S. 1810 — Universal School Choice Act

This section establishes a new nonrefundable tax credit under IRC section 25F for individuals equal to qualified contributions (cash or marketable securities) to scholarship granting organizations (SGOs), limited to the greater of 10% of adjusted gross income or $5,000 per taxable year, subject to volume caps tied to the Universal School Choice Act and reduced by any state tax credits claimed for the same contributions. Qualified contributions fund scholarships for eligible students (i.e., those eligible to enroll in public elementary or secondary school) to cover qualified elementary or secondary education expenses, including tuition and fees, curricula and instructional materials, online educational materials and required technology, tutoring by licensed teachers or qualified experts, standardized tests and college admission exams, dual enrollment fees, disability therapies, and transportation—all usable at public, private (including religious), or home schools (with no payments to family members). An SGO must be a tax-exempt 501(c)(3) organization (not a private foundation) that devotes substantially all activities to such scholarships, maintains separate accounts for qualified contributions, and meets additional requirements specified in the section.

This section establishes a national volume cap of $10 billion for tax credits under new IRC §§25F (individual credit for qualified contributions) and 45BB (business credit for qualified contributions) for calendar year 2026 and each subsequent year. For each year, the Secretary of the Treasury allocates the cap to states by (1) reserving, subject to an initial-year exception, amounts equal to qualifying contributions designated for each state in the prior year; (2) allocating the remainder based on each state's share of the U.S. population aged 5 through 17 (20% of remainder) and such population from families below the poverty line (80% of remainder), as determined using recent data from the Secretary of Education; and (3) guaranteeing each state at least 0.5% of the cap; with initial allocations announced by November 1 of the prior year (or earlier for 2026), unclaimed amounts after July 31 reallocated on a first-come, first-served basis, and taxpayers required to designate a "distribution state" (binding on scholarship granting organizations for student distributions, except administrative expenses). The section further requires a real-time tracking system for contributions; annual cap increases to 105% of the prior year following any "high-use year" (90% or more allocated), with no year-to-year decreases; and public notice of each year's cap amount.

This section establishes a new exclusion from gross income under IRC §139J for amounts provided as scholarships by a scholarship granting organization to a taxpayer's dependent for qualified elementary or secondary education expenses of an eligible student. (The terms *qualified elementary or secondary education expense*, *eligible student*, and *scholarship granting organization* have the same meanings as under IRC §25F(c), which authorizes a tax credit for contributions to such organizations to fund K-12 scholarships.) The exclusion applies to amounts received after December 31, 2025, in taxable years ending after such date.

This section prohibits Federal, State, or local governments from controlling scholarship granting organizations or private/religious elementary or secondary schools under the Act; bars exclusion or discrimination against qualified education expenses at such schools based on religious character or affiliation; protects parental rights to use scholarships at private, nonprofit, or faith-based schools; and grants parents of scholarship recipients the right to intervene in court challenges to the Act's constitutionality. It applies defined terms—eligible student, scholarship granting organization, and qualified elementary or secondary education expense—from new IRC §25F(c).