[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[S. 370 Introduced in Senate (IS)]
<DOC>
119th CONGRESS
1st Session
S. 370
To amend the Internal Revenue Code of 1986 to establish tax credits to
encourage individual and corporate taxpayers to contribute to
scholarships for students through eligible scholarship-granting
organizations and eligible workforce training organizations, and for
other purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
February 3, 2025
Mr. Cruz (for himself and Mr. Lankford) introduced the following bill;
which was read twice and referred to the Committee on Finance
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to establish tax credits to
encourage individual and corporate taxpayers to contribute to
scholarships for students through eligible scholarship-granting
organizations and eligible workforce training organizations, and for
other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Education Freedom Scholarships and
Opportunity Act''.
SEC. 2. PURPOSE.
The purpose of this Act is to encourage individual and corporate
taxpayers to contribute to scholarships for individual students through
eligible scholarship-granting organizations and eligible workforce
training organizations, as identified by States.
TITLE I--AMENDMENTS TO THE INTERNAL REVENUE CODE OF 1986
SEC. 101. REFERENCES TO THE INTERNAL REVENUE CODE OF 1986.
Except as otherwise expressly provided, whenever in this title an
amendment or repeal is expressed in terms of an amendment to, or repeal
of, a section or other provision, the reference shall be considered to
be made to a section or other provision of the Internal Revenue Code of
1986.
SEC. 102. TAX CREDITS FOR CONTRIBUTIONS TO ELIGIBLE SCHOLARSHIP-
GRANTING ORGANIZATIONS AND ELIGIBLE WORKFORCE TRAINING
ORGANIZATIONS.
(a) Credit for Individuals.--
(1) In general.--Subpart A of part IV of subchapter A of
chapter 1 is amended by adding after section 25E the following
new section:
``SEC. 25F. CONTRIBUTIONS TO ELIGIBLE SCHOLARSHIP-GRANTING
ORGANIZATIONS AND ELIGIBLE WORKFORCE TRAINING
ORGANIZATIONS.
``(a) Allowance of Credit.--In the case of an individual, there
shall be allowed as a credit against the tax imposed by this chapter
for the taxable year an amount equal to the sum of any qualified
contributions made by the taxpayer during the taxable year.
``(b) Amount of Credit.--The credit allowed under subsection (a) in
any taxable year shall not exceed 10 percent of the taxpayer's adjusted
gross income for the taxable year.
``(c) Definitions.--For purposes of this section--
``(1) Qualified contribution.--The term `qualified
contribution' means a contribution of cash to any eligible
scholarship-granting organization or eligible workforce
training organization.
``(2) Qualified expense.--The term `qualified expense'
means any educational expense that is--
``(A) for an individual student's elementary or
secondary education, as recognized by the State,
``(B) for the secondary education component of an
individual elementary or secondary student's career and
technical education, as defined by section 3(5) of the
Carl D. Perkins Career and Technical Education Act of
2006 (20 U.S.C. 2302(5)), or
``(C) for the purpose of providing eligible
individual participants with scholarships for secondary
or postsecondary vocational education and training,
workforce development, or apprenticeship training,
including preparation and examination costs relating to
portable certificates or credentials, or industry
recognized certification or credentialing programs.
``(3) Eligible scholarship-granting organization.--The term
`eligible scholarship-granting organization' means--
``(A) an organization that--
``(i) is described in section 501(c)(3) and
exempt from taxation under section 501(a),
``(ii) provides qualifying scholarships for
qualified expenses to only individual
elementary and secondary students who--
``(I) reside in the State in which
the eligible scholarship-granting
organization is recognized, or
``(II) in the case of the Bureau of
Indian Education, are members of a
federally recognized tribe,
``(iii) a State reports to the Secretary of
Education as an eligible scholarship-granting
organization pursuant to section 201(c)(5)(B)
of the Education Freedom Scholarships and
Opportunity Act,
``(iv) allocates at least 90 percent of
qualified contributions to qualifying
scholarships for qualified expenses, and
``(v) provides scholarships to--
``(I) more than 1 eligible student,
``(II) more than 1 eligible family,
and
``(III) different eligible students
attending more than one education
provider, or
``(B) an organization that--
``(i) is described in section 501(c)(3) and
exempt from taxation under section 501(a), and
``(ii) pursuant to State law, was able, as
of the date of the enactment of the Education
Freedom Scholarships and Opportunity Act, to
receive contributions that are eligible for a
State tax credit if such contributions are used
by the organization to provide scholarships to
individual elementary and secondary students,
including scholarships for attending private
schools.
``(4) Eligible workforce training organization.--
``(A) In general.--The term `eligible workforce
training organization' means any organization--
``(i) which is--
``(I) described in section
501(c)(3) and exempt from taxation
under section 501(a), and
``(II) not a private foundation (as
defined in section 509),
``(ii) whose purpose is to provide
vocational education and training, workforce
development, or apprenticeship training to
eligible potential secondary or postsecondary
students, including organizations whose purpose
is to provide scholarships for portable
certificates or credentials, or industry
recognized certifications or credentialing
programs, including preparation and examination
costs,
``(iii) which is in compliance with
applicable State laws,
``(iv) which a State has reported to the
Secretary of Education as an eligible workforce
training organization pursuant to section
201(c)(5)(B) of the Education Freedom
Scholarships and Opportunity Act, and
``(v) which satisfies the requirements
described in clauses (iv) and (v) of paragraph
(3)(A).
``(B) Potential eligible workforce training
organizations.--Eligible workforce training
organizations may include, but are not limited to,
organizations such as the following (provided that such
organizations satisfy the requirements under
subparagraph (A)):
``(i) Community colleges.
``(ii) Workforce training programs (as
defined by the applicable State workforce
agency).
``(iii) Organizations which provide--
``(I) career and technical
education, or
``(II) training or apprenticeships,
including, but not limited to, training
or apprenticeships operated by a
collective bargaining organization or
that provide industry recognized
certifications or credentials.
``(iv) Community organizations that provide
training that results in a certification.
``(5) Qualifying scholarship.--The term `qualifying
scholarship' means--
``(A) a scholarship granted by an eligible
scholarship-granting organization to an individual
elementary or secondary student, or
``(B) a scholarship granted by an eligible
workforce training organization as a scholarship to a
secondary or postsecondary student for the purpose of
vocational education and training, workforce
development, obtaining portable certificates or
credentials, or industry recognized certification or
credentialing programs, including preparation and
examination costs,
under this section.
``(6) 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) Rules of Construction.--
``(1) In general.--A scholarship awarded to a student from
the proceeds of a qualified contribution under this section or
section 45BB shall not be considered assistance to the school,
eligible workforce training organization, or other educational
provider that enrolls, or provides educational services to, the
student or the student's parents.
``(2) Not treated as income.--The amount of any such
scholarship shall not be treated as income of the student or
their parents for purposes of Federal tax laws or for
determining eligibility for any other Federal program.
``(3) Prohibition of control over nonpublic education
providers.--
``(A) Nothing in this Act shall be construed to
permit, allow, encourage, or authorize any Federal
control over any aspect of any private, religious, or
home education provider, whether or not a home
education provider is treated as a private school or
home school under State law. This Act shall not be
construed to exclude private, religious, or home
education providers from participation in programs or
services under this Act.
``(B) Nothing in this Act shall be construed to
permit, allow, encourage, or authorize an entity
submitting a list of eligible scholarship-granting
organizations or eligible workforce training
organizations on behalf of a State to mandate, direct,
or control any aspect of a private or home education
provider, regardless of whether or not a home education
provider is treated as a private school under State
law.
``(C) No participating State or entity acting on
behalf of a State shall exclude, discriminate against,
or otherwise disadvantage any education provider with
respect to programs or services under this Act based in
whole or in part on the provider's religious education
character or affiliation, including religiously or
mission-based policies or practices.
``(4) Parental rights to use scholarships.--No
participating State or entity acting on behalf of a State shall
disfavor or discourage the use of such scholarships for the
purchase of elementary and secondary or workforce training
education services, including those services provided by
private or nonprofit entities, such as faith-based providers.
``(5) State and local authority.--Nothing in this section
or section 45BB shall be construed to modify a State or local
government's authority and responsibility to fund education.
``(e) Limitations.--
``(1) Tax liability.--No credit allowed under this section
or section 45BB shall exceed the taxpayer's Federal income tax
liability for the taxable year.
``(2) Prohibitions.--A taxpayer is prohibited from selling
or transferring any portion of a tax credit allowed under this
section or section 45BB.
``(3) Denial of double benefit.--The Secretary shall
prescribe such regulations or other guidance to ensure that the
sum of the tax benefits provided by Federal, State, or local
law for a qualified contribution receiving a Federal tax credit
in any taxable year shall not exceed the sum of the qualified
contributions made by the taxpayer for the taxable year.
``(f) Carryover of Credit.--If a tax credit allowed under this
section or section 45BB is not fully used within the applicable taxable
year because of insufficient tax liability on the part of the taxpayer,
the unused amount may be carried forward for a period not to exceed 5
years.
``(g) Election.--This section shall apply to a taxpayer for a
taxable year only if the taxpayer elects to have this section apply for
such taxable year.
``(h) 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) Clerical amendment.--The table of sections for subpart
A of part IV of subchapter A of chapter 1 of is amended by
inserting after the item relating to section 25E the following
new item:
``Sec. 25F. Contributions to eligible scholarship-granting
organizations and eligible workforce
training organizations.''.
(b) Credit for Corporations.--
(1) In general.--Subpart D of part IV of subchapter A of
chapter 1 is amended by adding at the end the following new
section:
``SEC. 45BB. CONTRIBUTIONS TO ELIGIBLE SCHOLARSHIP-GRANTING
ORGANIZATIONS AND ELIGIBLE WORKFORCE TRAINING
ORGANIZATIONS.
``(a) Allowance of Credit.--For purposes of section 38, in the case
of a domestic corporation, there shall be allowed as a credit against
the tax imposed by this chapter for the taxable year an amount equal to
the sum of any qualified contributions (as defined in section
25F(c)(1)) made by such corporation taxpayer during 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 domestic corporation for
such taxable year.
``(c) Additional Provisions.--For purposes of this section, any
qualified contributions made by a domestic corporation shall be subject
to the provisions of section 25F, to the extent applicable.
``(d) Election.--This section shall apply to a taxpayer for a
taxable year only if the taxpayer elects to have this section apply for
such taxable year.''.
(2) Credit part of general business credit.--Section 38(b)
is amended--
(A) by striking ``plus'' at the end of paragraph
(40);
(B) by striking the period at the end of paragraph
(41) and inserting ``, plus''; and
(C) by adding at the end the following new
paragraph:
``(42) the credit for qualified contributions determined
under section 45BB(a).''.
(3) Clerical amendment.--The table of sections for subpart
D of part IV of subchapter A of chapter 1 is amended by adding
at the end the following new item:
``Sec. 45BB. Contributions to eligible scholarship-granting
organizations and eligible workforce
training organizations.''.
TITLE II--EDUCATION FREEDOM SCHOLARSHIPS AND OPPORTUNITY ACT WEB PORTAL
AND ADMINISTRATION
SEC. 201. EDUCATION FREEDOM SCHOLARSHIPS AND OPPORTUNITY ACT WEB PORTAL
AND ADMINISTRATION.
(a) In General.--The Secretary of Education shall, in coordination
with the Secretary of the Treasury and the Secretary of Labor,
establish, host, and maintain a Web portal that--
(1) lists all scholarship-granting organizations and
workforce training organizations that are eligible under
section 25F or 45BB of the Internal Revenue Code of 1986;
(2) enables a taxpayer to make a qualifying contribution to
one or more eligible scholarship-granting organizations and
eligible workforce training organizations and to immediately
obtain both a pre-approval of a tax credit for that
contribution and a receipt for tax filings;
(3) provides information about the tax benefits of the
provisions of the Education Freedom Scholarships and
Opportunity Act under the Internal Revenue Code of 1986; and
(4) enables a State to submit and update information about
its programs and its eligible scholarship-granting
organizations and eligible workforce training organizations for
informational purposes only, including information on--
(A) student eligibility;
(B) allowable educational expenses;
(C) the types of allowable education providers;
(D) the percentage of funds an organization may use
for program administration; and
(E) the percentage of total contributions the
organization awards in a calendar year.
(b) Nonportal Contributions.--A taxpayer may opt to make a
contribution directly to an eligible scholarship-granting organization
or an eligible workforce training organization, instead of through the
Web portal described in subsection (a), provided that the taxpayer, or
the eligible scholarship-granting organization or eligible workforce
training organization on behalf of the taxpayer, applies for, and
receives pre-approval for a tax credit from the Secretary of Education
in coordination with the Secretary of the Treasury.
(c) National and State Caps on Credits.--
(1) National cap.--There is a cap of $10,000,000,000 on the
sum of the contributions that qualify for a credit under
section 25F and section 45BB of the Internal Revenue Code of
1986 for each calendar year, of which--
(A) $5,000,000,000 shall be allotted for qualified
contributions to eligible scholarship-granting
organizations; and
(B) $5,000,000,000 shall be allotted for qualified
contributions to eligible workforce training
organizations.
(2) Allocation of cap.--
(A) Initial allocations.--For each calendar year,
the Secretary of Education, in coordination with the
Secretary of Labor, shall--
(i) from the amount allotted under
paragraph (1)(A)--
(I) first reserve, for each State,
an amount equal to the sum of the
qualifying contributions made in the
State in the previous year; and
(II) next, allocate the remaining
amount among the participating States
by allocating to each State the sum
of--
(aa) an amount that bears
the same relationship to 20
percent of such remaining
amount as the number of
individuals aged 5 through 17
in the State, as determined by
the Secretary of Education on
the basis of the most recent
satisfactory data, bears to the
number of those individuals in
all such States, as so
determined; and
(bb) an amount that bears
the same relationship to 80
percent of such remaining
amount as the number of
individuals aged 5 through 17
from families with incomes
below the poverty line in the
State, as determined by the
Secretary of Education, on the
basis of the most recent
satisfactory data, bears to the
number of those individuals in
all such States, as so
determined; and
(ii) from the amount allotted under
paragraph (1)(B)--
(I) first reserve, for each State,
an amount equal to the sum of the
qualifying contributions made in the
State in the previous year attributable
to eligible workforce training
organizations; and
(II) next, allocate the remaining
amount among the participating States
by allocating to each State an amount
determined through a system, as
established and maintained by the
Secretary of Labor, that accurately
reflects demand and potential qualified
participants for apprenticeships and
workforce training within that State.
(B) Minimum allocation.--Notwithstanding
subparagraph (A), no State receiving an allotment under
this section may receive less than one-half of one
percent of the amount allotted for a fiscal year.
(C) Alternative allocation for qualified
contributions to eligible scholarship-granting
organizations.--
(i) In general.--Not later than the end of
the fifth year of the program or one year after
the end of the first fiscal year for which the
total amount of credits claimed under section
25F and section 45BB of the Internal Revenue
Code of 1986 for qualified contributions to
eligible scholarship-granting organizations is
$2,500,000,000 or more, whichever comes first,
the Secretary of Education shall, by
regulation, provide for an alternative
allocation method for the amount described in
paragraph (1)(A) that shall take effect
beginning with the first fiscal year after the
regulation takes effect.
(ii) Alternative allocation method.--The
alternative allocation method described in
clause (i) shall be expressed as a formula
based on a combination of the following data
for each State, as reported by the State to the
Secretary of Education:
(I) The relative percentage of
students in the State who receive an
elementary or secondary scholarship
through a State program that is
financed through State tax-credited
donations or appropriations and that
permits the elementary or secondary
scholarship to be used to attend a
private school.
(II) The total amount of all
elementary and secondary scholarships
awarded through a State program that is
financed through State tax-credited
donations or appropriations compared to
the total amount of current State and
local expenditures for free public
education in the State.
(iii) Allocation formula.--For any fiscal
year to which clause (i) applies, the Secretary
of Education shall--
(I) first reserve, for each State,
an amount equal to the sum of the
qualifying contributions made in the
State in the previous year;
(II) next, allocate two-thirds of
the remaining amount of the national
cap for that year using the alternative
allocation method in clause (ii); and
(III) then, allocate one-third of
the remaining amount in accordance with
subparagraph (A)(ii).
(iv) Ineligibility.--For any fiscal year to
which clause (i) applies, a State that does not
provide the Secretary of Education with
information described in clause (ii) is not
eligible to receive an allocation through the
alternative allocation method under clause
(ii).
(3) Allowable partnerships.--A State may choose to
administer the allocation it receives under paragraph (2) in
partnership with one or more States, provided that the eligible
scholarship-granting organizations or eligible workforce
training organizations in each partner State serve students who
reside in all States in the partnership.
(4) Total allocation.--A State's allocation, for any fiscal
year, is the sum of the amount determined for it under
subparagraphs (A) and (B) of paragraph (2), except as provided
in paragraph (2)(C).
(5) Allocation and adjustments.--
(A) Initial allocation to states.--No later than
November 1 of the year preceding a year for which there
is a national cap on credits under paragraph (1)
(hereafter in this section, the ``applicable year''),
or as early as practicable with respect to the first
year, the Secretary of Education shall announce the
State allocations under paragraph (2) for the
applicable year.
(B) List of eligible scholarship-granting
organizations and eligible workforce training
organizations.--No later than January 1 of each
applicable year, or as early as practicable with
respect to the first year, each State shall provide the
Secretary of Education a list of eligible scholarship-
granting organizations and eligible workforce training
organizations described in paragraphs (3)(A) and (4) of
section 25F(c) of the Internal Revenue Code of 1986,
including a certification that the entity submitting
the list on behalf of the State has the authority to
perform this function. Neither this Act nor any other
Federal law shall be construed as limiting the entities
that may submit the list on behalf of a State.
(C) Reallocation.--
(i) In general.--The Secretary of Education
shall, in accordance with paragraph (2),
reallocate to any other States the allocation
of a State which, for any applicable year--
(I) fails to provide the Secretary
of Education a list of eligible
scholarship-granting organizations and
eligible workforce training
organizations pursuant to subparagraph
(B); and
(II) does not have an eligible
scholarship-granting organization (as
described in section 25F(c)(3)(B) of
the Internal Revenue Code of 1986)
located in such State.
(ii) Unclaimed credits.--On or after April
1 of any applicable year, the Secretary of
Education may reallocate, to one or more other
States that have eligible scholarship-granting
organizations and eligible workforce training
organizations in the States, without regard to
paragraph (2), the allocation of a State for
which the State's allocation has not been
claimed.
(d) Definitions.--The definitions of terms in section 25F(c) of the
Internal Revenue Code of 1986 apply to those terms as used in this
title.
(e) Authorization of Appropriations.--For the purpose of
administering this section and sections 25F and 45BB of the Internal
Revenue Code of 1986, there are authorized to be appropriated, and
there are appropriated, such sums as may be necessary for fiscal year
2025 and each succeeding fiscal year.
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