Universal School Choice Act
- Bill Number
- H.R. 3519
- Origin Chamber
- House
- Congress
- 119th Congress, Session 1
- Policy Area
- Taxation
- Status
- Introduced
- Latest Action
- 2025-05-20: 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.
- Last Updated
- 2025-12-05T06:26:40Z
AI-Generated Summary
Purpose
The Universal School Choice Act aims to expand access to elementary and secondary education options by incentivizing charitable donations to nonprofit organizations that provide scholarships. It promotes "school choice" by offering tax credits to donors, allowing funds to support educational expenses for eligible students, including those in public, private, religious, or home schools.
Key Provisions
- Tax Credits for Donations:
- Individuals receive a non-refundable tax credit equal to their qualified donations (cash or marketable securities) to scholarship-granting organizations, limited to the greater of 10% of adjusted gross income or $5,000 per year.
- Corporations receive a credit equal to their qualified donations, limited to 5% of taxable income.
- Credits are reduced by any similar state tax credits claimed; unused individual credits can carry forward up to 5 years.
- Donations qualifying for this credit cannot also be deducted as charitable contributions under existing tax rules.
- Scholarship-Grating Organizations (SGOs):
- SGOs must be tax-exempt nonprofits (under section 501(c)(3)) focused primarily on providing scholarships for qualified education expenses.
- They must maintain separate accounts for these funds, undergo annual audits by an independent certified public accountant, and prioritize scholarships for prior recipients, siblings of recipients, and low-income students (households below 500% of the poverty line).
- SGOs cannot earmark funds for specific students at donors' direction, award scholarships to insiders (to avoid self-dealing), or have officers/board members with felony convictions.
- SGOs must distribute at least 90% of receipts as scholarships within 3 years (with up to 10% for reasonable administrative costs); failure triggers loss of eligibility for future credits.
- Qualified Education Expenses:
- Cover tuition, fees, books, curricula, online materials, tutoring (by qualified instructors), testing fees, dual enrollment, therapies for students with disabilities, and transportation for school activities.
- Eligible for public, private (including religious), or home schools; excludes payments to family members.
- Scholarships are tax-exempt from the recipient's gross income.
- Volume Cap and Allocation:
- National cap of $10 billion annually starting in 2026, increasing by 5% in high-use years (90%+ utilization) and never decreasing year-over-year.
- Allocated to states based on population (ages 5-17) and poverty levels; minimum 0.5% per state.
- Taxpayers designate a "distribution state" for their donation, binding the SGO to award scholarships to residents there.
- Unclaimed allocations are reallocated first-come, first-served; real-time tracking system required by the Treasury Secretary.
- Organizational and Parental Autonomy:
- Prohibits federal, state, or local governments from controlling SGOs or private/religious schools.
- Prevents exclusion of private or religious schools from qualified expenses based on their religious character.
- Allows parents of scholarship recipients to intervene in lawsuits challenging the Act's constitutionality.
- Effective Dates:
- Tax credit and exemption provisions apply to taxable years ending after December 31, 2025.
Significant Changes to Existing Law
- Adds new sections to the Internal Revenue Code (IRC): Section 25F (individual credits), Section 45BB (corporate credits), Section 139J (scholarship income exclusion), and Section 4969 (SGO distribution penalties under a new subchapter).
- Introduces a novel federal tax incentive for education scholarships, distinct from existing charitable deductions (section 170), by providing direct credits instead.
- Establishes a national volume cap and state allocation system, with real-time tracking, which is new for this type of education-focused tax benefit.
- Explicitly protects religious and private schools from government interference, expanding beyond current IRC rules on charitable contributions.
Potential Impacts
- Government Agencies: The IRS (under Treasury) gains administrative burdens for tracking contributions, allocations, audits, and a real-time system; could increase enforcement needs for SGO compliance. States may see indirect effects through designated distributions and potential state tax credit interactions.
- Citizens: Taxpayers (individuals and corporations) benefit from credits, potentially reducing federal tax liability while encouraging philanthropy. Eligible students (K-12, including low-income and those with disabilities) gain access to more educational options via scholarships, possibly improving choice in schooling. Parents receive stronger legal standing in challenges to the program.
- International Relations: Minimal direct impact, as the bill focuses on U.S. domestic education and tax policy; no provisions affect foreign entities or treaties.
Main Stakeholders Affected
- Donors/Taxpayers: Individuals and corporations who donate and claim credits.
- Students and Parents: Eligible K-12 students (public school-age) and their families, particularly low-income households, who receive scholarships for diverse educational needs.
- Scholarship-Grating Organizations: Nonprofits administering funds, subject to strict rules, audits, and distribution requirements.
- Schools and Educators: Public, private, religious, and home schools benefiting from increased funding; tutors and therapists providing qualified services.
- Government Entities: IRS for tax administration; state education departments for data coordination; courts for potential constitutional challenges.
Notable Legal, Constitutional, or Political Implications
- Legal: Introduces penalties for SGO non-compliance (e.g., loss of credit eligibility), similar to private foundation rules (section 4946), enhancing oversight without direct government funding. The income verification safe harbor simplifies compliance for low-income prioritization.
- Constitutional: Emphasizes autonomy for religious schools to avoid Establishment Clause issues (government endorsement of religion), while allowing parental intervention to defend the Act, potentially invoking First Amendment protections for free exercise and speech. Could face challenges under federalism if seen as encroaching on state education control.
- Political: Promotes school choice as a bipartisan education reform tool, but may spark debates on equity (favoring private/religious options) versus public school funding. The volume cap and state allocations balance national incentives with local needs, though high demand could pressure future expansions.
This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.
Sponsor
Cosponsors (2)
Rep. Donalds, Byron [R-FL-19], Rep. Fine, Randy [R-FL-6]
Recent Actions
- 2025-05-20: 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.
- 2025-05-20: 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.
- 2025-05-20: Introduced in House
- 2025-05-20: Introduced in House
Bill Versions
- Universal School Choice Act — issued 2025-05-20 — PDF (27 pages)