I 
116TH CONGRESS 
1ST SESSION H. R. 1434 
To amend the Internal Revenue Code of 1986 to establish tax credits to 
encourage individual and corporate taxpayers to contribute to scholar-
ships for elementary and secondary students through eligible scholarship- 
granting organizations, and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
FEBRUARY 28, 2019 
Mr. BYRNE (for himself, Mr. WRIGHT, Mr. LAMALFA, Ms. FOXX of North 
Carolina, Mr. ROONEY of Florida, Mrs. LESKO, Mr. BANKS, Mr. GAETZ, 
Mr. MITCHELL, Mrs. WALORSKI, Mr. ALLEN, Mr. POSEY, Mr. BUDD, 
Mr. STIVERS, Mr. GOSAR, Mr. BISHOP of Utah, Mr. MOONEY of West 
Virginia, Mr. MEADOWS, Mr. HAGEDORN, Mr. GIANFORTE, Mr. 
HUIZENGA, Mr. BIGGS, Mr. WALBERG, Mr. TIMMONS, Mr. WEBER of 
Texas, Mr. NEWHOUSE, Mr. NORMAN, Mr. SCALISE, Mr. FLORES, Mr. 
ROGERS of Alabama, Mr. SMITH of Nebraska, Mr. HARRIS, Mrs. ROBY, 
Mr. WILSON of South Carolina, Mr. YOHO, Mr. LOUDERMILK, Mr. 
CHABOT, Mr. BABIN, Mr. BARR, and Mr. DUNCAN) introduced the fol-
lowing bill; which was referred to the Committee on Ways and Means, 
and in addition to the Committee on Education and Labor, for a period 
to be subsequently determined by the Speaker, in each case for consider-
ation of such provisions as fall within the jurisdiction of the committee 
concerned 
A BILL 
To amend the Internal Revenue Code of 1986 to establish 
tax credits to encourage individual and corporate tax-
payers to contribute to scholarships for elementary and 
secondary students through eligible scholarship-granting 
organizations, and for other purposes. 
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Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Education Freedom 
Scholarships and Opportunity Act’’. 
SEC. 2. PURPOSE. 
The purpose of this Act is to encourage individual 
and corporate taxpayers to contribute to scholarships for 
individual elementary and secondary students through eli-
gible scholarship-granting organizations, as identified by 
States. 
TITLE I—AMENDMENTS TO THE 
INTERNAL 
REVENUE 
CODE 
OF 1986 
SEC. 101. REFERENCES TO THE INTERNAL REVENUE CODE 
OF 1986. 
Except as otherwise expressly provided, whenever in 
this title an amendment or repeal is expressed in terms 
of an amendment to, or repeal of, a section or other provi-
sion, the reference shall be considered to be made to a 
section or other provision of the Internal Revenue Code 
of 1986. 
SEC. 102. TAX CREDITS FOR CONTRIBUTIONS TO ELIGIBLE 
SCHOLARSHIP-GRANTING ORGANIZATIONS. 
(a) CREDIT FOR INDIVIDUALS.— 
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(1) IN GENERAL.—Subpart A of part IV of sub-
chapter A of chapter 1 is amended by adding after 
section 25D the following new section: 
‘‘SEC. 25E. CONTRIBUTIONS TO ELIGIBLE SCHOLARSHIP- 
GRANTING ORGANIZATIONS. 
‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in-
dividual, there shall be allowed as a credit against the tax 
imposed by this chapter for the taxable year an amount 
equal to the sum of any qualified contributions made by 
the taxpayer during the taxable year. 
‘‘(b) AMOUNT OF CREDIT.—The credit allowed under 
subsection (a) for any taxable year shall not exceed 10 
percent of the taxpayer’s adjusted gross income for the 
taxable year. 
‘‘(c) DEFINITIONS.—For purposes of this section— 
‘‘(1) QUALIFIED
CONTRIBUTION.—The term 
‘qualified contribution’ means a contribution of cash 
to any eligible scholarship-granting organization. 
‘‘(2) QUALIFIED EXPENSE.—The term ‘quali-
fied expense’ means any educational expense that 
is— 
‘‘(A) for an individual student’s elementary 
or secondary education, as recognized by the 
State, or 
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‘‘(B) for the secondary education compo-
nent of an individual elementary or secondary 
student’s career and technical education, as de-
fined by section 3(5) of the Carl D. Perkins Ca-
reer and Technical Education Act of 2006 (20 
U.S.C. 2302(5)). 
‘‘(3) SECRETARY.—The term ‘Secretary’ means 
the Secretary of Education. 
‘‘(4) ELIGIBLE SCHOLARSHIP-GRANTING ORGA-
NIZATION.—The term ‘eligible scholarship-granting 
organization’ means— 
‘‘(A) an organization that— 
‘‘(i) is described in section 501(c)(3) 
and exempt from taxation under section 
501(a); 
‘‘(ii) provides qualifying scholarships 
to individual elementary and secondary 
students who— 
‘‘(I) reside in the State in which 
the eligible scholarship-granting orga-
nization is recognized; or 
‘‘(II) in the case of the Bureau of 
Indian Education, are members of a 
federally recognized tribe; 
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‘‘(iii) a State reports to the Secretary 
as an eligible scholarship-granting organi-
zation under subsection (e)(5)(B); 
‘‘(iv) allocates at least 90 percent of 
qualified contributions to qualifying schol-
arships; and 
‘‘(v) provides scholarships to— 
‘‘(I) more than 1 eligible student; 
‘‘(II) more than 1 eligible family; 
and 
‘‘(III) different eligible students 
attending more than one education 
provider; or 
‘‘(B) an organization that— 
‘‘(i) is described in section 501(c)(3) 
and exempt from taxation under section 
501(a); and 
‘‘(ii) pursuant to State law, was able, 
as of the date of the enactment of the 
Education Freedom Scholarships and Op-
portunity Act, to receive contributions that 
are eligible for a State tax credit if such 
contributions are used by the organization 
to provide scholarships to individual ele-
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mentary and secondary students, including 
scholarships for attending private schools. 
‘‘(5) QUALIFYING
SCHOLARSHIP.—The term 
‘qualifying scholarship’ means a scholarship granted 
by an eligible scholarship-granting organization to 
an individual elementary or secondary student under 
this section or section 45T. 
‘‘(6) STATE.—The term ‘State’ means each of 
the 50 States, the District of Columbia, the Com-
monwealth of Puerto Rico, the outlying areas (as de-
fined in section 1121(c) of the Elementary and Sec-
ondary Education Act of 1965), and the Department 
of the Interior (acting through the Bureau of Indian 
Education). 
‘‘(d) RULES OF CONSTRUCTION.— 
‘‘(1) IN GENERAL.—A scholarship awarded to a 
student from the proceeds of a qualified contribution 
under this section or section 45T shall not be con-
sidered assistance to the school or other educational 
provider that enrolls, or provides educational services 
to, the student or the student’s parents. 
‘‘(2) NOT TREATED AS INCOME.—The amount 
of any such scholarship shall not be treated as in-
come of the child or his or her parents for purposes 
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education provider with respect to programs or 
services under this Act based in whole or in 
part on the provider’s religious character or af-
filiation, including religiously or mission-based 
policies or practices. 
‘‘(4) PARENTAL
RIGHTS
TO
USE
SCHOLAR-
SHIPS.—No participating State or entity acting on 
behalf of a State shall disfavor or discourage the use 
of such scholarships for the purchase of elementary 
and secondary education services, including those 
services provided by private or nonprofit entities, 
such as faith-based providers. 
‘‘(5) STATE AND LOCAL AUTHORITY.—Nothing 
in this section or section 45T shall be construed to 
modify a State or local government’s authority and 
responsibility to fund education. 
‘‘(e) LIMITATIONS.— 
‘‘(1) TAX LIABILITY.—No credit allowed under 
this section or section 45T shall exceed the tax-
payer’s Federal income tax liability for the taxable 
year. 
‘‘(2) PROHIBITIONS.—A taxpayer is prohibited 
from selling or transferring any portion of a tax 
credit allowed under this section or section 45T. 
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‘‘(3) DENIAL OF DOUBLE BENEFIT.—The Sec-
retary of the Treasury shall prescribe such regula-
tions or other guidance to ensure that the sum of 
the tax benefits provided by Federal, State, or local 
law for a qualified contribution receiving a Federal 
tax credit in any taxable year shall not exceed the 
sum of the qualified contributions made by the tax-
payer for the taxable year. 
‘‘(f) CARRYOVER OF CREDIT.—If a tax credit allowed 
under this section or section 45T is not fully used within 
the applicable taxable year because of insufficient tax li-
ability on the part of the taxpayer, the unused amount 
may be carried forward for a period not to exceed 5 years. 
‘‘(g) ELECTION.—This section shall apply to a tax-
payer for a taxable year only if the taxpayer elects to have 
this section or section 45T apply for such taxable year. 
‘‘(h) ALTERNATIVE MINIMUM TAX.—For purposes of 
calculating the alternative minimum tax under section 55, 
a taxpayer may use any credit received for a qualified con-
tribution under this section.’’. 
(2) CLERICAL AMENDMENT.—The table of sec-
tions for subpart A of part IV of subchapter A of 
chapter 1 is amended by inserting after the item re-
lating to section 25D the following new item: 
‘‘Sec. 25E. Contributions to eligible scholarship-granting organizations.’’. 
(b) CREDIT FOR CORPORATIONS.— 
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(1) IN GENERAL.—Subpart D of part IV of 
subchapter A of chapter 1 is amended by adding at 
the end the following new section: 
‘‘SEC. 45T. CONTRIBUTIONS TO ELIGIBLE SCHOLARSHIP- 
GRANTING ORGANIZATIONS. 
‘‘(a) ALLOWANCE OF CREDIT.—For purposes of sec-
tion 38, in the case of a domestic corporation, there shall 
be allowed as a credit against the tax imposed by this 
chapter for the taxable year an amount equal to the sum 
of any qualified contributions (as defined in section 
25E(c)(1)) made by such corporation taxpayer during the 
taxable year. 
‘‘(b) AMOUNT OF CREDIT.—The credit allowed under 
subsection (a) for any taxable year shall not exceed 5 per-
cent of the taxable income (as defined in section 
170(b)(2)(D)) of the domestic corporation for such taxable 
year. 
‘‘(c) ADDITIONAL PROVISIONS.—For purposes of this 
section, any qualified contributions made by a domestic 
corporation shall be subject to the provisions of section 
25E, to the extent applicable.’’. 
(2) CREDIT
PART
OF
GENERAL
BUSINESS 
CREDIT.—Section 38(b) is amended— 
(A) by striking ‘‘plus’’ at the end of para-
graph (31), 
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(B) by striking the period at the end of 
paragraph (32) and inserting ‘‘, plus’’, and 
(C) by adding at the end the following new 
paragraph: 
‘‘(33) the credit for qualified contributions de-
termined under section 45T(a).’’. 
(3) CLERICAL AMENDMENT.—The table of sec-
tions for subpart D of part IV of subchapter A of 
chapter 1 is amended by adding at the end the fol-
lowing new item: 
‘‘Sec. 45T. Contributions to eligible scholarship-granting organizations.’’. 
TITLE II—EDUCATION FREEDOM 
SCHOLARSHIPS WEB PORTAL 
AND ADMINISTRATION 
SEC. 201. EDUCATION FREEDOM SCHOLARSHIPS WEB POR-
TAL AND ADMINISTRATION. 
(a) IN GENERAL.—The Secretary of Education shall, 
in coordination with the Secretary of the Treasury, estab-
lish, host, and maintain a Web portal that— 
(1) lists all scholarship-granting organizations 
that are eligible under section 25E or 45T of the In-
ternal Revenue Code of 1986; 
(2) enables a taxpayer to make a qualifying 
contribution to one or more eligible scholarship- 
granting organizations and to immediately obtain 
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both a pre-approval of a tax credit for that contribu-
tion and a receipt for tax filings; 
(3) provides information about the tax benefits 
of Education Freedom Scholarships under the Inter-
nal Revenue Code of 1986; and 
(4) enables a State to submit and update infor-
mation about its programs and its eligible scholar-
ship-granting organizations for informational pur-
poses only, including information on— 
(A) student eligibility; 
(B) allowable educational expenses; 
(C) the types of allowable education pro-
viders; 
(D) the percentage of funds an organiza-
tion may use for program administration; and 
(E) the percentage of total contributions 
the organization awards in a calendar year. 
(b) NONPORTAL CONTRIBUTIONS.—A taxpayer may 
opt to make a contribution directly to an eligible scholar-
ship-granting organization, instead of through the Web 
portal described in subsection (a), provided that the tax-
payer, or the eligible scholarship-granting organization on 
behalf of the taxpayer, applies for, and receives pre-ap-
proval for a tax credit from the Secretary of Education 
in coordination with the Secretary of the Treasury. 
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(c) NATIONAL AND STATE CAPS ON CREDITS.— 
(1) NATIONAL
CAP.—There is a cap of 
$5,000,000,000 on the sum of the contributions that 
qualify for a credit under section 25E and section 
45T of the Internal Revenue Code of 1986 for each 
calendar year. 
(2) ALLOCATION OF CAP.— 
(A) INITIAL ALLOCATIONS.—For each cal-
endar year, the Secretary shall— 
(i) first reserve, for each State, an 
amount equal to the sum of the qualifying 
contributions made in the State in the pre-
vious year; and 
(ii) 
next, 
allocate 
the 
remaining 
amount among the participating States by 
allocating to each State the sum of— 
(I) an amount that bears the 
same relationship to 20 percent of 
such remaining amount as the num-
ber of individuals aged 5 through 17 
in the State, as determined by the 
Secretary on the basis of the most re-
cent satisfactory data, bears to the 
number of those individuals in all 
such States, as so determined; and 
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(II) an amount that bears the 
same relationship to 80 percent of 
such remaining amount as the num-
ber of individuals aged 5 through 17 
from families with incomes below the 
poverty line in the State, as deter-
mined by the Secretary, on the basis 
of the most recent satisfactory data, 
bears to the number of those individ-
uals in all such States, as so deter-
mined. 
(B) 
MINIMUM
ALLOCATION.—Notwith-
standing subparagraph (A), no State receiving 
an allotment under this section may receive less 
than one-half of one percent of the amount al-
lotted for a fiscal year. 
(C) ALTERNATIVE ALLOCATION.— 
(i) IN GENERAL.—Not later than the 
end of the fifth year of the program or one 
year after the end of the first fiscal year 
for which the total amount of credits 
claimed under section 25E and section 
45T of the Internal Revenue Code of 1986 
is $2,500,000,000 or more, whichever 
comes first, the Secretary shall, by regula-
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tion, provide for an alternative allocation 
method that shall take effect beginning 
with the first fiscal year after the regula-
tion takes effect. 
(ii) ALTERNATIVE ALLOCATION METH-
OD.—The alternative allocation method 
shall be expressed as a formula based on 
a combination of the following data for 
each State, as reported by the State to the 
Secretary: 
(I) The relative percentage of 
students in the State who receive a el-
ementary or secondary scholarship 
through a State program that is fi-
nanced through State tax-credited do-
nations or appropriations and that 
permits the elementary or secondary 
scholarship to be used to attend a pri-
vate school. 
(II) The total amount of all ele-
mentary and secondary scholarships 
awarded through a State program 
that is financed through State tax- 
credited donations or appropriations 
compared to the total amount of cur-
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rent State and local expenditures for 
free public education in the State. 
(iii) ALLOCATION FORMULA.—For any 
fiscal year to which clause (i) applies, the 
Secretary shall— 
(I) first reserve, for each State, 
an amount equal to the sum of the 
qualifying contributions made in the 
State in the previous year; 
(II) next, allocate two-thirds of 
the remaining amount of the national 
cap for that year using the alternative 
allocation method in clause (ii); and 
(III) then, allocate one-third of 
the remaining amount in accordance 
with subparagraph (A)(ii). 
(iv) INELIGIBILITY.—For any fiscal 
year to which clause (i) applies, a State 
that does not provide the Secretary with 
information described in clause (ii) is not 
eligible to receive an allocation through the 
alternative allocation method under clause 
(ii). 
(3) ALLOWABLE PARTNERSHIPS.—A State may 
choose to administer the allocation it receives under 
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paragraph (2) in partnership with 1 or more States, 
provided that the eligible scholarship-granting orga-
nizations in each partner State serve students who 
reside in all States in the partnership. 
(4) TOTAL ALLOCATION.—A State’s allocation, 
for any fiscal year, is the sum of the amount deter-
mined for it under subparagraphs (A) and (B) of 
paragraph (2), except as provided in paragraph 
(2)(C). 
(5) ALLOCATION AND ADJUSTMENTS.— 
(A) INITIAL ALLOCATION TO STATES.—No 
later than November 1 of the year preceding a 
year for which there is a national cap on credits 
under paragraph (1) (hereafter in this section, 
the ‘‘applicable year’’), or as early as prac-
ticable with respect to the first year, the Sec-
retary shall announce the State allocations 
under paragraph (2) for the applicable year. 
(B) LIST
OF
ELIGIBLE
SCHOLARSHIP- 
GRANTING
ORGANIZATIONS.—No later than 
January 1 of each applicable year, or as early 
as practicable with respect to the first year, 
each State shall provide the Secretary a list of 
eligible scholarship-granting organizations de-
scribed in section 25E(c)(4)(A) of the Internal 
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Revenue Code of 1986, including a certification 
that the entity submitting the list on behalf of 
the State has the authority to perform this 
function. Neither this Act nor any other Fed-
eral law shall be construed as limiting the enti-
ties that may submit the list on behalf of a 
State. 
(C) REALLOCATION OF UNCLAIMED CRED-
ITS.—The Secretary shall reallocate a State’s 
allocation to other States, in accordance with 
paragraph (2), if the State— 
(i) chooses not to identify scholarship- 
granting organizations under subparagraph 
(B) in any applicable year; or 
(ii) does not have an existing eligible 
scholarship-granting organization (as de-
fined in section 25E(c)(4)(B) of the Inter-
nal Revenue Code of 1986). 
(D) REALLOCATION.—On or after April 1 
of any applicable year, the Secretary may re-
allocate, to 1 or more other States that have el-
igible scholarship-granting organizations in the 
States, without regard to paragraph (2), the al-
location of a State for which the State’s alloca-
tion has not been claimed. 
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(d) DEFINITIONS.—The definitions of terms in sec-
tion 25E(c) of the Internal Revenue Code of 1986 apply 
to those terms as used in this title. 
Æ 
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