Taxation; participation in the federal tax credit for individuals making qualified contributions to scholarship granting organizations provided for

Plain English Breakdown

The bill becomes effective immediately upon passage, but participation in the tax credit is limited to taxable years starting after December 31, 2026.

Alabama Joins Federal Tax Credit for Scholarship Donors

This law lets Alabama join a federal program that gives tax credits to people who donate money to scholarship groups.

What This Bill Does

• Allows the state of Alabama to take part in a specific federal tax credit under U.S. Code section 25F for individuals making qualified contributions.
• Requires the Department of Revenue to send a list of qualified local scholarship organizations to the U.S. Secretary of the Treasury each year.
• Directs the Department of Revenue to publish this list on its official website.
• Gives the Department of Revenue power to create rules needed to run and manage this program.

Who It Names or Affects

• Individuals who donate money to scholarship granting organizations in Alabama.
• Scholarship granting organizations located within the state that meet federal requirements under U.S. Code section 25F.
• The Alabama Department of Revenue, which must handle reporting and rule-making duties.

Terms To Know

Federal tax credit

A reduction in taxes owed to the U.S. government for people who make certain donations under federal law.

Scholarship granting organization

A group that gives money to students, which must meet specific requirements listed in 26 U.S.C. § 25F to be included on the state list.

Limits and Unknowns

• The tax credit participation applies only to taxable years beginning after December 31, 2026.
• Scholarship organizations must meet specific federal rules listed in U.S. Code section 25F and any applicable federal regulations or guidance.

Official Summary Text

Taxation; participation in the federal tax credit for individuals making qualified contributions to scholarship granting organizations provided for

Current Bill Text

HB342 ENGROSSED
Page 0
HB342
FKN8PCD-2
By Representative DuBose
RFD: Fiscal Responsibility
First Read: 29-Jan-26
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HB342 Engrossed
Page 1
First Read: 29-Jan-26
A BILL
TO BE ENTITLED
AN ACT
Relating to federal tax credits; to provide for the
State of Alabama's participation in the federal tax credit for
individuals who make qualified contributions to scholarship
granting organizations.
BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:
Section 1. (a) The Legislature voluntarily elects the
State of Alabama to participate in the federal tax credit
established under 26 U.S.C. § 25F for individuals who make
qualified contributions to scholarship granting organizations.
(b) The Department of Revenue shall annually submit to
the U.S. Secretary of the Treasury and publish on the
Department of Revenue's website a list of all scholarship
granting organizations that meet the requirements under 26
U.S.C. § 25F and are located in this state. The Department of
Revenue shall certify to the U.S. Secretary of the Treasury
the Department of Revenue's authority to submit the list on
behalf of the state and comply with the requirements of 26
U.S.C. § 25F, including any applicable federal regulations or
guidance, to ensure that the state is eligible to participate
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HB342 Engrossed
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guidance, to ensure that the state is eligible to participate
in taxable years beginning after December 31, 2026.
(c) The Department of Revenue may establish rules for
the implementation and administration of this act.
Section 2. This act shall become effective immediately.
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HB342 Engrossed
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Section 2. This act shall become effective immediately.
House of Representatives
Read for the first time and referred
to the House of Representatives
committee on Fiscal Responsibility
................29-Jan-26
Read for the second time and placed
on the calendar:
1 amendment
................12-Feb-26
Read for the third time and passed
as amended
Yeas 103
Nays 0
Abstains 1
................26-Feb-26
John Treadwell
Clerk
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