Universal School Choice Act
The Universal School Choice Act would create a nationwide federal tax credit program to encourage charitable donations to scholarship granting organizations that provide scholarships for qualified elementary and secondary education expenses to eligible students. Individuals could claim a credit for the amount they donate (subject to income-based and annual volume caps), and corporations could claim a separate credit for their qualified contributions. The act sets a national volume cap, allocates a portion of that cap to states, and requires donors to designate a distribution state. Scholarships funded under the program could cover a wide range of qualified education expenses, including tuition, books, tutoring, online materials, certain therapies, and homeschooling costs. The bill also establishes governance and accountability requirements for scholarship granting organizations, creates protections for parental choice, and imposes penalties if organizations fail to distribute receipts as required. In addition, it provides tax-exemption for scholarship-related scholarships and expands parental autonomy in the school-choice framework. In short, the bill would shift some federal tax dollars toward private and nonprofit scholarship funding instead of direct public funding for schools, with a centralized cap and state-based allocation, enhanced oversight, and a strong emphasis on parental choice and autonomy.
Key Points
- 1Creation of a federal tax credit (Sec. 25F for individuals; Sec. 45BB for corporations) for qualified contributions to scholarship granting organizations that fund elementary and secondary education scholarships. The individual credit is limited by AGI or a $5,000 floor, and the corporate credit is capped at 5% of taxable income. There is a “no double benefit” rule (no deduction for the same expense).
- 2A national volume cap of $10 billion (starting in 2026) with state-by-state allocations. Donors designate a distribution state, and allocations to each state follow a formula based on state population of 5-17-year-olds and families in poverty, with a minimum allocation guarantee. The cap can be adjusted upward after high-use years, and credits are tracked in real time.
- 3Establishment and strict oversight of scholarship granting organizations. Requirements include: (a) non-profit status focused on scholarships, (b) independent audits, (c) safeguards against self-dealing, (d) income verification for priority eligibility, and (e) priority scholarship distribution rules favoring returning students, siblings, and low-income households (up to 500% of the poverty line). The bill also prohibits payments to family members for qualified expenses and requires compliance with distribution deadlines.
- 4New provisions on scholarships’ tax treatment and administration. Scholarships used to pay eligible expenses are exempt from gross income (for recipients), while qualified contributions used for these scholarships are not deductible as charitable contributions for other purposes. The act also creates a new enforcement mechanism (Sec. 4969) for failures to distribute receipts by scholarship organizations, with consequences for future contributions.
- 5Strong emphasis on parental autonomy. The bill asserts that scholarship organizations operate independently of governmental control, protects parental rights to use scholarships at private or religious schools, and allows parents to intervene in related constitutional challenges.