One Big Beautiful Bill Act · Public Law 119-21
Tax Credit for Contributions of Individuals to Scholarship Granting Organizations
Verbatim text of Section 70411 as published in the enrolled Act (Public Law 119-21). This is the section that enacted Internal Revenue Code Section 25F. Reproduced from the official govinfo.gov text; United States Government works are not subject to copyright.
SEC. 70411. TAX CREDIT FOR CONTRIBUTIONS OF INDIVIDUALS TO
SCHOLARSHIP GRANTING ORGANIZATIONS.
(a) Allowance of Credit for Contributions of Individuals to
Scholarship Granting Organizations.--
(1) In general.--Subpart A of part IV of subchapter A of
chapter 1 is amended by inserting after section 25E the
following new section:
``SEC. 25F. <<NOTE: 26 USC 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 (within the meaning of 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 $1,700.
``(2) 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) Covered state.--The term `covered State' means one of
the States, or the District of Columbia, that, for a calendar
year, voluntarily elects to participate under this section and
to identify scholarship granting organizations in the State, in
accordance with subsection (g).
``(2) Eligible student.--The term `eligible student' means
an individual who--
``(A) is a member of a household with an income
which, for the calendar year prior to the date of the
application for a scholarship, is not greater than 300
percent of the area median gross income (as such term is
used in section 42), and
``(B) is eligible to enroll in a public elementary
or secondary school.
``(3) Qualified contribution.--The term `qualified
contribution' means a charitable contribution of cash to a
scholarship granting organization that uses the contribution to
fund scholarships for eligible students solely within the State
in which the organization is listed pursuant to subsection (g).
``(4) Qualified elementary or secondary education expense.--
The term `qualified elementary or secondary education expense'
means any expense of an eligible student which is described in
section 530(b)(3)(A).
[[Page 139 STAT. 216]]
``(5) Scholarship granting organization.--The term
`scholarship granting organization' means any organization--
``(A) which--
``(i) is described in section 501(c)(3) and
exempt from tax under section 501(a), and
``(ii) is not a private foundation,
``(B) which prevents the co-mingling of qualified
contributions with other amounts by maintaining one or
more separate accounts exclusively for qualified
contributions,
``(C) which satisfies the requirements of subsection
(d), and
``(D) which is included on the list submitted for
the applicable covered State under subsection (g) for
the applicable year.
``(d) Requirements for Scholarship Granting Organizations.--
``(1) In general.--An organization meets the requirements of
this subsection if--
``(A) such organization provides scholarships to 10
or more students who do not all attend the same school,
``(B) such organization spends not less than 90
percent of the income of the organization on
scholarships for eligible students,
``(C) such organization does not provide
scholarships for any expenses other than qualified
elementary or secondary education expenses,
``(D) such organization provides a scholarship to
eligible students with a priority for--
``(i) students awarded a scholarship the
previous school year, and
``(ii) after application of clause (i), any
eligible students who have a sibling who was
awarded a scholarship from such organization,
``(E) such organization does not earmark or set
aside contributions for scholarships on behalf of any
particular student, and
``(F) such organization--
``(i) verifies the annual household income and
family size of eligible students who apply for
scholarships to ensure such students meet the
requirement of subsection (c)(2)(A), and
``(ii) limits the awarding of scholarships to
eligible students who are a member of a household
for which the income does not exceed the amount
established under subsection (c)(2)(A).
``(2) 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.--
[[Page 139 STAT. 217]]
``(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) State List of Scholarship Granting Organizations.--
``(1) List.--
``(A) <<NOTE: Deadlines.>> In general.--Not later
than January 1 of each calendar year (or, with respect
to the first calendar year for which this section
applies, as early as practicable), a State that
voluntarily elects to participate under this section
shall provide to the Secretary a list of the scholarship
granting organizations that meet the requirements
described in subsection (c)(5) and are located in the
State.
``(B) Process.--The election under this paragraph
shall be made by the Governor of the State or by such
other individual, agency, or entity as is designated
under State law to make such elections on behalf of the
State with respect to Federal tax benefits.
``(2) Certification.--Each list submitted under paragraph
(1) shall include a certification that the individual, agency,
or entity submitting such list on behalf of the State has the
authority to perform this function.
``(h) Regulations and Guidance.--The Secretary shall issue such
regulations or other guidance as the Secretary determines necessary to
carry out the purposes of this section, including regulations or other
guidance--
``(1) providing for enforcement of the requirements under
subsections (d) and (g), and
``(2) with respect to recordkeeping or information reporting
for purposes of administering the requirements of this
section.''.
(2) Conforming amendments.--
(A) Section 25(e)(1)(C) is amended by striking ``and
25D'' and inserting ``25D, and 25F''.
(B) The table of sections for subpart A of part IV
of subchapter A of chapter 1 <<NOTE: 26 USC prec. 21.>>
is amended by inserting after the item relating to
section 25E the following new item:
``Sec. 25F. Qualified elementary and secondary education
scholarships.''.
(b) Exclusion From Gross Income for Scholarships for Qualified
Elementary or Secondary Education Expenses of Eligible Students.--
(1) In general.--Part III of subchapter B of chapter 1 is
amended by inserting before section 140 the following new
section:
``SEC. 139K. <<NOTE: 26 USC 139K.>> SCHOLARSHIPS FOR QUALIFIED
ELEMENTARY OR SECONDARY EDUCATION
EXPENSES OF ELIGIBLE STUDENTS.
``(a) In General.--In the case of an individual, gross income shall
not include any amounts provided to such individual or any
[[Page 139 STAT. 218]]
dependent of such individual pursuant to a scholarship for qualified
elementary or secondary education expenses of an eligible student which
is provided by a scholarship granting organization.
``(b) Definitions.--In this section, the terms `qualified elementary
or secondary education expense', `eligible student', and `scholarship
granting organization' have the same meaning given such terms under
section 25F(c).''.
(2) Conforming amendment.--The table of sections for part
III of subchapter B of chapter 1 <<NOTE: 26 USC prec. 101.>> is
amended by inserting before the item relating to section 140 the
following new item:
``Sec. 139K. Scholarships for qualified elementary or secondary
education expenses of eligible students.''.
(c) <<NOTE: 26 USC 25 note.>> Effective Date.--
(1) In general.--Except as otherwise provided in this
subsection, the amendments made by this section shall apply to
taxable years ending after December 31, 2026.
(2) Exclusion from gross income.--The amendments made by
subsection (b) shall apply to amounts received after December
31, 2026, in taxable years ending after such date.