High-Quality Charter Schools Act
The High-Quality Charter Schools Act would create a new federal tax credit to encourage charitable donations to eligible charter school organizations that create or expand high-quality charter schools. Individuals who donate cash or marketable securities to qualified organizations could claim a credit equal to 75% of their qualified contribution, with an annual cap of the greater of 10% of their adjusted gross income (AGI) or $5,000. The program would be subject to a nationwide volume cap of $5 billion per year, with part of the cap allocated to each state and a real-time tracking system to monitor use. Eligible organizations must meet strict governance and auditing standards, and there are requirements to ensure donated funds are spent promptly for charter-school purposes. The bill also specifies that eligible charter school organizations should operate with a high degree of autonomy from government control. It would take effect for tax years beginning after December 31, 2025.
Key Points
- 175% tax credit on qualified contributions to eligible charter school organizations, for the creation or expansion of high-quality charter schools.
- 2Credit cap: the lesser of the taxpayer’s tax liability or the greater of 10% of AGI or $5,000 per taxable year.
- 3Eligible charter school organizations must be either a 501(c)(3) public-charter entity, a charter management organization, or a charter school meeting certain high-performance or grant-based criteria; they must maintain independent accounting for donations and undergo annual CPA audits.
- 4Expenditure rules: contributions that are not expended by the organization by the expenditure deadline (the first day of the fifth taxable year after receipt) may be disqualified as qualified contributions; includes a safe harbor for administrative expenses and a carryover provision for up to 15% of contributions.
- 5Volume cap and allocation: a nationwide $5 billion annual cap starting in 2026, with at least $10 million allocated to each state; credits are first-come, first-serve and tracked in real time; if most of the cap is used, the nationwide cap can increase by 5% the following year.