Federal tax dollars now fund private schools—with no public oversight

What it does

This bill creates a federal tax credit allowing individuals and corporations to deduct donations to nonprofit scholarship organizations that fund private and religious school tuition for low-income students (up to 300% of area median income). Individuals can claim up to $5,000 or 10% of AGI annually; corporations can claim 5% of taxable income. The bill caps total annual credits at $10 billion, allocated first-come-first-serve, and includes provisions barring government control over participating schools and scholarship organizations.

Why we flagged it

The bill's operative mechanism is a federal tax credit that reduces government revenue and channels it to private and religious schools through nonprofit intermediaries. Despite the 'educational choice' framing, the primary effect is a tax expenditure benefiting private institutions and their donors.

• Section 5(4) grants parents of scholarship recipients standing to intervene in any state or federal court challenge to the bill's constitutionality—a procedural provision unrelated to the tax credit mechanism itself, inserted to preempt legal challenges.

What the text implies

• The $10 billion annual cap is allocated first-come-first-serve with no geographic equity requirement, meaning wealthy states and early filers will exhaust the cap, leaving low-income families in other states without access.
• Scholarship organizations are permitted to carry over up to 15% of receipts annually and have until the third year to distribute funds, creating a de facto endowment that reduces actual scholarship distribution and accountability.

The full analysis lists 5 implications of this text.

Who stands to gain

private and religious schools; high-income donors claiming tax credits; nonprofit scholarship intermediaries