Congress moves to defund private scholarships, redirect tax breaks to public schools

What it does

This bill repeals two federal tax provisions that currently allow individuals to reduce their taxes by contributing to scholarship granting organizations (SGOs). It eliminates a tax credit (section 25F) that directly reduced taxes dollar-for-dollar for such contributions, and removes an exclusion (section 139K) that allowed scholarship recipients to exclude those funds from taxable income. The bill takes effect for tax years ending after December 31, 2026.

Why we flagged it

The bill is a straightforward repeal of two tax provisions that subsidized private scholarship funding. It is not a new program or restriction but a removal of existing tax preferences, making it fundamentally a tax-policy amendment with redistributive intent.

What the text implies

• Repealing section 139K may create tax liability for scholarship recipients who received SGO funds in prior years if the exclusion is interpreted retroactively or if recipients face amended return obligations.
• The bill does not appropriate recaptured tax revenue to public schools, so the fiscal benefit to public education is contingent on separate appropriations legislation.
• Elimination of the tax credit may disproportionately affect middle-income families in states with robust SGO programs (e.g., Florida, Arizona, Indiana), potentially reducing scholarship availability in those regions.
• The bill does not address Education Savings Accounts (ESAs) or other education tax preferences, leaving other private-education tax subsidies intact.

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

Who it affects

Repealing the tax credit increases taxes on middle-class and wealthy donors who fund private scholarships, which may reduce private scholarship availability and burden lower-income scholarship recipients with taxable income. However, it redirects tax revenue to public schools and reduces the federal subsidy of private scholarship programs, which may strengthen public education funding and reduce inequality between public and private school access. The net effect depends on whether public schools

Who stands to gain

• U.S. Treasury (increased tax revenue from eliminated credits and exclusions)
• Public school systems (if recaptured revenue is appropriated to them)

Named in the bill

Internal Revenue Code of 1986, Section 25F (tax credit for SGO contributions), Section 139K (exclusion of SGO scholarships from gross income), Scholarship Granting Organizations (SGOs), U.S. Treasury, Public schools

Where it stands

111 cosponsors: 111 Democrats.

• Jun 11, 2026 — Introduced · Congress.gov: “Introduced in House”
• Jun 11, 2026 — Referred to House Committee on Ways and Means · Congress.gov: “Referred to the House Committee on Ways and Means”

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

Money around this bill

8 lobbying clients named this bill on 8 disclosure filings across 1 quarter, Jun 2026 to Jun 2026. Those filings disclosed $1,960,000 in lobbying spend. A filing names 37 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 88% of bills with at least one filing.

Gwen Moore, the sponsor, reported $754,653 in PAC receipts in the 2026 cycle.

• National Education Association — $670,000 on 1 filing
• American Federation of State County and Municipal Employees — $630,000 on 1 filing
• American Federation of Teachers — $410,000 on 1 filing
• Americans United for Separation of Church and State — $80,000 on 1 filing
• National Association of Elementary School Principals (naesp) — $70,000 on 1 filing

Lobbying Disclosure Act filings through Jul 22, 2026. A filing shows who paid to lobby on a bill it names, not what changed.