Education Freedom Scholarships and Opportunity Act
The Education Freedom Scholarships and Opportunity Act creates federal tax credits to encourage charitable contributions to two types of organizations: eligible scholarship-granting organizations that fund elementary and secondary scholarships, and eligible workforce training organizations that support vocational, career, and postsecondary training. Individuals can claim a credit equal to the amount of their qualified contributions (up to 10% of adjusted gross income each year), and domestic corporations can claim a credit equal to the amount of their qualified contributions (up to 5% of taxable income). The act also establishes a national web portal, caps on total credits each year, and state-by-state allocation rules to distribute credits among states, with priority given to scholarships and workforce training opportunities. It sunsets into ongoing administration through annual appropriations and requires an election to apply the credits in a given year. In short, the bill uses federal tax credits and a national portal to steer private contributions toward private-school scholarships and vocational/workforce training, with detailed eligibility rules for organizations, protections for parental choice and religious providers, and a structured, state-partnered funding allocation model.
Key Points
- 1Establishes two new federal tax credits:
- 2- Individuals: Section 25F credit for qualified contributions to eligible scholarship-granting or eligible workforce training organizations (up to 10% of the taxpayer’s adjusted gross income).
- 3- Corporations: Section 45BB credit for qualified contributions (up to 5% of the corporation’s taxable income). Both credits require an affirmative election to apply for the year.
- 4Definitions and eligibility:
- 5- Eligible scholarship-granting organizations must be 501(c)(3) groups meeting state-based scholarship criteria and allocating at least 90% of qualified contributions to qualifying scholarships.
- 6- Eligible workforce training organizations must be 501(c)(3), non-private foundation, focused on vocational education/training, compliant with state law, and reported to the Secretary of Education as eligible.
- 7- Qualified contributions are cash; qualified expenses include elementary/secondary education costs, career/technical education, and portable certificates or credentials-related training and testing.
- 8Parental rights and private providers:
- 9- Money from credits cannot be used to exert federal control over private, religious, or home education providers.
- 10- States cannot disfavor or discriminate against providers based on religious affiliation; parental choice to use scholarships is protected.
- 11Education Freedom Scholarships and Opportunity Act Web Portal:
- 12- A federal portal lists eligible organizations, enables pre-approved credits and receipts for filings, and provides state program information.
- 13- States must submit lists of eligible organizations and may reallocate credits if a state fails to cooperate or lacks eligible organizations.
- 14National and state caps; allocation:
- 15- National cap of $10 billion per calendar year: $5B for scholarships and $5B for workforce training.
- 16- Allocation to states uses a formula based on previous-year contributions and California-like population/poverty metrics; minimum allocations and potential alternative allocation methods are specified.
- 17- Provisions for partnerships between states and possible reallocation if credits are unclaimed.
- 18Compliance and administration:
- 19- Credits cannot exceed federal tax liability; no double benefits; carryforward of unused credits up to 5 years.
- 20- AMT treatment allows using the credits for calculating the alternative minimum tax.
- 21- Authorized appropriations to administer the program beginning in fiscal year 2025 and continuing.