Federal tax credit funnels $10B annually to private school tuition via donor deductions

What it does

This bill creates a federal tax credit allowing individuals and corporations to deduct donations to nonprofit scholarship organizations from their taxes. The scholarships fund K-12 education expenses—tuition, tutoring, materials, special education therapies—at public, private, and religious schools, as well as homeschooling. A $10 billion annual cap limits total credits nationwide, allocated to states based on school-age population and poverty rates. Scholarship organizations must distribute funds within two years, prioritize low-income students and returning scholars, and undergo annual audits. The bill also exempts scholarship recipients from reporting the aid as taxable income.

Why we flagged it

The bill's operative mechanism is a federal tax credit for donations to scholarship organizations, functioning as a subsidy for private and religious K-12 education. While framed as 'school choice,' the primary fiscal effect is a reduction in federal revenue to fund private-school attendance.

What the text implies

• The $10 billion annual cap is indexed to grow 5% in 'high use' years (≥90% claimed), creating an open-ended entitlement if demand exceeds cap—no hard spending limit.
• Scholarship organizations may retain up to 10% of donations for administrative costs without penalty, creating incentive to minimize actual scholarship distribution and maximize overhead.
• The bill prohibits government 'control' of scholarship orgs and private schools (Section 5), potentially shielding recipients from civil-rights compliance, nondiscrimination audits, or curriculum oversight.
• Donors receive a federal tax credit (not just a deduction), meaning the government forgoes revenue dollar-for-dollar—more expensive than charitable deductions and disproportionately benefits high-income taxpayers in high tax brackets.
• Scholarship orgs can include non-eligible students in their portfolios (Section 25F(c)(4)(B)), weakening the targeting to low-income families and allowing mission drift.

Section numbers refer to the bill text the analysis read — linked under Primary records below.

Who it affects

The bill expands educational choice and may benefit low-income families by funding private/religious school attendance otherwise unaffordable. However, it reduces federal tax revenue (a public cost), benefits primarily middle- and upper-income donors (who itemize and have discretionary income to donate), and creates a parallel funding stream outside public education that may weaken public school resources and accountability.

Who stands to gain

• private and religious K-12 schools (tuition revenue)
• tutoring and educational services providers
• high-income individual donors (tax credit value)
• scholarship granting organizations (administrative overhead up to 10%)

Named in the bill

Internal Revenue Service, Secretary of the Treasury, Secretary of Education, nonprofit scholarship granting organizations, private and religious elementary and secondary schools, eligible students (K-12, from families up to 500% of poverty line)

Where it stands

2 cosponsors: 2 Republicans.

• May 20, 2025 — Introduced · Congress.gov: “Introduced in House”
• May 20, 2025 — Referred to House Committee on Education and Workforce and House Committee on Ways and Means · Congress.gov: “Referred to the Committee on Ways and Means, and in addition to the Committee on Education and Workforce, for…”

Dates and quoted wording are Congress.gov's action record; the timeline shows status changes, not every procedural step.

Money around this bill

1 lobbying clients named this bill on 1 disclosure filings across 1 quarter, Jun 2026 to Jun 2026. Those filings disclosed $70,000 in lobbying spend. A filing names 4 bills on average, so that figure is what each filing reported, not a share belonging to this bill.

More lobbying clients named this bill than 0% of bills with at least one filing.

Burgess Owens, the sponsor, reported $133,666 in PAC receipts in the 2026 cycle.

• Racetrac, Inc. — $70,000 on 1 filing

Lobbying Disclosure Act filings through Jul 20, 2026. A filing shows who paid to lobby on a bill it names, not what changed.