(1) In general

Subpart A of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting after section 25E the following new section:

25F. Qualified elementary and secondary education scholarships

(a) Allowance of credit

In the case of an individual who is a citizen or resident of the United States (as defined in section 7701(a)(9)), there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the aggregate amount of qualified contributions made by the taxpayer during the taxable year.

(b) Limitations

(1) In general

The credit allowed under subsection (a) to any taxpayer for any taxable year shall not exceed an amount equal to the greater of—

(A)

10 percent of the adjusted gross income of the taxpayer for the taxable year, or

(B)

$5,000.

(2) Application of volume cap

No credit shall be allowed under subsection (a) to the taxpayer with respect to the amount of any qualified contribution made during a taxable year which would result in the aggregate amount of credits claimed under this section for such taxable year exceeding—

(A)

with respect to qualified contributions for which the taxpayer is required to designate a distribution State pursuant to paragraph (4) of section 3(a) of the Universal School Choice Act, the volume cap allocated to such State pursuant to paragraph (2) of such section, or

(B)

with respect to qualified contributions which are not described in subparagraph (A), the volume cap made available to taxpayers pursuant to paragraph (3)(B) of such section.

(3) Reduction based on State credit

The amount allowed as a credit under subsection (a) for a taxable year shall be reduced by the amount allowed as a credit on any State tax return of the taxpayer for qualified contributions made by the taxpayer during the taxable year.

(c) Definitions

For purposes of this section—

(1) Eligible student

The term eligible student means an individual who is eligible to enroll in a public elementary or secondary school.

(2) Qualified contribution

The term qualified contribution means a charitable contribution (as defined by section 170(c)) to a scholarship granting organization in the form of cash or marketable securities.

(3) Qualified elementary or secondary education expense

(A) In general

The term qualified elementary or secondary education expense means the following expenses in connection with enrollment or attendance at, or for students enrolled at or attending, a public or private elementary or secondary school (including a religious elementary or secondary school):

(i)

Tuition and required fees.

(ii)

Curricula and curricular materials.

(iii)

Books or other instructional materials.

(iv)

Online educational materials, as well as software, courses, and computer hardware or other technological devices required to access such materials and which is primarily used for educational purposes.

(v)

Tuition for tutoring or educational classes outside of the home or online, including at a tutoring facility, but only if the tutor or instructor is not related to the student and—

(I)

is licensed as a teacher in any State,

(II)

has taught at—

(aa)

a public or private elementary or secondary school, or

(bb)

an institution of higher education (as defined in section 101(a) of the Higher Education Act of 1965 (20 U.S.C. 1001(a))), or

(III)

is a subject matter expert in the relevant subject.

(vi)

Fees for a nationally standardized norm-referenced achievement test, an advanced placement examination, or any examinations related to admission to an institution of higher education.

(vii)

Fees for dual enrollment in an institution of higher education.

(viii)

Educational therapies for students with disabilities provided by a licensed or accredited practitioner or provider, including occupational, behavioral, physical, and speech-language therapies.

(ix)

Transportation costs incurred for students to participate in any activity for which expenses are authorized under this paragraph.

(B) Home schooling

The term qualified elementary or secondary education expense shall include expenses for the purposes described in clauses (i) through (ix) of subparagraph (A) in connection with a home school (whether treated as a home school or a private school for purposes of applicable State law).

(C) Prohibition on payments to family members

The term qualified elementary or secondary education expense shall not include any expenses related to services provided to the student which are provided by an individual who bears a relationship to the student described in section 152(d)(2).

(4) Scholarship granting organization

(A) In general

The term scholarship granting organization means any organization—

(i)

which—

(I)

is described in section 501(c)(3) and exempt from tax under section 501(a), and

(II)

is not a private foundation,

(ii)

substantially all of the activities of which are providing scholarships for qualified elementary or secondary education expenses of eligible students,

(iii)

which prevents the co-mingling of qualified contributions with other amounts by maintaining 1 or more separate accounts exclusively for qualified contributions, and

(iv)

which meets the requirements of subsection (d).

(B) Scholarships for non-eligible students

For purposes of determining whether an organization satisfies the requirement described in subparagraph (A)(ii), such organization may include activities of which are providing scholarships for education expenses of children who are not described in paragraph (1).

(5) State

The term State means each of the 50 States, the District of Columbia, the Commonwealth of Puerto Rico, American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, the United States Virgin Islands, and the Department of the Interior (acting through the Bureau of Indian Education).

(d) Requirements for scholarship granting organizations

(1) In general

An organization meets the requirements of this subsection if—

(A)

such organization provides scholarships to 2 or more students, provided that not all such students attend the same school,

(B)

with respect to any amount contributed to such organization for which a credit is allowed under this section, such organization does not provide scholarships for any expenses other than qualified elementary or secondary education expenses,

(C)

with respect to any amount contributed to such organization for which a credit is allowed under this section, such organization provides a scholarship to eligible students with a priority for—

(i)

students awarded a scholarship the previous school year,

(ii)

after application of clause (i), any such students who have a sibling who was awarded a scholarship from such organization, and

(iii)

after application of clauses (i) and (ii), any such students from households with annual incomes below 500 percent of the poverty line in the State,

(D)

such organization does not earmark or set aside contributions for scholarships on behalf of any particular student at the direction of any individual or corporation that has made a qualified contribution to such organization,

(E)

such organization—

(i)

obtains from an independent certified public accountant annual financial and compliance audits, and

(ii)

certifies to the Secretary (at such time, and in such form and manner, as the Secretary may prescribe) that the audit described in clause (i) has been completed, and

(F)

no officer or board member of such organization has been convicted of a felony.

(2) Income verification

(A) In general

For purposes of paragraph (1)(C)(iii), in the case where providing such priority may be applicable with respect to a student, the organization shall take appropriate steps to verify the annual household income to the student.

(B) Safe harbor

For purposes of subparagraph (A), review of all of the following (as applicable) shall be treated as satisfying the requirement to take appropriate steps to verify annual household income:

(i)

Federal and State income tax returns or tax return transcripts with applicable schedules for the taxable year prior to application.

(ii)

Income reporting statements for tax purposes or wage and income transcripts from the Internal Revenue Service.

(iii)

Notarized income verification letter from employers.

(iv)

Unemployment or workers compensation statements.

(v)

Budget letters regarding public assistance payments and Supplemental Nutrition Assistance Program (SNAP) payments including a list of household members.

(3) Independent certified public accountant

For purposes of paragraph (1)(E), the term independent certified public accountant means, with respect to an organization, a certified public accountant who is not a person described in section 465(b)(3)(A) with respect to such organization or any employee of such organization.

(4) Prohibition on self-dealing

(A) In general

A scholarship granting organization may not award a scholarship to any disqualified person.

(B) Disqualified person

For purposes of this paragraph, a disqualified person shall be determined pursuant to rules similar to the rules of section 4946.

(e) Denial of double benefit

Any qualified contribution for which a credit is allowed under this section shall not be taken into account as a charitable contribution for purposes of section 170.

(f) Carryforward of unused credit

(1) In general

If the credit allowable under subsection (a) for any taxable year exceeds the limitation imposed by section 26(a) for such taxable year reduced by the sum of the credits allowable under this subpart (other than this section, section 23, and section 25D), such excess shall be carried to the succeeding taxable year and added to the credit allowable under subsection (a) for such taxable year.

(2) Limitation

No credit may be carried forward under this subsection to any taxable year following the fifth taxable year after the taxable year in which the credit arose. For purposes of the preceding sentence, credits shall be treated as used on a first-in first-out basis.

(g) Alternative minimum tax

For purposes of calculating the alternative minimum tax under section 55, a taxpayer may use any credit received for a qualified contribution under this section.

(2) Conforming amendments

(1) In general

Subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by adding after section 45AA the following:

45BB. Contributions to scholarship granting organizations

(a) General rule

For purposes of section 38, in the case of a corporation, the education scholarship credit determined under this section for the taxable year is the aggregate amount of qualified contributions for the taxable year.

(b) Amount of credit

The credit allowed under subsection (a) for any taxable year shall not exceed 5 percent of the taxable income (as defined in section 170(b)(2)(D)) of the corporation for such taxable year.

(c) Qualified contributions

For purposes of this section, the term qualified contribution has the meaning given such term under section 25F.

(d) Denial of double benefit

No deduction shall be allowed under any provision of this chapter for any expense for which a credit is allowed under this section.

(e) Application of volume cap

A qualified contribution shall be taken into account under this section only if such contribution is not in excess of the volume cap established under section 3 of the Universal School Choice Act.

(2) Conforming amendments

Section 38(b) of such Code is amended by striking plus at the end of paragraph (40), by striking the period and inserting , plus at the end of paragraph (41), and by adding at the end the following new paragraph:

(42)

the education scholarship credit determined under section 45BB(a).

(3) Clerical amendment

The table of sections for subpart D of part IV of subchapter A of chapter 1 of such Code is amended by adding at the end the following new item:

(1) In general

Chapter 42 of such Code is amended by adding at the end the following new subchapter:

I Scholarship Granting Organizations

4969. Failure to distribute receipts

(a) In general

In the case of any scholarship granting organization (as defined in section 25F) which has been determined by the Secretary to have failed to satisfy the requirement under subsection (b) for any taxable year, any contribution made to such organization during the first taxable year beginning after the date of such determination shall not be treated as a qualified contribution (as defined in section 25F(c)(2)) for purposes of sections 25F and 45BB.

(b) Requirement

(1) In general

The requirement described in this subsection is that the amount of receipts of the scholarship granting organization for the taxable year which are distributed before the distribution deadline with respect to such receipts shall not be less than the required distribution amount with respect to such taxable year.

(2) Distribution deadline

The distribution deadline with respect to receipts for a taxable year is the first day of the third taxable year following the taxable year in which such receipts are received by the scholarship granting organization.

(c) Definitions

For purposes of this section—

(1) Required distribution amount

(A) In general

The required distribution amount with respect to a taxable year is the amount equal to 100 percent of the total receipts of the scholarship granting organization for such taxable year, as reduced by the sum of such receipts that are retained for reasonable administrative expenses for the taxable year.

(B) Safe harbor for reasonable administrative expenses

For purposes of subparagraph (A), if the percentage of total receipts of a scholarship granting organization for a taxable year which are used for administrative purposes is equal to or less than 10 percent, such expenses shall be deemed to be reasonable for purposes of such subparagraph.

(2) Distributions

The term distribution includes amounts which are formally committed but not distributed. A formal commitment described in the preceding sentence may include contributions set aside for eligible students for more than 1 year.

(2) Clerical amendment

The table of subchapters for chapter 42 of such Code is amended by adding at the end the following new item:

(1) National Cap

For purposes of sections 25F(b)(2) and 45BB(e) of the Internal Revenue Code of 1986 (as added by this Act), the volume cap applicable under this section shall be $10,000,000,000 for calendar year 2026 and each subsequent year thereafter.

(2) Allocation of cap

(3) Allocation and adjustments

(4) Designation by taxpayer

(1) In general

In the case of the calendar year after a high use calendar year, the dollar amount otherwise in effect under subsection (a) for such calendar year shall be equal to 105 percent of the dollar amount in effect for such high use calendar year.

(2) High use calendar year

For purposes of this subsection, the term high use calendar year means any calendar year for which 90 percent or more of the volume cap in effect for such calendar year under subsection (a) is allocated to taxpayers.

(3) Prevention of decreases in annual volume cap

The volume cap in effect under subsection (a) for any calendar year shall not be less than the volume cap in effect under such subsection for the preceding calendar year.

(4) Publication of annual volume cap

The Secretary shall make publicly available the dollar amount of the volume cap in effect under subsection (a) for each calendar year.

(1) In general

(2) Prohibition of control over non-public schools

(3) Parental rights to use scholarships

No Federal, State, or local government entity, or officer or employee thereof, shall disfavor or discourage the use of scholarships granted by participating scholarship granting organizations for qualified elementary or secondary education expenses at private or nonprofit elementary and secondary education institutions, including faith-based schools.

(4) Parental right to intervene

In any action filed in any State or Federal court which challenges the constitutionality (under the constitution of such State or the Constitution of the United States) of any provision of this Act (or any amendment made by this Act), any parent of an eligible student who has received a scholarship from a scholarship granting organization shall have the right to intervene in support of the constitutionality of such provision or amendment. To avoid duplication of efforts and reduce the burdens placed on the parties to the action, the court in any such action may require interveners taking similar positions to file joint papers or to be represented by a single attorney at oral argument, provided that the court does not require such interveners to join any brief filed on behalf of any State which is a defendant in such action.