II 

117TH CONGRESS 

2D SESSION S. 4416 

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 SENATE OF THE UNITED STATES 

JUNE 16, 2022 

Mr. CASSIDY (for himself, Mr. SCOTT of South Carolina, Mr. DAINES, and 

Mr. YOUNG) introduced the following bill; which was read twice and referred to the Committee on Finance 

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. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Educational Choice 

5 for Children Act’’. 

6 SEC. 2. TAX CREDIT FOR CONTRIBUTIONS TO SCHOLAR7 SHIP GRANTING ORGANIZATIONS. 

8 (a) CREDIT FOR INDIVIDUALS.— 


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1 (1) IN GENERAL.—Subpart A of part IV of sub2 chapter A of chapter 1 of the Internal Revenue Code 

3 of 1986 is amended by inserting after section 25D 

4 the following new section: 

5 ‘‘SEC. 25E. QUALIFIED ELEMENTARY AND SECONDARY EDU6 CATION SCHOLARSHIPS. 

7 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in8 dividual, there shall be allowed as a credit against the tax 

9 imposed by this chapter for the taxable year an amount 

10 equal to the amount of qualified contributions made by 

11 the taxpayer during the taxable year. 

12 ‘‘(b) AMOUNT OF CREDIT.—The credit allowed under 

13 subsection (a) in any taxable year shall not exceed an 

14 amount equal to the greater of— 

15 ‘‘(1) 10 percent of the adjusted gross income of 

16 the taxpayer for the taxable year, or 

17 ‘‘(2) $2,000. 

18 ‘‘(c) DEFINITIONS.—For purposes of this section— 

19 ‘‘(1) ELIGIBLE STUDENT.—The term ‘eligible 

20 student’ means an individual who— 

21 ‘‘(A) is a member of a household with an 

22 income which is not greater than 300 percent 

23 of the area median gross income (as such term 

24 is used in section 42), and 


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1 ‘‘(B) is eligible to enroll in a public ele2 mentary or secondary school. 

3 ‘‘(2) QUALIFIED CONTRIBUTION.—The term 

4 ‘qualified contribution’ means a charitable contribu5 tion (as defined by section 170(c)) to a scholarship 

6 granting organization in the form of cash or market7 able securities. 

8 ‘‘(3) QUALIFIED ELEMENTARY OR SECONDARY

9 EDUCATION EXPENSE.—The term ‘qualified elemen10 tary or secondary education expense’ has the same 

11 meaning given the term ‘qualified higher education 

12 expenses’ under paragraph (3) of section 529(e), ex13 cept that such paragraph shall be applied— 

14 ‘‘(A) by substituting ‘elementary school or 

15 secondary school (as such terms are defined in 

16 section 8101 of the Elementary and Secondary 

17 Education Act of 1965 (20 U.S.C. 7801))’ for 

18 ‘eligible educational institution’ each place it 

19 appears, and 

20 ‘‘(B) in subparagraph (B) thereof, by sub21 stituting ‘such school’ for ‘such institution’ each 

22 place it appears. 

23 ‘‘(4) SCHOLARSHIP GRANTING ORGANIZA24 TION.—The term ‘scholarship granting organization’ 

25 means any organization— 


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1 ‘‘(A) which— 

2 ‘‘(i) is described in section 501(c)(3) 

3 and exempt from tax under section 501(a), 

4 and 

5 ‘‘(ii) is not a private foundation, 

6 ‘‘(B) whose exclusive purpose is to provide 

7 scholarships for qualified elementary or sec8 ondary education expenses of eligible students, 

9 and 

10 ‘‘(C)(i) which meets the requirements of 

11 subsection (d), or 

12 ‘‘(ii) which, pursuant to State law, was 

13 able, as of the date of the enactment of the 

14 Educational Choice for Children Act, to receive 

15 contributions that are eligible for a State tax 

16 credit if such contributions are used by the or17 ganization to provide scholarships to individual 

18 elementary and secondary students, including 

19 scholarships for attending private schools. 

20 ‘‘(d) REQUIREMENTS FOR SCHOLARSHIP GRANTING

21 ORGANIZATIONS.— 

22 ‘‘(1) IN GENERAL.—An organization meets the 

23 requirements of this subsection if— 


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1 ‘‘(A) such organization provides scholar2 ships to 2 or more students, provided that not 

3 all such students attend the same school, 

4 ‘‘(B) such organization does not provide 

5 scholarships for any expenses other than quali6 fied elementary or secondary education ex7 penses, 

8 ‘‘(C) such organization provides a scholar9 ship to eligible students with a priority for— 

10 ‘‘(i) students awarded a scholarship 

11 the previous school year, and 

12 ‘‘(ii) after application of clause (i), 

13 any such students who have a sibling who 

14 was awarded a scholarship from such orga15 nization, 

16 ‘‘(D) such organization does not earmark 

17 or set aside contributions for scholarships on 

18 behalf of any particular student, 

19 ‘‘(E) such organization takes appropriate 

20 steps to verify the annual household income and 

21 family size of eligible students to whom it 

22 awards scholarships, and limits them to a mem23 ber of a household for which the income does 

24 not exceed the amount established under sub25 section (c)(1)(A), 


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1 ‘‘(F) such organization— 

2 ‘‘(i) obtains from an independent cer3 tified public accountant annual financial 

4 and compliance audits, and 

5 ‘‘(ii) certifies to the Secretary (at such 

6 time, and in such form and manner, as the 

7 Secretary may prescribe) that the audit de8 scribed in clause (i) has been completed, 

9 and 

10 ‘‘(G) no officer or board member of such 

11 organization has been convicted of a felony. 

12 ‘‘(2) INDEPENDENT CERTIFIED PUBLIC AC13 COUNTANT.—For purposes of paragraph (1)(F), the 

14 term ‘independent certified public accountant’ 

15 means, with respect to an organization, a certified 

16 public accountant who is not a person described in 

17 section 465(b)(3)(A) with respect to such organiza18 tion or any employee of such organization. 

19 ‘‘(3) PROHIBITION ON SELF-DEALING.— 

20 ‘‘(A) IN GENERAL.—A scholarship grant21 ing organization may not award a scholarship 

22 to any disqualified person. 

23 ‘‘(B) DISQUALIFIED PERSON.—For pur24 poses of this paragraph, a disqualified person 


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1 shall be determined pursuant to rules similar to 

2 the rules of section 4946. 

3 ‘‘(e) DENIAL OF DOUBLE BENEFIT.—Any qualified 

4 contribution for which a credit is allowed under this sec5 tion shall not be taken into account as a charitable con6 tribution for purposes of section 170. 

7 ‘‘(f) CARRYFORWARD OF UNUSED CREDIT.— 

8 ‘‘(1) IN GENERAL.—If the credit allowable 

9 under subsection (a) for any taxable year exceeds 

10 the limitation imposed by section 26(a) for such tax11 able year reduced by the sum of the credits allowable 

12 under this subpart (other than this section, section 

13 23, and section 25D), such excess shall be carried to 

14 the succeeding taxable year and added to the credit 

15 allowable under subsection (a) for such taxable year. 

16 ‘‘(2) LIMITATION.—No credit may be carried 

17 forward under this subsection to any taxable year 

18 following the fifth taxable year after the taxable year 

19 in which the credit arose. For purposes of the pre20 ceding sentence, credits shall be treated as used on 

21 a first-in first-out basis. 

22 ‘‘(g) APPLICATION OF VOLUME CAP.—A qualified 

23 contribution shall be taken into account under this section 

24 only if such contribution is not in excess of the volume 


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1 cap established under section 3 of the Educational Choice 

2 for Children Act.’’. 

3 (2) CLERICAL AMENDMENT.—The table of sec4 tions for subpart A of part IV of subchapter A of 

5 chapter 1 of such Code is amended by inserting 

6 after the item relating to section 25D the following 

7 new item: 

‘‘Sec. 25E. Qualified elementary and secondary education scholarships.’’. 

8 (b) CREDIT FOR CORPORATIONS.— 

9 (1) IN GENERAL.—Subpart D of part IV of 

10 subchapter A of chapter 1 of such Code is amended 

11 by adding after section 45T the following: 

12 ‘‘SEC. 45U. CONTRIBUTIONS TO SCHOLARSHIP GRANTING 

13 ORGANIZATIONS. 

14 ‘‘(a) GENERAL RULE.—For purposes of section 38, 

15 in the case of a corporation, the education scholarship 

16 credit determined under this section for the taxable year 

17 is the aggregate amount of qualified contributions for the 

18 taxable year. 

19 ‘‘(b) AMOUNT OF CREDIT.—The credit allowed under 

20 subsection (a) for any taxable year shall not exceed 5 per21 cent of the taxable income (as defined in section 

22 170(b)(2)(D)) of the corporation for such taxable year. 

23 ‘‘(c) QUALIFIED CONTRIBUTIONS.—For purposes of 

24 this section, the term ‘qualified contribution’ has the 

25 meaning given such term under section 25E. 


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1 ‘‘(d) DENIAL OF DOUBLE BENEFIT.—No deduction 

2 shall be allowed under any provision of this chapter for 

3 any expense for which a credit is allowed under this sec4 tion. 

5 ‘‘(e) APPLICATION OF VOLUME CAP.—A qualified 

6 contribution shall be taken into account under this section 

7 only if such contribution is not in excess of the volume 

8 cap established under section 3 of the Educational Choice 

9 for Children Act.’’. 

10 (2) CONFORMING AMENDMENTS.—Section 

11 38(b) of such Code is amended by striking ‘‘plus’’ at 

12 the end of paragraph (32), by striking the period 

13 and inserting ‘‘, plus’’ at the end of paragraph (33), 

14 and by adding at the end the following new para15 graph: 

16 ‘‘(34) the education scholarship credit deter17 mined under section 45U(a).’’. 

18 (3) CLERICAL AMENDMENT.—The table of sec19 tions for subpart D of part IV of subchapter A of 

20 chapter 1 of such Code, as amended by this Act, is 

21 amended by adding at the end the following new 

22 item: 

‘‘Sec. 45U. Contributions to scholarship granting organizations.’’. 

23 (c) FAILURE OF SCHOLARSHIP GRANTING ORGANI24 ZATIONS TO MAKE DISTRIBUTIONS.— 


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1 (1) IN GENERAL.—Chapter 42 of such Code is 

2 amended by adding at the end the following new 

3 subchapter: 

4 ‘‘Subchapter I—Scholarship Granting 

5 Organizations 

‘‘Sec. 4969. Failure to distribute receipts. 

6 ‘‘SEC. 4969. FAILURE TO DISTRIBUTE RECEIPTS. 

7 ‘‘(a) IN GENERAL.—In the case of any scholarship 

8 granting organization (as defined in section 25E) which 

9 has been determined by the Secretary to have failed to 

10 satisfy the requirement under subsection (b) for any tax11 able year, any contribution made to such organization dur12 ing the first taxable year beginning after the date of such 

13 determination shall not be treated as a qualified contribu14 tion (as defined in section 25E(c)(2)) for purposes of sec15 tions 25E and 45U. 

16 ‘‘(b) REQUIREMENT.—The requirement described in 

17 this subsection is that the amount of receipts of the schol18 arship granting organization for the taxable year which 

19 are distributed before the distribution deadline with re20 spect to such receipts shall not be less than the required 

21 distribution amount with respect to such taxable year. 

22 ‘‘(c) DEFINITIONS.—For purposes of this section— 

23 ‘‘(1) REQUIRED DISTRIBUTION AMOUNT.— 


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1 ‘‘(A) IN GENERAL.—The required distribu2 tion amount with respect to a taxable year is 

3 the amount equal to 100 percent of the total re4 ceipts of the scholarship granting organization 

5 for such taxable year— 

6 ‘‘(i) reduced by the sum of such re7 ceipts that are retained for reasonable ad8 ministrative expenses for the taxable year 

9 or are carried to the succeeding taxable 

10 year under subparagraph (C), and 

11 ‘‘(ii) increased by the amount of the 

12 carryover under subparagraph (C) from 

13 the preceding taxable year. 

14 ‘‘(B) SAFE HARBOR FOR REASONABLE AD15 MINISTRATIVE EXPENSES.—For purposes of 

16 subparagraph (A)(i), if the percentage of total 

17 receipts of a scholarship granting organization 

18 for a taxable year which are used for adminis19 trative purposes is equal to or less than 10 per20 cent, such expenses shall be deemed to be rea21 sonable for purposes of such subparagraph. 

22 ‘‘(C) CARRYOVER.—With respect to the 

23 amount of the total receipts of a scholarship 

24 granting organization with respect to any tax25 able year, an amount not greater than 15 perVerDate Sep 11 2014 21:55 Jun 17, 2022 Jkt 029200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S4416.IS S4416

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1 cent of such amount may, at the election of 

2 such organization, be carried to the succeeding 

3 taxable year. 

4 ‘‘(2) DISTRIBUTIONS.—The term ‘distribution’ 

5 includes amounts which are formally committed but 

6 not distributed. A formal commitment described in 

7 the preceding sentence may include contributions set 

8 aside for eligible students for more than one year. 

9 ‘‘(3) DISTRIBUTION DEADLINE.—The distribu10 tion deadline with respect to receipts for a taxable 

11 year is the first day of the third taxable year fol12 lowing the taxable year in which such receipts are 

13 received by the scholarship granting organization.’’. 

14 (2) CLERICAL AMENDMENT.—The table of sub15 chapters for chapter 42 of such Code is amended by 

16 adding at the end the following new item: 

‘‘SUBCHAPTER I. SCHOLARSHIP GRANTING ORGANIZATIONS’’. 

17 SEC. 3. VOLUME CAP. 

18 (a) ALLOCATION.— 

19 (1) IN GENERAL.—For purposes of sections 

20 25E(g) and 45U(e) of the Internal Revenue Code of 

21 1986 (as added by this Act), the volume cap applica22 ble with respect to both such sections shall be 

23 $10,000,000,000 for calendar year 2023 and each 

24 subsequent year thereafter, with such amount to be 

25 allocated as follows: 


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1 (A) $1,000,000,000 shall be allocated to 

2 the States, with such amount to be allocated in 

3 equal amounts to each State. With respect to 

4 the amount which has been allocated to a State 

5 for any calendar year— 

6 (i) 50 percent of such amount shall be 

7 made available for any individual residing 

8 in such State to claim the credit allowed 

9 under section 25E of the Internal Revenue 

10 Code of 1986 with respect to any qualified 

11 contributions (as defined in such section) 

12 made by such individual during any tax13 able year beginning during such calendar 

14 year, and 

15 (ii) 50 percent of such amount shall 

16 be made available for any corporation cre17 ated or organized in such State to claim 

18 the credit determined under section 45U of 

19 such Code with respect to any qualified 

20 contributions made by such corporation 

21 during any taxable year beginning during 

22 such calendar year. 

23 (B) With respect to the amount remaining 

24 after the allocation under subparagraph (A)— 


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1 (i) 50 percent of such amount shall be 

2 made available for any individual to claim 

3 the credit allowed under section 25E of the 

4 Internal Revenue Code of 1986 with re5 spect to any qualified contributions made 

6 by such individual during any taxable year 

7 beginning during such calendar year, and 

8 (ii) 50 percent of such amount shall 

9 be made available for any corporation to 

10 claim the credit determined under section 

11 45U of such Code with respect to any 

12 qualified contributions made by such cor13 poration during any taxable year beginning 

14 during such calendar year. 

15 (2) CARRYOVER.—The amount of any allotment 

16 to a State under paragraph (1)(A) for any calendar 

17 year which is not claimed by taxpayers described in 

18 such paragraph during such calendar year shall be 

19 added to the allotment provided to such State under 

20 such paragraph for the subsequent calendar year. 

21 (b) FIRST-COME, FIRST-SERVE.—For purposes of 

22 applying the volume cap under this section, such volume 

23 cap shall be applied based on a first-come, first-serve 

24 basis, as determined based on the date on which the tax25 payer made the qualified contribution. 


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1 (c) REAL-TIME INFORMATION.—For purposes of this 

2 section, the Secretary of the Treasury (or the Secretary’s 

3 delegate) shall develop a system to track the amount of 

4 qualified contributions made during the calendar year for 

5 which a credit may be claimed under section 25E or 45U 

6 of the Internal Revenue Code of 1986, with such informa7 tion to be updated in real time. 

8 SEC. 4. EXEMPTION FROM GROSS INCOME FOR SCHOLAR9 SHIPS FOR QUALIFIED ELEMENTARY OR SEC10 ONDARY EDUCATION EXPENSES OF ELIGIBLE 

11 STUDENTS. 

12 (a) IN GENERAL.—Part III of subchapter B of chap13 ter 1 of the Internal Revenue Code of 1986 is amended 

14 by inserting before section 140 the following new section: 

15 ‘‘SEC. 139I. SCHOLARSHIPS FOR QUALIFIED ELEMENTARY 

16 OR SECONDARY EDUCATION EXPENSES OF 

17 ELIGIBLE STUDENTS. 

18 ‘‘(a) IN GENERAL.—In the case of an individual, 

19 gross income shall not include any amounts provided to 

20 any dependent of such individual pursuant to a scholar21 ship for qualified elementary or secondary education ex22 penses of an eligible student which is provided by a schol23 arship granting organization. 

24 ‘‘(b) DEFINITIONS.—In this section, the terms ‘quali25 fied elementary or secondary education expense’, ‘eligible 


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1 student’, and ‘scholarship granting organization’ have the 

2 same meaning given such terms under section 25E(c).’’. 

3 (b) CONFORMING AMENDMENT.—The table of sec4 tions for part III of subchapter B of chapter 1 of the In5 ternal Revenue Code of 1986 is amended by inserting be6 fore the item relating to section 140 the following new 

7 item: 

‘‘Sec. 139I. Scholarships for qualified elementary or secondary education expenses of eligible students.’’. 

8 SEC. 5. ORGANIZATIONAL AND PARENTAL AUTONOMY. 

9 (a) PROHIBITION OF CONTROL OVER SCHOLARSHIP

10 ORGANIZATIONS.— 

11 (1) IN GENERAL.— 

12 (A) TREATMENT.—A scholarship granting 

13 organization shall not, by virtue of participation 

14 under any provision of this Act or any amend15 ment made by this Act, be regarded as acting 

16 on behalf of any governmental entity. 

17 (B) NO GOVERNMENTAL CONTROL.—Noth18 ing in this Act, or any amendment made by this 

19 Act, shall be construed to permit, allow, encour20 age, or authorize any Federal, State, or local 

21 government entity, or officer or employee there22 of, to mandate, direct, or control any aspect of 

23 any scholarship granting organization. 


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1 (C) MAXIMUM FREEDOM.—To the extent 

2 permissible by law, this Act, and any amend3 ment made by this Act, shall be construed to 

4 allow scholarship granting organizations max5 imum freedom to provide for the needs of the 

6 participants without governmental control. 

7 (2) PROHIBITION OF CONTROL OVER NON-PUB8 LIC SCHOOLS.— 

9 (A) NO GOVERNMENTAL CONTROL.—Noth10 ing in this Act, or any amendment made by this 

11 Act, shall be construed to permit, allow, encour12 age, or authorize any Federal, State, or local 

13 government entity, or officer or employee there14 of, to mandate, direct, or control any aspect of 

15 any private or religious elementary or secondary 

16 education institution. 

17 (B) NO EXCLUSION OF PRIVATE OR RELI18 GIOUS SCHOOLS.—No Federal, State, or local 

19 government entity, or officer or employee there20 of, shall impose or permit the imposition of any 

21 conditions or requirements that would exclude 

22 or operate to exclude educational expenses at 

23 private or religious elementary and secondary 

24 education institutions from being considered 


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1 qualified elementary or secondary education ex2 penses. 

3 (C) NO EXCLUSION OF QUALIFIED EX4 PENSES DUE TO INSTITUTION’S RELIGIOUS

5 CHARACTER OR AFFILIATION.—No Federal, 

6 State, or local government entity, or officer or 

7 employee thereof, shall exclude, discriminate 

8 against, or otherwise disadvantage any elemen9 tary or secondary education institution with re10 spect to qualified elementary or secondary edu11 cation expenses at that institution based in 

12 whole or in part on the institution’s religious 

13 character or affiliation, including religiously 

14 based or mission-based policies or practices. 

15 (3) PARENTAL RIGHTS TO USE SCHOLAR16 SHIPS.—No Federal, State, or local government en17 tity, or officer or employee thereof, shall disfavor or 

18 discourage the use of scholarships granted by par19 ticipating scholarship granting organizations for 

20 qualified elementary or secondary education ex21 penses at private or nonprofit elementary and sec22 ondary education institutions, including faith-based 

23 schools. 

24 (4) PARENTAL RIGHT TO INTERVENE.—In any 

25 action filed in any State or Federal court which 


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1 challenges the constitutionality (under the constitu2 tion of such State or the Constitution of the United 

3 States) of any provision of this Act (or any amend4 ment made by this Act), any parent of an eligible 

5 student who has received a scholarship from a schol6 arship granting organization shall have the right to 

7 intervene in support of the constitutionality of such 

8 provision or amendment. To avoid duplication of ef9 forts and reduce the burdens placed on the parties 

10 to the action, the court in any such action may re11 quire interveners taking similar positions to file joint 

12 papers or to be represented by a single attorney at 

13 oral argument, provided that the court does not re14 quire such interveners to join any brief filed on be15 half of any State which is a defendant in such ac16 tion. 

17 (b) DEFINITIONS.—For purposes of this section, the 

18 terms ‘‘eligible student’’, ‘‘scholarship granting organiza19 tion’’, and ‘‘qualified elementary or secondary education 

20 expense’’ shall have the same meanings given such terms 

21 under section 25E(c) of the Internal Revenue Code of 

22 1986 (as added by section 2(a) of this Act). 


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1 SEC. 6. EFFECTIVE DATE. 

2 The amendments made by this Act shall apply to tax3 able years beginning after December 31, 2022. 

Æ 


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