High-Quality Charter Schools Act
- Bill Number
- H.R. 2798
- Origin Chamber
- House
- Congress
- 119th Congress, Session 1
- Policy Area
- Taxation
- Status
- Introduced
- Latest Action
- 2025-04-09: Referred to the House Committee on Ways and Means.
- Last Updated
- 2026-06-11T08:07:24Z
AI-Generated Summary
Purpose
The High-Quality Charter Schools Act (H.R. 2798) aims to encourage private donations for starting or growing high-performing charter schools—publicly funded but independently operated schools—by offering a federal tax credit. This incentivizes individual U.S. citizens and residents to contribute cash or marketable securities (like stocks) to qualified nonprofit organizations that manage or run these schools.
Key Provisions
- Tax Credit (Section 25F): Provides a non-refundable tax credit equal to 75% of "qualified contributions" (donations specifically for creating or expanding charter schools) made to "eligible charter school organizations." The credit is limited to the greater of 10% of the donor's adjusted gross income (AGI, a measure of taxable income after certain deductions) or $5,000 per year. Unused credits can be carried forward for up to five years.
- Eligible Organizations: These must be tax-exempt nonprofits under section 501(c)(3) of the Internal Revenue Code (not private foundations). They include "charter management organizations" (groups that oversee multiple charter schools) or individual charter schools that either:
- Have received federal grants for replication or expansion under the Elementary and Secondary Education Act (ESEA), or
- Are ranked in the top 10% for student performance by their state.
Organizations must maintain separate accounting for these donations, undergo annual audits by an independent certified public accountant (a neutral external auditor not affiliated with the organization), and certify compliance to the IRS.
- No Double Benefit: Donations qualifying for this credit cannot also be deducted as charitable contributions under existing tax rules (section 170).
- Expenditure Requirements (Section 4969): Eligible organizations must spend at least 100% of qualified contributions on charter school creation or expansion within five years (the "expenditure deadline"). Up to 15% can be carried over to the next year, and up to 10% can cover reasonable administrative costs (e.g., overhead). "Expenditures" include formal commitments, like multi-year funding pledges. Failure to comply results in the organization losing eligibility for future credits, determined by the IRS.
- Volume Cap (Section 4): Limits total annual credits to $5 billion starting in 2026, allocated as:
- $10 million minimum per state (for residents of that state), with unclaimed amounts rolling over to a national pool.
- The rest distributed nationally on a first-come, first-served basis (based on donation date).
- If usage reaches 90% of the cap, it increases by 5% the next year.
The IRS must create a real-time tracking system for contributions.
- Organizational Autonomy (Section 5): Protects eligible organizations from government control; they are not considered agents of any government entity. The law maximizes their freedom to meet student needs, as allowed by other laws.
- Effective Date: Applies to tax years beginning after December 31, 2025.
Significant Changes to Existing Law
- Adds a new tax credit section (25F) to the Internal Revenue Code, specifically targeting charter school support—unlike general charitable deductions, this offers a direct credit (reducing tax owed dollar-for-dollar) at a high rate (75%) but with strict caps and eligibility rules.
- Introduces a new subchapter (I) under chapter 42 for penalties on non-compliant organizations, similar to existing rules for private foundations but tailored to charter school donors.
- Ties eligibility to ESEA definitions and performance metrics, integrating federal education policy with tax incentives for the first time in this targeted way.
- Imposes a national volume cap with state allocations and real-time IRS tracking, a mechanism not previously used for individual charitable tax credits.
Potential Impacts
- On Citizens: Encourages higher-income individuals to donate more to charter schools by reducing their federal tax liability, potentially increasing private funding for education alternatives. Low- and middle-income donors may benefit less due to the AGI cap and credit's non-refundable nature (it only offsets taxes owed).
- On Government Agencies: The IRS gains responsibilities for auditing certifications, tracking contributions in real time, and enforcing expenditure rules, which could increase administrative costs. States may need to evaluate and rank charter organizations for top-10% status, affecting education departments.
- On Education and Communities: Could accelerate the growth of high-quality charter schools, providing more school choice options for families, especially in under-served areas. However, it might divert resources from traditional public schools if donations shift funding priorities.
- International Relations: No direct impact, as the bill focuses on domestic U.S. tax and education policy.
Main Stakeholders Affected
- Individual Donors: U.S. citizens and residents who pay federal income taxes and wish to support charter schools through philanthropy.
- Eligible Charter School Organizations: Nonprofits managing or operating high-performing charter schools, benefiting from increased donations but facing new audit and spending mandates.
- Students and Parents: Particularly those in or seeking access to charter schools, who could gain from expanded options; traditional public school families might see indirect effects on overall education funding.
- State Governments: Responsible for authorizing charters and potentially selecting top performers, influencing local education landscapes.
- Federal Agencies: IRS (tax administration and tracking) and Department of Education (via ESEA grant ties), with added oversight roles.
- Traditional Public Schools: Potentially competing for students and resources, though not directly funded by this bill.
Notable Legal, Constitutional, or Political Implications
- Legal: Strengthens accountability through audits and expenditure deadlines, reducing risks of misuse (e.g., funds not reaching schools). The "no double benefit" rule prevents over-subsidization, aligning with tax code principles. Ties to ESEA ensure focus on "high-quality" schools, but disputes could arise over state rankings or IRS determinations of compliance.
- Constitutional: Emphasizes autonomy to avoid treating nonprofits as government extensions, potentially shielding them from First Amendment issues (e.g., free speech or religion in school operations). However, if charters involve religious elements, it could raise establishment clause concerns (separation of church and state), though the bill targets secular public charters.
- Political: Promotes school choice and private-sector involvement in education, appealing to supporters of charter expansion. Critics might view it as favoring alternatives to traditional public schools, potentially exacerbating funding inequities. The $5 billion cap reflects fiscal restraint, but automatic increases could lead to debates over long-term costs to federal revenue (estimated forgone taxes).
This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.
Sponsor
Rep. Tenney, Claudia [R-NY-24]
Cosponsors (8)
Rep. Kiley, Kevin [R-CA-3], Rep. Malliotakis, Nicole [R-NY-11], Rep. Owens, Burgess [R-UT-4], Rep. Stefanik, Elise M. [R-NY-21], Rep. Lee, Laurel M. [R-FL-15], Del. Moylan, James C. [R-GU-At Large], Rep. Donalds, Byron [R-FL-19], Rep. Fine, Randy [R-FL-6]
Recent Actions
- 2025-04-09: Referred to the House Committee on Ways and Means.
- 2025-04-09: Introduced in House
- 2025-04-09: Introduced in House
Bill Versions
- High-Quality Charter Schools Act — issued 2025-04-09 — PDF (13 pages)