H.R. 833 — Educational Choice for Children Act of 2025

This section establishes a nonrefundable tax credit under new IRC §25F for U.S. citizens and residents equal to qualified contributions to scholarship granting organizations (SGOs), limited to the greater of $5,000 or 10% of adjusted gross income (AGI) per taxable year, further capped by an allocation from a volume cap under section 3 of the Educational Choice for Children Act of 2025, and reduced by any related state tax credits. Qualified contributions are cash or marketable securities donated to an SGO—a 501(c)(3) organization (not a private foundation) whose primary activity is awarding scholarships for qualified elementary or secondary education expenses of eligible students (households with income not exceeding 300% of area median gross income, as under IRC §42, who are eligible for public K-12 enrollment). SGOs must maintain separate accounts for such contributions; provide scholarships to at least two students not all at the same school; prioritize renewals and siblings; avoid earmarking; verify student eligibility; and undergo annual independent audits (certified to the Secretary). Qualified expenses include tuition; curricula, books, and online materials; tutoring by licensed teachers, those with relevant teaching experience (including at institutions of higher education as defined in 20 U.S.C. §1001(a)), or subject experts; fees for standardized tests, AP exams, or college admissions exams; dual enrollment fees at institutions of higher education; and licensed therapies for students with disabilities (e.g., occupational, speech-language)—covering public, private (including religious), or homeschool settings.

This section establishes a $10 billion volume cap for calendar year 2026 and each subsequent year on tax credits under new IRC §§25F (for individuals) and 45BB (for corporations) with respect to qualified contributions. Of this amount, 10% ($1 billion) is divided evenly among the states (including the District of Columbia) and reserved for individuals residing in each state (§25F) and corporations created or organized in each state (§45BB); the remainder is allocated by the Secretary on a first-come, first-served basis based on the timing of qualified contributions during the calendar year, with allocations ceasing after December 31 and real-time public tracking required. The cap automatically increases to 105% of the prior year's level following any "high use" year (i.e., when 90% or more of the cap is allocated), may not decrease below the prior year's level, and must be publicly announced annually by the Secretary.

This section establishes a new exclusion from gross income under IRC §139J for amounts provided by a scholarship granting organization as scholarships to an eligible student who is a dependent of the taxpayer for qualified elementary or secondary education expenses (as defined in IRC §25F(c)), effective for amounts received after December 31, 2025. (Thus, parents or guardians do not include such scholarship amounts in their taxable income.)

This section prohibits any Federal, State, or local government entity from mandating, directing, or controlling scholarship granting organizations or private or religious elementary or secondary schools participating under the Act; from excluding qualified elementary or secondary education expenses at such schools or discriminating against them based on religious character or affiliation; and from disfavoring scholarship use at private, nonprofit, or faith-based schools. The section further grants parents of eligible students who received scholarships the right to intervene in State or Federal court actions challenging the constitutionality of the Act or its amendments.