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.
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.
Plain Language Summary
# HR 817: Educational Choice for Children Act of 2025 – Summary **What the Bill Would Do:** This bill would create a new tax credit that allows individuals to reduce their federal taxes when they donate money or stock to nonprofit organizations that provide education scholarships to elementary and secondary school students. The tax credit would be worth up to $5,000 per person per year (or 10% of their adjusted gross income, whichever is greater). The bill includes a $5 billion annual spending cap for 2025-2028, meaning the government would limit total credits distributed each year.
Ten percent of available credits would be reserved for distribution equally among all states. **Who It Affects:** This bill primarily affects taxpayers who donate to scholarship organizations, as well as students and families who receive scholarships from these nonprofits. It could also impact school choice, as scholarships could be used for various elementary and secondary school expenses. **Current Status:** The bill was introduced by Rep. Adrian Smith (R-Nebraska) in the 119th Congress and is currently in committee, meaning it has not yet been voted on by the full House of Representatives.
CRS Official Summary
Educational Choice for Children Act of 2025This bill establishes a nonrefundable tax credit for contributions (cash or stock) made by an individual to a tax-exempt organization that provides scholarships for qualified elementary and secondary school expenses to eligible students (scholarship granting organization), subject to limitations.Under the bill, the tax credit is limited to the greater of $5,000 or 10% of adjusted gross income.Further, the bill establishes a $5 billion annual volume cap (for 2025-2028) for the tax credit (which may be increased under certain circumstances). The volume cap is allocated by the Department of the Treasury for the tax credit on a first-come, first-serve basis (based on the contribution date). However, under the bill, 10% of the volume cap must be divided evenly among states for allocation to individuals residing in those states.The bill allows any portion of the tax credit that exceeds the individual’s tax liability (less certain other tax credits) to be carried forward for up to five tax years.The bill alsoestablishes specific requirements for a scholarship granting organization,requires a scholarship granting organization to distribute all contributions within a specific timeframe (exceptions apply), andexcludes from gross income scholarships received by an individual from a scholarship granting organization.Finally, the bill prohibits federal, state, and local government entities, officers, and employees from imposing requirements that prevent the use of scholarship funds for private or religious elementary or secondary education expenses or discouraging the use of scholarship funds at such education institutions.
Latest Action
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.