[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[H.R. 9462 Reported in House (RH)]
<DOC>
Union Calendar No. 600
118th CONGRESS
2d Session
H. R. 9462
[Report No. 118-707, Part I]
To amend the Internal Revenue Code of 1986 to allow a credit against
tax for charitable donations to nonprofit organizations providing
education scholarships to qualified elementary and secondary students.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
September 6, 2024
Mr. Smith of Nebraska (for himself, Mr. Owens, Ms. Foxx, Mr. Kelly of
Pennsylvania, Mr. Yakym, Mr. Jordan, Mr. Reschenthaler, Mr. Donalds,
Mr. Feenstra, Ms. Malliotakis, and Ms. Tenney) introduced the following
bill; which was referred to the Committee on Ways and Means, and in
addition to the Committee on Education and the Workforce, for a period
to be subsequently determined by the Speaker, in each case for
consideration of such provisions as fall within the jurisdiction of the
committee concerned
October 4, 2024
Additional sponsors: Mrs. Miller-Meeks, Ms. Stefanik, Ms. Letlow, Mr.
Scalise, Mr. Walberg, Mr. Pence, Mr. Williams of New York, Mr. Lawler,
Mr. Moolenaar, Mr. Wenstrup, Mr. Fong, Mr. Van Drew, and Mr. Kean of
New Jersey
October 4, 2024
Reported from the Committee on Ways and Means with an amendment
[Strike out all after the enacting clause and insert the part printed
in italic]
October 4, 2024
Committee on Education and the Workforce discharged; committed to the
Committee of the Whole House on the State of the Union and ordered to
be printed
[For text of introduced bill, see copy of bill as introduced on
September 6, 2024]
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to allow a credit against
tax for charitable donations to nonprofit organizations providing
education scholarships to qualified elementary and secondary students.
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 ``Educational Choice for Children Act
of 2024''.
SEC. 2. TAX CREDIT FOR CONTRIBUTIONS OF INDIVIDUALS TO SCHOLARSHIP
GRANTING ORGANIZATIONS.
(a) Allowance of Credit.--
(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:
``SEC. 25F. QUALIFIED ELEMENTARY AND SECONDARY EDUCATION SCHOLARSHIPS.
``(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 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) Allocation of volume cap.--The credit allowed under
subsection (a) to any taxpayer for any taxable year shall not
exceed the amount of the volume cap allocated by the Secretary
to such taxpayer under subsection (g) with respect to qualified
contributions made by the taxpayer during the taxable year.
``(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--
``(A) is a member of a household with an income
which 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.
``(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.--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, an elementary or secondary public, private, or
religious school:
``(A) Tuition.
``(B) Curriculum and curricular materials.
``(C) Books or other instructional materials.
``(D) Online educational materials.
``(E) Tuition for tutoring or educational classes
outside of the home, 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 an eligible
educational institution, or
``(iii) is a subject matter expert in the
relevant subject.
``(F) Fees for a nationally standardized norm-
referenced achievement test, an advanced placement
examination, or any examinations related to college or
university admission.
``(G) Fees for dual enrollment in an institution of
higher education.
``(H) Educational therapies for students with
disabilities provided by a licensed or accredited
practitioner or provider, including occupational,
behavioral, physical, and speech-language therapies.
Such term shall include expenses for the purposes described in
subparagraphs (A) through (H) in connection with a homeschool
(whether treated as a homeschool or a private school for
purposes of applicable State law).
``(4) 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) substantially all of the activities of which
are providing scholarships for qualified elementary or
secondary education expenses of eligible students,
``(C) which prevents the co-mingling of qualified
contributions with other amounts by maintaining one or
more separate accounts exclusively for qualified
contributions, and
``(D) which either--
``(i) meets the requirements of subsection
(d), or
``(ii) pursuant to State law, was able (as
of the date of the enactment of this section)
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.
``(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) such organization does not provide
scholarships for any expenses other than qualified
elementary or secondary education expenses,
``(C) 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
such students who have a sibling who was
awarded a scholarship from such organization,
``(D) such organization does not earmark or set
aside contributions for scholarships on behalf of any
particular student,
``(E) such organization takes appropriate steps to
verify the annual household income and family size of
eligible students to whom it awards scholarships, and
limits them to a member of a household for which the
income does not exceed the amount established under
subsection (c)(1)(A),
``(F) 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
``(G) no officer or board member of such
organization has been convicted of a felony.
``(2) Income verification.--For purposes of paragraph
(1)(E), review of all of the following (as applicable) shall be
treated as satisfying the requirement to take appropriate steps
to verify annual household income:
``(A) Federal and State income tax returns or tax
return transcripts with applicable schedules for the
taxable year prior to application.
``(B) Income reporting statements for tax purposes
or wage and income transcripts from the Internal
Revenue Service.
``(C) Notarized income verification letter from
employers.
``(D) Unemployment or workers compensation
statements.
``(E) 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)(F), 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) Volume Cap.--
``(1) In general.--The volume cap applicable under this
section shall be $5,000,000,000 for each of calendar years 2025
through 2028, and zero for calendar years thereafter. Such
amount shall be allocated by the Secretary as provided in
paragraph (2) to taxpayers with respect to qualified
contributions made by such taxpayers, except that 10 percent of
such amount shall be divided evenly among the States, and shall
be available with respect to individuals residing in such
States.
``(2) First-come, first-serve.--For purposes of applying
the volume cap under this section, such volume cap for any
calendar year shall be allocated by the Secretary on a first-
come, first-serve basis, as determined based on the time
(during such calendar year) at which the taxpayer made the
qualified contribution with respect to which the allocation is
made. The Secretary shall not make any allocation of volume cap
for any calendar year after December 31 of such calendar year.
``(3) Real-time information.--For purposes of this section,
the Secretary shall develop a system to track the amount of
qualified contributions made during the calendar year for which
a credit may be claimed under this section, with such
information to be updated in real time.
``(4) Annual increases.--
``(A) 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.
``(B) 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.
``(C) 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.
``(D) 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.
``(5) States.--For purposes of this subsection, the term
`State' includes the District of Columbia.''.
(2) Conforming amendments.--
(A) Section 25(e)(1)(C) of such Code 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 of such Code is amended by
inserting after the item relating to section 25E the
following new item:
``Sec. 25F. Qualified elementary and secondary education
scholarships.''.
(b) Failure of Scholarship Granting Organizations to Make
Distributions.--
(1) In general.--Chapter 42 of such Code is amended by
adding at the end the following new subchapter:
``Subchapter I--Scholarship Granting Organizations
``Sec. 4969. Failure to distribute receipts.
``SEC. 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 section 25F.
``(b) Requirement.--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.
``(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--
``(i) reduced by the sum of such receipts
that are retained for reasonable administrative
expenses for the taxable year or are carried to
the succeeding taxable year under subparagraph
(C), and
``(ii) increased by the amount of the
carryover under subparagraph (C) from the
preceding taxable year.
``(B) Safe harbor for reasonable administrative
expenses.--For purposes of subparagraph (A)(i), 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.
``(C) Carryover.--With respect to the amount of the
total receipts of a scholarship granting organization
with respect to any taxable year, an amount not greater