Summary#
This bill would remove two federal tax provisions that support private-school scholarship programs. It strikes the tax credit for individual contributions to scholarship-granting organizations and removes a rule that let certain scholarship payments be excluded from taxable income. The stated goal in the title is to keep public funds in public schools by ending these tax incentives.
- Main change: repeals the tax credit for donations to scholarship-granting organizations and repeals the tax exclusion for amounts tied to those scholarship programs.
- Who it changes: affects individual donors, scholarship-granting organizations, and people who receive those scholarships.
- Timing: the repeal applies to taxable years ending after December 31, 2026; the income exclusion change applies to amounts received after December 31, 2026, in taxable years ending after that date.
- Removes two named Internal Revenue Code provisions by striking them from the Code.
What it means for you#
- Donors / Taxpayers: If you give money to a scholarship-granting organization, you would no longer be able to claim the federal tax credit that the law currently allows for those donations for tax years ending after Dec. 31, 2026.
- Recipients of scholarships: Amounts tied to the scholarship program that are currently excluded from gross income would no longer be excluded for amounts received after Dec. 31, 2026. This could mean some scholarship funds become taxable income for students or families, depending on the specific payments involved.
- Scholarship-granting organizations (SGOs): SGOs that rely on individual donations incentivized by the federal credit could see less giving if donors lose the tax credit.
- Public schools / Private schools: The bill does not directly change school rules or funding formulas. But by removing tax incentives for private-school scholarships, it could indirectly affect the flow of private donations that fund attendance at nonpublic schools.
- IRS / Tax filing: Tax forms and guidance would need to be updated to remove the credit and the exclusion starting in the specified tax years.
Expenses#
No publicly available information on federal budget or cost estimates was included with the bill text.
- No official fiscal note or revenue estimate is provided in the bill text.
- Possible effects (not provided in the bill): federal revenue could rise if credits are eliminated or if formerly excluded scholarship amounts become taxable, but the bill does not give numbers.
- Administrative costs: the IRS would need to update forms and guidance. The bill does not say how much that would cost.
Proponents' View#
- The bill appears intended to stop federal tax incentives that support private-school scholarships and thus keep more public support focused on public schools.
- Removing the credit could reduce the diversion of taxpayer-subsidized dollars to private-school scholarship programs.
- Ending the income exclusion for certain scholarship payments could increase transparency about how scholarship funds are treated for tax purposes.
(These are reasonable inferences from the bill text and its title. No direct sponsor statements or explanatory notes were included in the provided material.)
Opponents' View#
- One concern is that removing the tax credit may reduce donations to scholarship-granting organizations, which could lead to fewer scholarships for students who use them to attend private schools.
- The bill does not provide a fiscal estimate, so it is unclear how much federal revenue would change.
- It is unclear exactly which scholarship payments will become taxable in practice and how that would affect recipients; the bill text gives the timing but not implementation details.
- There could be short-term administrative costs for the IRS and for organizations and taxpayers adjusting to the change, but no cost figures are provided.