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[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[H.R. 9462 Introduced in House (IH)]

<DOC>

118th CONGRESS
  2d Session
                                H. R. 9462

 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

_______________________________________________________________________

                                 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 sections 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 
                than 15 percent of such amount may, at the election of 
                such organization, be carried to the succeeding taxable 
                year.
            ``(2) Distributions.--The term `distribution' includes 
        amounts which are formally committed but not distributed. A 
        formal commitment described in the preceding sentence may 
        include contributions set aside for eligible students for more 
        than one year.
            ``(3) Distribution deadline.--The distribution deadline 
        with respect to receipts for a taxable year is the first day of 
        the third taxable year following the taxable year in which such 
        receipts are received by the scholarship granting 
        organization.''.
            (2) Clerical amendment.--The table of subchapters for 
        chapter 42 of such Code is amended by adding at the end the 
        following new item:

         ``subchapter i. scholarship granting organizations''.

    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years ending after December 31, 2024.

SEC. 3. EXEMPTION FROM GROSS INCOME FOR SCHOLARSHIPS FOR QUALIFIED 
              ELEMENTARY OR SECONDARY EDUCATION EXPENSES OF ELIGIBLE 
              STUDENTS.

    (a) In General.--Part III of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 is amended by inserting before section 
140 the following new section:

``SEC. 139J. 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 any 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).''.
    (b) Conforming Amendment.--The table of sections for part III of 
subchapter B of chapter 1 of the Internal Revenue Code of 1986 is 
amended by inserting before the item relating to section 140 the 
following new item:

``Sec. 139J. Scholarships for qualified elementary or secondary 
                            education expenses of eligible students.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to amounts received after December 31, 2024, in taxable years 
ending after such date.

SEC. 4. ORGANIZATIONAL AND PARENTAL AUTONOMY.

    (a) Prohibition of Control Over Scholarship Organizations.--
            (1) In general.--
                    (A) Treatment.--A scholarship granting organization 
                shall not, by virtue of participation under any 
                provision of this Act or any amendment made by this 
                Act, be regarded as acting on behalf of any 
                governmental entity.
                    (B) No governmental control.--Nothing in this Act, 
                or any amendment made by this Act, shall be construed 
                to permit, allow, encourage, or authorize any Federal, 
                State, or local government entity, or officer or 
                employee thereof, to mandate, direct, or control any 
                aspect of any scholarship granting organization.
                    (C) Maximum freedom.--To the extent permissible by 
                law, this Act, and any amendment made by this Act, 
                shall be construed to allow scholarship granting 
                organizations maximum freedom to provide for the needs 
                of the participants without governmental control.
            (2) Prohibition of control over non-public schools.--
                    (A) No governmental control.--Nothing in this Act, 
                or any amendment made by this Act, shall be construed 
                to permit, allow, encourage, or authorize any Federal, 
                State, or local government entity, or officer or 
                employee thereof, to mandate, direct, or control any 
                aspect of any private or religious elementary or 
                secondary education institution.
                    (B) No exclusion of private or religious schools.--
                No Federal, State, or local government entity, or 
                officer or employee thereof, shall impose or permit the 
                imposition of any conditions or requirements that would 
                exclude or operate to exclude educational expenses at 
                private or religious elementary and secondary education 
                institutions from being considered qualified elementary 
                or secondary education expenses.
                    (C) No exclusion of qualified expenses due to 
                institution's religious character or affiliation.--No 
                Federal, State, or local government entity, or officer 
                or employee thereof, shall exclude, discriminate 
                against, or otherwise disadvantage any elementary or 
                secondary education institution with respect to 
                qualified elementary or secondary education expenses at 
                that institution based in whole or in part on the 
                institution's religious character or affiliation, 
                including religiously based or mission-based policies 
                or practices.
            (3) Parental rights to use scholarships.--No Federal, 
        State, or local government entity, or officer or employee 
        thereof, shall disfavor or discourage the use of scholarships 
        granted by participating scholarship granting organizations for 
        qualified elementary or secondary education expenses at private 
        or nonprofit elementary and secondary education institutions, 
        including faith-based schools.
            (4) Parental right to intervene.--In any action filed in 
        any State or Federal court which challenges the 
        constitutionality (under the constitution of such State or the 
        Constitution of the United States) of any provision of this Act 
        (or any amendment made by this Act), any parent of an eligible 
        student who has received a scholarship from a scholarship 
        granting organization shall have the right to intervene in 
        support of the constitutionality of such provision or 
        amendment. To avoid duplication of efforts and reduce the 
        burdens placed on the parties to the action, the court in any 
        such action may require interveners taking similar positions to 
        file joint papers or to be represented by a single attorney at 
        oral argument, provided that the court does not require such 
        interveners to join any brief filed on behalf of any State 
        which is a defendant in such action.
    (b) Definitions.--For purposes of this subsection, the terms 
``eligible student'', ``scholarship granting organization'', and 
``qualified elementary or secondary education expense'' shall have the 
same meanings given such terms under section 25F(c) of the Internal 
Revenue Code of 1986 (as added by section 2(a) of this Act).
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