S-1813-119
Committee on Health, Education, Labor, and Pensions. Hearings held.
Sponsored by Tim Scott (R-SC)
What it does
This bill would create a new federal tax credit (IRC §25F) equal to 75% of charitable donations made to qualifying charter school organizations, capped at the greater of $5,000 or 10% of the donor's adjusted gross income per year. Unused credits could be carried forward up to five years. The total nationwide credit would be capped at $5 billion per year starting in 2026, with $10 million allocated to each state and the remainder available nationally on a first-come, first-served basis. Only organizations in the top 10% of state charter performance rankings, or those that have received federal replication grants, would qualify to receive donations eligible for the credit.
Who benefits
Donors (individuals) who contribute to qualifying charter school organizations would receive a substantial tax reduction. High-performing charter management organizations and charter schools that meet the eligibility threshold would gain access to a new private funding stream. Students and families in areas served by qualifying charter schools could benefit from expanded school capacity. States with strong charter sectors would see more private capital directed toward school creation and expansion. Real estate developers and contractors involved in building or renovating charter school facilities may benefit indirectly from increased capital flows.
Who is hurt
Traditional public school districts could face increased competition for students and, in some states, per-pupil funding. Taxpayers broadly would bear the cost of the foregone federal revenue. Charter schools that do not meet the top-10% performance threshold or lack federal replication grants would be ineligible, potentially disadvantaging newer or smaller operators. Lower-income donors who owe little federal income tax would receive limited or no benefit from a non-refundable credit. States that do not authorize charter schools or have few qualifying organizations may see their $10 million allocation go unclaimed while other states draw from the national pool.
Supporters argue
Supporters argue that the credit channels private capital — not direct federal appropriations — toward schools that have already demonstrated high performance, reducing fiscal risk. They contend that existing federal data on charter replication grants and state performance rankings provide an objective quality filter, ensuring funds flow only to proven operators. They further argue that the $5 billion annual cap and expenditure requirements (organizations must spend contributions within five years, with administrative costs capped at 10%) build in accountability mechanisms that protect against misuse of the tax benefit.
Opponents argue
Opponents argue that a 75% tax credit is functionally equivalent to a federal subsidy, diverting up to $5 billion annually from the Treasury to privately governed schools with limited public accountability. They contend that the "top 10% of charter schools" eligibility standard could entrench already well-resourced operators while excluding newer schools serving the most disadvantaged communities. They further argue that the bill's Section 5 provision — which explicitly limits governmental oversight of participating organizations — reduces transparency and accountability for what is effectively a publicly subsidized education system.