S. 370 — Education Freedom Scholarships and Opportunity Act

This section specifies that, unless otherwise provided, all references in this title to a section or other provision of law are to a section or other provision of the Internal Revenue Code of 1986.

This section establishes a nonrefundable income tax credit for individuals equal to qualified cash contributions to eligible scholarship-granting organizations or eligible workforce training organizations, not to exceed 10% of adjusted gross income. Qualified expenses eligible for scholarships include (1) an individual student's elementary or secondary education as recognized by the state; (2) the secondary education component of career and technical education, as defined in the Carl D. Perkins Career and Technical Education Act of 2006 (i.e., organized educational activities offering a sequence of courses providing individuals with coherent and rigorous content aligned with academic and technical knowledge and skills); or (3) secondary or postsecondary vocational education, workforce development, apprenticeship training, or costs for portable certificates, credentials, or industry-recognized certifications. Eligible scholarship-granting organizations and eligible workforce training organizations are specified 501(c)(3) organizations (1) that allocate at least 90% of qualified contributions to qualifying scholarships for more than one student and family across multiple providers, (2) that comply with state reporting to the Secretary of Education under the Education Freedom Scholarships and Opportunity Act, and (3) for workforce organizations, that provide training such as through community colleges, state workforce programs, career and technical education, apprenticeships, or community-based certification programs. (The term "state" includes the 50 states, the District of Columbia, Puerto Rico, American Samoa, Guam, the Northern Mariana Islands, the U.S. Virgin Islands, and the Bureau of Indian Education.)

This section establishes a web portal, to be hosted and maintained by the Secretary of Education in coordination with the Secretaries of the Treasury and Labor, that (1) lists eligible scholarship-granting organizations under new IRC §25F and workforce training organizations under new IRC §45BB; (2) enables taxpayers to make qualifying contributions, receive immediate pre-approval for tax credits, and obtain receipts; (3) provides information on tax benefits under the Education Freedom Scholarships and Opportunity Act; and (4) allows states to submit details on their programs (e.g., student eligibility, allowable expenses, administrative cost limits). It permits taxpayers to make contributions directly to eligible organizations outside the portal, subject to pre-approval of tax credits by the Secretary of Education in coordination with the Secretary of the Treasury. It imposes a national cap of $10 billion per calendar year on qualifying contributions eligible for credits under IRC §§25F and 45BB, with $5 billion allotted to scholarship-granting organizations and $5 billion to workforce training organizations, allocated as follows: (1) for scholarships, first reserving each state's prior-year contributions and then apportioning the remainder (20% by population aged 5-17 and 80% by such population in poverty), with a minimum state allotment of 0.5%; (2) for workforce training, first reserving each state's prior-year contributions and then allocating based on state apprenticeship and training demand as determined by the Secretary of Labor, with a minimum state allotment of 0.5%; and (3) after five years or $2.5 billion in scholarship credits claimed (whichever first), an alternative scholarship allocation formula based on state-reported data on existing tax-credit scholarship programs relative to public education spending.