Educational Choice for Children Act of 2025

This bill creates federal tax credits for individuals and corporations that donate to scholarship granting organizations, which provide scholarships for qualified elementary and secondary education expenses of eligible students. It also exempts those scholarships from the recipient's gross income and sets rules for the organizations and a national volume cap on the credits.

Sec. 2, Tax credit for contributions to scholarship granting organizations: Individuals who are U.S. citizens or residents can claim a tax credit for qualified contributions (cash or marketable securities) to scholarship granting organizations. The credit is limited to the greater of 10% of adjusted gross income or $5,000, and is reduced by any state tax credit for the same contribution. The credit cannot exceed a volume cap allocated by the Secretary. Corporations can also claim a credit for qualified contributions, limited to 5% of taxable income. Scholarship granting organizations must meet requirements, including providing scholarships to at least two students not all at the same school, prioritizing returning students and their siblings, not earmarking contributions, verifying household income (up to 300% of area median gross income), and undergoing annual audits. Self-dealing is prohibited. The credit cannot also be claimed as a charitable deduction. Unused credit can be carried forward up to five years. If a scholarship granting organization fails to distribute at least 85% of its receipts within two years, future contributions to it are not eligible for the credit. These provisions apply to taxable years ending after December 31, 2025.

Sec. 3, Volume cap: The total amount of qualified contributions eligible for the credits is capped at $10 billion per calendar year, starting in 2026. Ten percent of this cap is divided evenly among the states (including D.C.) for residents and corporations in that state. The cap is allocated on a first-come, first-served basis. The Secretary must develop a real-time tracking system. If 90% or more of the cap is used in a year, the next year's cap increases by 5%. The cap cannot decrease from one year to the next.

Sec. 4, Exemption from gross income for scholarships: Scholarships provided by a scholarship granting organization for qualified elementary or secondary education expenses of an eligible student are not included in the gross income of the student's dependent. This applies to amounts received after December 31, 2025.

Sec. 5, Organizational and parental autonomy: Scholarship granting organizations are not considered to be acting on behalf of any government. No government entity can control any aspect of a scholarship granting organization or a private or religious school. No government entity can exclude or discriminate against religious schools or discourage the use of scholarships at private or faith-based schools. Parents of eligible students have the right to intervene in court cases challenging the constitutionality of this Act.