119th CONGRESS

1st Session

H. R. 2798

1. Short title
2. Tax credit for contributions to eligible charter school organizations
3. Failure of eligible charter school organization to make expenditures
4. Volume cap
5. Organizational and parental autonomy
6. Effective date

1. Short title

This Act may be cited as the "High-Quality Charter Schools Act".

2. Tax credit for contributions to eligible charter school organizations

(a) In general - Subpart A of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting after section 25E the following new section:

25F. Contributions to eligible charter school organizations

(a) Allowance of credit - In the case of an individual who is a citizen or resident of the United States (as defined in section 7701(a)(9)), there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to 75 percent of the amount of qualified contributions made by the taxpayer during the taxable year.

(b) Amount of credit - The credit allowed under subsection (a) in any taxable year shall not exceed an amount equal to the greater of—

(1) - 10 percent of the adjusted gross income of the taxpayer for the taxable year, or

(2) - $5,000.

(1) Charter school - The term charter school has the same meaning given such term in section 4310 of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 7221i).

(2) Eligible charter school organization -

(A) In general - The term eligible charter school organization means an organization which—

(i) - is described in section 501(c)(3) and exempt from tax under section 501(a) and is not a private foundation,

(ii) - is a charter management organization (as defined in section 4310 of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 7221i)), or a charter school (as defined in section 4310 of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 7221i)), that—

(I) - has received, or manages a charter school that has received, a grant for the replication or expansion of high-quality charter schools under section 4305(b) of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 7221d(b)), or

(II) - has been selected by a State for eligibility under this section based on a determination by the State that the organization is in the highest 10 percent of charter management organizations (as so defined) or charter schools (as so defined) for student performance in the State,

(iii) - separate from any other funds or contributions received by such organization, maintains and accounts for any contributions made by any person for the purpose of the creation or expansion of charter schools operated or managed by such organization,

(iv) - obtains from an independent certified public accountant annual financial and compliance audits, and

(v) - certifies to the Secretary (at such time, and in such form and manner, as the Secretary may prescribe) that the audit described in clause (iii) has been completed.

(B) Independent certified public accountant - For purposes of subparagraph (A), the term independent certified public accountant means, with respect to an organization, a certified public accountant who is not a person described in section 465(b)(3)(A) with respect to such organization or any employee of such organization.

(3) Qualified contribution - The term qualified contribution means a charitable contribution (as defined by section 170(c)) to an eligible charter school organization in the form of cash or marketable securities for the purpose of the creation or expansion of charter schools managed or operated by such organization.

(d) Denial of double benefit - Any qualified contribution for which a credit is allowed under this section shall not be taken into account as a charitable contribution for purposes of section 170.

(e) Carryforward of unused credit -

(1) In general - If the credit allowable under subsection (a) for any taxable year exceeds the limitation imposed by section 26(a) for such taxable year reduced by the sum of the credits allowable under this subpart (other than this section, section 23, and section 25D), such excess shall be carried to the succeeding taxable year and added to the credit allowable under subsection (a) for such taxable year.

(2) Limitation - No credit may be carried forward under this subsection to any taxable year following the fifth taxable year after the taxable year in which the credit arose. For purposes of the preceding sentence, credits shall be treated as used on a first-in first-out basis.

(f) Application of volume cap - A qualified contribution shall be taken into account under this section only if such contribution would not result in aggregate tax credits under this section that are in excess of the volume cap established under section 4 of the High-Quality Charter Schools Act.

(b) Clerical amendment - The table of sections for subpart A of part IV of subchapter A of chapter 1 of such Code is amended by inserting after the item relating to section 25E the following new item:

3. Failure of eligible charter school organization to make expenditures

(a) In general - Chapter 42 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subchapter:

(b) Clerical amendment - The table of subchapters for chapter 42 of such Code is amended by adding at the end the following new item:

4. Volume cap

(a) Allocation -

(1) In general - For purposes of section 25F(f) of the Internal Revenue Code of 1986 (as added by this Act), the volume cap applicable with respect to such section shall be $5,000,000,000 of tax credits for taxable years beginning in calendar year 2026 and each subsequent year thereafter, with such amount to be allocated as follows:

(A) - $10,000,000 of tax credits shall be allocated to each State (as defined in section 7701(a)(10) of the Internal Revenue Code of 1986), with such amount to be made available, in the manner described in subsection (b), for any individual residing in such State to claim the credit allowed under section 25F of the Internal Revenue Code of 1986 with respect to any qualified contributions (as defined in such section) made by such individual during any taxable year beginning during such calendar year.

(B) - With respect to the amount remaining after the allocation under subparagraph (A), such amount (as adjusted pursuant to paragraph (3)) shall be made available, in the manner described in subsection (b), for any individual to claim the credit allowed under section 25F of the Internal Revenue Code of 1986 with respect to any qualified contributions made by such individual during any taxable year beginning during such calendar year.

(2) Carryover - The amount of any allotment to a State under paragraph (1)(A) for any calendar year which is not claimed by taxpayers described in such paragraph during such calendar year shall be added to the allotment provided under paragraph (1)(B) for the subsequent calendar year.

(3) Increase in nationwide volume cap - For purposes of paragraph (1)(B), if the Secretary determines during any calendar year that the amount of tax credits allowable under section 25F with respect to qualified contributions made during such calendar year is equal to or greater than 90 percent of the total amount made available under such paragraph for such calendar year, such amount shall be increased by an amount equal to 5 percent of the total amount made available under such paragraph as of January 1 of such calendar year, with such increase to remain in effect for the subsequent calendar year.

(b) First-Come, first-Serve - For purposes of applying the volume cap under this section, such volume cap shall be applied based on a first-come, first-serve basis, as determined based on the date on which the taxpayer made the qualified contribution.

(c) Real-Time information - For purposes of this section, the Secretary of the Treasury (or the Secretary's delegate) shall develop a system to track the amount of qualified contributions made during the calendar year for which a credit may be claimed under section 25F of the Internal Revenue Code of 1986, with such information to be updated in real time.

5. Organizational and parental autonomy

(a) Prohibition of control over eligible charter school organizations -

(1) In general - An eligible charter school organization shall not, by virtue of participation under any provision of this Act or any amendment made by this Act, be regarded as acting on behalf of any governmental entity.

(2) Maximum freedom - To the extent permissible by law, this Act, and any amendment made by this Act, shall be construed to allow eligible charter school organizations maximum freedom to provide for the needs of the students served by the charter schools operated or managed by the organization without governmental control.

(b) Definitions - For purposes of this section, the terms charter school and eligible charter school organization shall have the same meanings given such terms under section 25F(c) of the Internal Revenue Code of 1986 (as added by section 2(a) of this Act).

6. Effective date

The amendments made by this Act shall apply to taxable years beginning after December 31, 2025.

119-HR2798

High-Quality Charter Schools Act