Federal Legislation

HR 1 – Federal budget reconciliation bill passed by Congress and signed into law by President Trump on July 4, 2025, known as the One Big Beautiful Bill Act.  Includes a measure (titled Qualified Elementary and Secondary Education Scholarships or vouchers) creating new, permanent federal income tax credits for donations to “scholarship granting organizations” (SGOs) that provide vouchers to private schools, in states that opt to participate in the program, beginning in calendar year 2027. Provisions of the program can be found in HR 1, Subchapter B—Permanent Investments in Students and Reforms to Tax-exempt Institutions; SEC. 70411. Tax Credit for Contributions of Individuals to Scholarship Granting Organizations.

As signed into law, the bill provides that:

• states have the option of participating; it appears the decision to opt in can be made by a governor or other entity, potentially circumventing state legislatures
• taxpayers can claim a dollar-for-dollar credit against their federal income tax owed, up to $1,700 annually, for donations to SGO’s
• there is no overall cap on tax credits to be allowed in the program, meaning no limit to the cost U.S. taxpayers will bear annually
• students are eligible for vouchers if they live in a household with income up to 300% of the area median gross income
• if Mississippi opts in, vouchers could be available to children in households with income up to approximately $150,000 annually
• the final version of the bill removed previous language that stated the federal government could not exercise control over any aspect of private schools or parent choice, leaving private schools unprotected from government regulation and oversight
• the bill does not stipulate an amount or cap for individual vouchers given to students; SGOs must use 90 percent of their income on vouchers
• vouchers can be used for a range of educational expenses, including tuition and fees for private or online schools, tutoring, computers, etc.
• the U.S. Department of the Treasury is responsible for developing regulations for the program (see public comments submitted by TPCREF regarding potential regulations)

The U.S. Senate committee version of HR 1 (as of June 16, 2025) included the following provisions as compared to the original version passed on May 22, 2025, by the U.S. House:

• federal tax-credit voucher program begins calendar year 2027 and continues in perpetuity (House version begins calendar year 2026 and goes through calendar 2029 after which annual cap goes to zero)
• taxpayers receive dollar-for-dollar federal income tax credits (same as House)
• program has an annual cap of $4-billion (House version $5-billion annually)
• tax credit claimed cannot exceed 10% of taxpayer’s adjusted gross income or $5,000, whichever is greater (same as House)
• eligible students must live in household with income up to 300% of area median gross income (same as House)
• taxpayers claim credits on first come, first served basis until the annual cap or “volume” is reached (except 10% of the cap to be distributed evenly among the states); volume will be tracked by a real-time system to be built by USDE to calculate contributions to SGOs (same as House)

A provision in earlier versions of the bill making donations of corporate stock eligible for the tax credit was omitted from the final bill.

The measure as passed the U.S. House would have forced private school vouchers into every state, including states that have rejected state voucher legislation. This provision was amended by the U.S. Senate in the final bill to make the program optional for states.