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S. 292: Educational Choice for Children Act of 2025

This bill, named the Educational Choice for Children Act of 2025, proposes to amend the Internal Revenue Code to create tax credits for individuals and corporations who make charitable donations to nonprofit organizations that provide education scholarships for students in need. Here are the main components of the bill:

Tax Credits for Individuals

Individuals can receive a credit against their federal income tax for contributions made to scholarship granting organizations (SGOs). The amount of the credit is based on the total contributions made during the taxable year, capped at either 10% of the individual's adjusted gross income or $5,000, whichever is greater. However, this credit can be reduced by any amount credited on a state tax return for similar contributions.

Tax Credits for Corporations

Corporations can also receive tax credits for contributions to SGOs, with the credit not exceeding 5% of the corporation's taxable income for the year. Similar to individuals, these contributions are subject to a volume cap defined in the bill.

Scholarships and Eligible Students

The scholarships can be used for a variety of education-related expenses, including:

Tuition
Curricula and materials
Books and instructional materials
Online educational resources
Tutoring services
Standardized testing fees
Educational therapies for students with disabilities

To qualify for these scholarships, students must come from households earning less than 300% of the area median income and must be eligible for enrollment in public elementary or secondary schools.

Qualified Contributions and Organizations

Qualified contributions include cash or marketable securities donated to SGOs that primarily provide scholarships. These organizations must be recognized as tax-exempt (501(c)(3) status), not operate as private foundations, and follow specific operational guidelines to ensure compliance.

Volume Cap and Allocation

The total available credits for qualified contributions are limited by a volume cap of $10 billion per year, starting in 2026. The allocation is managed on a first-come, first-served basis, ensuring that credits are available to individuals and corporations based on when their contributions are made.

Parental and Organizational Autonomy

The bill emphasizes that participation in scholarship programs will not subject organizations or educational institutions to governmental control. It affirms parental rights to utilize scholarships at both public and private educational institutions, including religious schools, without any penalties or exclusions based on the institution’s religious character.

Prohibitions on Self-Dealing

Scholarship granting organizations will be prohibited from award distributions to disqualified individuals, ensuring that funds are not improperly used.

Carryforward of Unused Credits

If individuals or corporations cannot fully utilize their credits in a given year, they may carry forward unused credits to future tax years, subject to certain limitations.

Definitions and Compliance Requirements

The bill includes definitions for eligible students, qualified contributions, and scholarship granting organizations, along with requirements for these organizations to maintain good standing and comply with financial audits.