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.

This bill establishes a nonrefundable tax credit for contributions (cash or stock) made by an individual to a tax-exempt organization that provides scholarships for qualified elementary and secondary school expenses to eligible students (scholarship granting organization), subject to limitations.

Under the bill, the tax credit is limited to the greater of $5,000 or 10% of adjusted gross income.

Further, the bill establishes a $5 billion annual volume cap (for 2025-2028) for the tax credit (which may be increased under certain circumstances). The volume cap is allocated by the Department of the Treasury for the tax credit on a first-come, first-serve basis (based on the contribution date). However, under the bill, 10% of the volume cap must be divided evenly among states for allocation to individuals residing in those states.

The bill allows any portion of the tax credit that exceeds the individual’s tax liability (less certain other tax credits) to be carried forward for up to five tax years.

Summary by the Congressional Research Service.