Congress moves to end tax breaks for private school scholarships

What it does

This bill repeals two federal tax benefits for private school scholarships: a tax credit (section 25F) that allowed individuals to deduct contributions to scholarship-granting organizations, and an income exclusion (section 139K) that let recipients exclude scholarship payments from taxable income. The repeal takes effect for tax years ending after December 31, 2026, eliminating a federal subsidy for private school funding.

Why we flagged it

The bill's operative mechanism is the removal of two existing tax benefits for private school scholarships. It is a straightforward repeal of prior tax code provisions, not a new restriction or regulation—it simply eliminates a tax advantage.

What the text implies

• Repealing section 139K (income exclusion) may affect existing scholarship recipients in 2027 and later, potentially increasing their tax liability retroactively if they received scholarships in 2026 under the old rule and the exclusion is deemed to apply prospectively only—the bill's effective date language ('amounts received after December 31, 2026') suggests prospective application, but ambiguit
• The bill does not appropriate recovered federal revenue to public schools, so the civic benefit (increased public funding) is contingent on separate appropriations action; without that, the bill is purely a tax increase on private school families with no guaranteed public-education offset.
• Repealing the tax credit may disproportionately affect middle-income families who used the credit to afford private school; higher-income families may absorb the cost more easily, creating a regressive effect within the private-school population.

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

Who it affects

Families using private schools lose tax benefits, raising their net cost; families in public schools see no direct change but may benefit if repealed revenue funds public education. The bill's civic framing assumes public schools are underfunded and private-school tax breaks divert public resources, but the actual fiscal impact on public education depends on whether Congress appropriates the recovered revenue to schools—the bill does not mandate that.

Named in the bill

Internal Revenue Code of 1986, section 25F (tax credit for scholarship contributions), section 139K (income exclusion for scholarship receipts), Subpart A of part IV of subchapter A of chapter 1, Part III of subchapter B of chapter 1

Where it stands

35 cosponsors: 33 Democrats, 2 Independents.

• Apr 15, 2026 — Introduced · Congress.gov: “Introduced in Senate”
• Apr 15, 2026 — Referred to Senate Committee on Finance · Congress.gov: “Read twice and referred to the Committee on Finance”

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

Money around this bill

9 lobbying clients named this bill on 9 disclosure filings across 1 quarter, Jun 2026 to Jun 2026. Those filings disclosed $1,966,281 in lobbying spend. A filing names 24 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 89% of bills with at least one filing.

Mark Kelly, the sponsor, reported $48,750 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.