused amount may be carried forward for a period not to exceed 5 
years.
 ``

    (g) Election.--This section shall apply to a taxpayer for a 
taxable year only if the taxpayer elects to have this section apply for 
such taxable year.
 ``

    (h) Alternative Minimum Tax.--For purposes of calculating the 
alternative minimum tax under 

section 55, a taxpayer may use any credit 
received for a qualified contribution under this section.''.

    (2) Clerical amendment.--The table of sections for subpart 
 A of part IV of subchapter A of chapter 1 of is amended by 
 inserting after the item relating to 

section 25E the following 
 new item:

``

Sec. 25F. Contributions to eligible scholarship-granting 
 organizations and eligible workforce 
 training organizations.''.

    (b) Credit for Corporations.--

    (1) In general.--Subpart D of part IV of subchapter A of 
 chapter 1 is amended by adding at the end the following new 
 section:

``

SEC. 45BB. CONTRIBUTIONS TO ELIGIBLE SCHOLARSHIP-GRANTING 
 ORGANIZATIONS AND ELIGIBLE WORKFORCE TRAINING 
 ORGANIZATIONS.

 ``

    (a) Allowance of Credit.--For purposes of 

section 38, in the case 
of a domestic corporation, there shall be allowed as a credit against 
the tax imposed by this chapter for the taxable year an amount equal to 
the sum of any qualified contributions (as defined in 

section 25F
            (c) (1) ) made by such corporation taxpayer during 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 domestic corporation for 
such taxable year.
 ``
            (c) Additional Provisions.--For purposes of this section, any 
qualified contributions made by a domestic corporation shall be subject 
to the provisions of 

section 25F, to the extent applicable.
 ``
            (d) Election.--This section shall apply to a taxpayer for a 
taxable year only if the taxpayer elects to have this section apply for 
such taxable year.''.

    (2) Credit part of general business credit.--

Section 38

    (b) is amended--
        (A) by striking ``plus'' at the end of paragraph

    (40) ;
        (B) by striking the period at the end of paragraph

    (41) and inserting ``, plus''; and
            (C) by adding at the end the following new 
 paragraph:
 ``

    (42) the credit for qualified contributions determined 
 under 

section 45BB

    (a) .''.

    (3) Clerical amendment.--The table of sections for subpart 
 D of part IV of subchapter A of chapter 1 is amended by adding 
 at the end the following new item:

``

Sec. 45BB. Contributions to eligible scholarship-granting 
 organizations and eligible workforce 
 training organizations.''.

TITLE II--EDUCATION FREEDOM SCHOLARSHIPS AND OPPORTUNITY ACT WEB PORTAL 
 AND ADMINISTRATION

SEC. 201. EDUCATION FREEDOM SCHOLARSHIPS AND OPPORTUNITY ACT WEB PORTAL 
 AND ADMINISTRATION.

    (a) In General.--The Secretary of Education shall, in coordination 
with the Secretary of the Treasury and the Secretary of Labor, 
establish, host, and maintain a Web portal that--

    (1) lists all scholarship-granting organizations and 
 workforce training organizations that are eligible under 
 

section 25F or 45BB of the Internal Revenue Code of 1986;

    (2) enables a taxpayer to make a qualifying contribution to 
 one or more eligible scholarship-granting organizations and 
 eligible workforce training organizations and to immediately 
 obtain both a pre-approval of a tax credit for that 
 contribution and a receipt for tax filings;

    (3) provides information about the tax benefits of the 
 provisions of the Education Freedom Scholarships and 
 Opportunity Act under the Internal Revenue Code of 1986; and

    (4) enables a State to submit and update information about 
 its programs and its eligible scholarship-granting 
 organizations and eligible workforce training organizations for 
 informational purposes only, including information on--
        (A) student eligibility;
        (B) allowable educational expenses;
            (C) the types of allowable education providers;
            (D) the percentage of funds an organization may use 
 for program administration; and
        (E) the percentage of total contributions the 
 organization awards in a calendar year.

    (b) Nonportal Contributions.--A taxpayer may opt to make a 
contribution directly to an eligible scholarship-granting organization 
or an eligible workforce training organization, instead of through the 
Web portal described in subsection

    (a) , provided that the taxpayer, or 
the eligible scholarship-granting organization or eligible workforce 
training organization on behalf of the taxpayer, applies for, and 
receives pre-approval for a tax credit from the Secretary of Education 
in coordination with the Secretary of the Treasury.
            (c) National and State Caps on Credits.--

    (1) National cap.--There is a cap of $10,000,000,000 on the 
 sum of the contributions that qualify for a credit under 
 

section 25F and 

section 45BB of the Internal Revenue Code of 
 1986 for each calendar year, of which--
        (A) $5,000,000,000 shall be allotted for qualified 
 contributions to eligible scholarship-granting 
 organizations; and
        (B) $5,000,000,000 shall be allotted for qualified 
 contributions to eligible workforce training 
 organizations.

    (2) Allocation of cap.--
        (A) Initial allocations.--For each calendar year, 
 the Secretary of Education, in coordination with the 
 Secretary of Labor, shall--
            (i) from the amount allotted under 
 paragraph

    (1)
        (A) --
            (I) first reserve, for each State, 
 an amount equal to the sum of the 
 qualifying contributions made in the 
 State in the previous year; and
            (II) next, allocate the remaining 
 amount among the participating States 
 by allocating to each State the sum 
 of--

    (aa) an amount that bears 
 the same relationship to 20 
 percent of such remaining 
 amount as the number of 
 individuals aged 5 through 17 
 in the State, as determined by 
 the Secretary of Education on 
 the basis of the most recent 
 satisfactory data, bears to the 
 number of those individuals in 
 all such States, as so 
 determined; and

    (bb) an amount that bears 
 the same relationship to 80 
 percent of such remaining 
 amount as the number of 
 individuals aged 5 through 17 
 from families with incomes 
 below the poverty line in the 
 State, as determined by the 
 Secretary of Education, on the 
 basis of the most recent 
 satisfactory data, bears to the 
 number of those individuals in 
 all such States, as so 
 determined; and
            (ii) from the amount allotted under 
 paragraph

    (1)
        (B) --
            (I) first reserve, for each State, 
 an amount equal to the sum of the 
 qualifying contributions made in the 
 State in the previous year attributable 
 to eligible workforce training 
 organizations; and
            (II) next, allocate the remaining 
 amount among the participating States 
 by allocating to each State an amount 
 determined through a system, as 
 established and maintained by the 
 Secretary of Labor, that accurately 
 reflects demand and potential qualified 
 participants for apprenticeships and 
 workforce training within that State.
        (B) Minimum allocation.--Notwithstanding 
 subparagraph
        (A) , no State receiving an allotment under 
 this section may receive less than one-half of one 
 percent of the amount allotted for a fiscal year.
            (C) Alternative allocation for qualified 
 contributions to eligible scholarship-granting 
 organizations.--
            (i) In general.--Not later than the end of 
 the fifth year of the program or one year after 
 the end of the first fiscal year for which the 
 total amount of credits claimed under 

section 25F and 

section 45BB of the Internal Revenue 
 Code of 1986 for qualified contributions to 
 eligible scholarship-granting organizations is 
 $2,500,000,000 or more, whichever comes first, 
 the Secretary of Education shall, by 
 regulation, provide for an alternative 
 allocation method for the amount described in 
 paragraph

    (1)
        (A) that shall take effect 
 beginning with the first fiscal year after the 
 regulation takes effect.
            (ii) Alternative allocation method.--The 
 alternative allocation method described in 
 clause
            (i) shall be expressed as a formula 
 based on a combination of the following data 
 for each State, as reported by the State to the 
 Secretary of Education:
            (I) The relative percentage of 
 students in the State who receive an 
 elementary or secondary scholarship 
 through a State program that is 
 financed through State tax-credited 
 donations or appropriations and that 
 permits the elementary or secondary 
 scholarship to be used to attend a 
 private school.
            (II) The total amount of all 
 elementary and secondary scholarships 
 awarded through a State program that is 
 financed through State tax-credited 
 donations or appropriations compared to 
 the total amount of current State and 
 local expenditures for free public 
 education in the State.
            (iii) Allocation formula.--For any fiscal 
 year to which clause
            (i) applies, the Secretary 
 of Education shall--
            (I) first reserve, for each State, 
 an amount equal to the sum of the 
 qualifying contributions made in the 
 State in the previous year;
            (II) next, allocate two-thirds of 
 the remaining amount of the national 
 cap for that year using the alternative 
 allocation method in clause
            (ii) ; and
            (III) then, allocate one-third of 
 the remaining amount in accordance with 
 subparagraph
        (A)
            (ii) .
            (iv) Ineligibility.--For any fiscal year to 
 which clause
            (i) applies, a State that does not 
 provide the Secretary of Education with 
 information described in clause
            (ii) is not 
 eligible to receive an allocation through the 
 alternative allocation method under clause
            (ii) .

    (3) Allowable partnerships.--A State may choose to 
 administer the allocation it receives under paragraph

    (2) in 
 partnership with one or more States, provided that the eligible 
 scholarship-granting organizations or eligible workforce 
 training organizations in each partner State serve students who 
 reside in all States in the partnership.

    (4) Total allocation.--A State's allocation, for any fiscal 
 year, is the sum of the amount determined for it under 
 subparagraphs
        (A) and
        (B) of paragraph

    (2) , except as provided 
 in paragraph

    (2)
            (C) .

    (5) Allocation and adjustments.--
        (A) Initial allocation to states.--No later than 
 November 1 of the year preceding a year for which there 
 is a national cap on credits under paragraph

    (1) (hereafter in this section, the ``applicable year''), 
 or as early as practicable with respect to the first 
 year, the Secretary of Education shall announce the 
 State allocations under paragraph

    (2) for the 
 applicable year.
        (B) List of eligible scholarship-granting 
 organizations and eligible workforce training 
 organizations.--No later than January 1 of each 
 applicable year, or as early as practicable with 
 respect to the first year, each State shall provide the 
 Secretary of Education a list of eligible scholarship-
 granting organizations and eligible workforce training 
 organizations described in paragraphs

    (3)
        (A) and

    (4) of 
 

section 25F
            (c) of the Internal Revenue Code of 1986, 
 including a certification that the entity submitting 
 the list on behalf of the State has the authority to 
 perform this function. Neither this Act nor any other 
 Federal law shall be construed as limiting the entities 
 that may submit the list on behalf of a State.
            (C) Reallocation.--
            (i) In general.--The Secretary of Education 
 shall, in accordance with paragraph

    (2) , 
 reallocate to any other States the allocation 
 of a State which, for any applicable year--
            (I) fails to provide the Secretary 
 of Education a list of eligible 
 scholarship-granting organizations and 
 eligible workforce training 
 organizations pursuant to subparagraph
        (B) ; and
            (II) does not have an eligible 
 scholarship-granting organization (as 
 described in 

section 25F
            (c) (3)
        (B) of 
 the Internal Revenue Code of 1986) 
 located in such State.
            (ii) Unclaimed credits.--On or after April 
 1 of any applicable year, the Secretary of 
 Education may reallocate, to one or more other 
 States that have eligible scholarship-granting 
 organizations and eligible workforce training 
 organizations in the States, without regard to 
 paragraph

    (2) , the allocation of a State for 
 which the State's allocation has not been 
 claimed.
            (d) === Definitions. ===
-The definitions of terms in 

section 25F
            (c) of the 
Internal Revenue Code of 1986 apply to those terms as used in this 
title.

    (e) Authorization of Appropriations.--For the purpose of 
administering this section and sections 25F and 45BB of the Internal 
Revenue Code of 1986, there are authorized to be appropriated, and 
there are appropriated, such sums as may be necessary for fiscal year 
2025 and each succeeding fiscal year.
 <all>