H.R. 3519: Universal School Choice Act

This bill, titled the Universal School Choice Act, aims to provide tax credits for individuals and corporations who make charitable contributions to nonprofit organizations that grant educational scholarships for elementary and secondary education. Here is a summary of its main provisions:

Tax Credits for Contributions

The bill introduces a tax credit for both individual taxpayers and corporations that donate to scholarship granting organizations. The key points include:

• **Individuals** can receive a tax credit equal to the total amount of their donations to these organizations, subject to certain limits. The maximum credit is either 10% of their adjusted gross income or $5,000, whichever is greater.
• **Corporations** can also claim a credit based on their contributions, up to 5% of their taxable income.
• Donations cannot result in a double benefit; contributions eligible for the federal tax credit cannot also be claimed as state tax deductions.

Definition and Requirements for Scholarship Granting Organizations

To qualify for these credits, organizations must meet specific criteria:

• They must be recognized as tax-exempt under section 501(c)(3) of the Internal Revenue Code and primarily provide scholarships for qualified educational expenses.
• They are required to conduct annual financial audits and demonstrate compliance with rules regarding the distribution of scholarships.
• Scholarships must be awarded to eligible students based on financial need and priority must be given to returning scholarship students, siblings, and those from lower-income households.

Qualified Educational Expenses

The bill specifies what expenses are eligible under "qualified education expenses," which may include:

• Tuition and fees for both public and private schools.
• Costs for curricular materials, books, online educational resources, and technology necessary for education.
• Tuition for tutoring and fees for standardized tests.
• Educational therapies for students with disabilities and transportation costs for educational activities.

Volume Cap on Tax Credits

There is a national cap of $10 billion on the total amount of credits allowed each year. This cap is allocated among the states, with specific rules on how each state's share is determined based on its population and number of low-income families.

Exemption from Gross Income

Scholarships provided to students under this program will not be counted as income, meaning recipients do not have to claim these scholarships on their tax returns, thereby increasing the financial benefit of these funds.

Protection of Scholarships and Organizations

The bill emphasizes the independence of scholarship granting organizations and non-public schools from government control or interference. It ensures that educational institutions, including private and religious schools, are not excluded based on their affiliations.

Parental Rights

Parents of eligible students receive protections to use scholarships for educational expenses at any qualifying institution without governmental disfavor, as well as the right to intervene in legal challenges concerning the constitutionality of this legislation.

Implementation Timeline

The provisions of this act are set to take effect for taxable years ending after December 31, 2025.

Relevant Companies

• None found