S-5420-119
Read twice and referred to the Committee on Finance.
Sponsored by Bill Cassidy (R-LA)
What it does
The bill would amend Section 25F(b)(1) of the Internal Revenue Code so the limit on the federal credit for qualified elementary and secondary education scholarship contributions is 200 percent of the base limit for married couples filing a joint return. Under current law the base limit is $1,700, so the joint-return limit would be $3,400. It would apply to taxable years beginning after December 31, 2025, and other existing limits and state opt-in rules would stay as they are.
Who benefits
Married couples filing jointly who donate to scholarship-granting organizations in states that participate, because they could claim a larger credit. Families who receive scholarships, if added donations increase scholarship funding. Scholarship-granting organizations and private or religious schools that may receive more donations. Joint filers would no longer get the same limit as a single filer.
Who is hurt
Federal taxpayers generally, because the larger credit would likely reduce Treasury revenue. Public schools in participating states, which critics say could lose students or funding if scholarships grow. Single filers and heads of household, whose limit would stay unchanged. Lower-income households with little tax liability, who may gain little from a credit used by donors. Federal and state agencies that would administer and monitor the credit.
Supporters argue
Supporters argue the current limit treats a married couple the same as one person, even though two earners each could give up to the individual limit if filing separately. They contend that doubling the limit for joint returns removes a marriage penalty, would likely raise donations that fund scholarships, and would expand the school options available to families.
Opponents argue
Opponents argue the change would cut federal revenue and mainly help higher-income couples with enough tax liability to use the credit. They contend that scholarship funding could draw students and support away from public schools, and that the credit would reach children only in states that choose to participate, so the benefits would be uneven across the country.
Constitutional context
Congress's power to tax and spend under Article I, Section 8, Clause 1 supports tax credits like this one. A challenge based on the Establishment Clause is possible because scholarships can go to religious schools. Zelman v. Simmons-Harris (2002) upheld school choice aid that flows through private choice, and Espinoza v. Montana Department of Revenue (2020) held that states may not exclude religious schools from scholarship programs.
Checks and balances
Congress sets the credit limit, the Treasury and IRS administer it, and states decide whether to participate, which gives state governments a role. The Finance Committee and later full congressional votes check the bill, and courts can review any legal challenges.
Historical precedent
Section 25F was created by the 2025 budget reconciliation law (Pub. L. 119-21) as the first federal tax credit for contributions to scholarship-granting organizations, and this bill would adjust its limit for joint filers.