An Act amending the act of March 10, 1949 (P.L.30, No.14), known as the Public School Code of 1949, in educational tax credits, further providing for definitions and providing for compliance with Federal tax credit for contributions to scholarship organizations.

PRINTER'S NO. 2173
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No. 1763
Session of
2025
INTRODUCED BY GLEIM, GREINER, WALSH, BERNSTINE, JAMES, RAPP,
HAMM, PICKETT, ANDERSON, M. MACKENZIE AND D'ORSIE,
JULY 24, 2025
REFERRED TO COMMITTEE ON EDUCATION, JULY 24, 2025
AN ACT
Amending the act of March 10, 1949 (P.L.30, No.14), entitled "An
act relating to the public school system, including certain
provisions applicable as well to private and parochial
schools; amending, revising, consolidating and changing the
laws relating thereto," in educational tax credits, further
providing for definitions and providing for compliance with
Federal tax credit for contributions to scholarship
organizations.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Section 2002-B of the act of March 10, 1949
(P.L.30, No.14), known as the Public School Code of 1949, is
amended by adding a definition to read:
Section 2002-B. Definitions.
The following words and phrases when used in this article
shall have the meanings given to them in this section unless the
context clearly indicates otherwise:
* * *
"Secretary." The Secretary of Community and Economic
Development of the Commonwealth.
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* * *
Section 2. The act is amended by adding a section to read:
Section 2014-B. Compliance with Federal tax credit for
contributions to scholarship organizations.
(a) Designated agency.--In accordance with 26 U.S.C. §
25F(g)(1)(B) (relating to qualified elementary and secondary
education scholarships), the department is designated as the
agency to make elections on behalf of the Commonwealth with
respect to Federal tax benefits related to contributions of
individuals to scholarship granting organizations.
(b) Notice.--By October 1, 2026, and each October 1
thereafter, the secretary shall transmit a notice to the United
States Secretary of the Treasury opting into the Federal tax
credit for contributions of individuals to scholarship granting
organizations as required under 26 U.S.C. § 25F. The notice
shall include a list of the scholarship organizations located in
this Commonwealth that meet the requirements for a scholarship
granting organization under 26 U.S.C. § 25F(c)(5).
(c) Submission of information.--To assist the department in
determining if a scholarship organization meets Federal
requirements under 26 U.S.C. § 25F(c)(5), each scholarship
organization shall submit the following information to the
department, in a form and manner prescribed by the department,
by June 1, 2026, and each June 1 thereafter:
(1) Proof that the scholarship organization:
(i) is exempt from Federal taxation under 26 U.S.C.
§ 501(c)(3) (relating to exemption from tax on
corporations, certain trusts, etc.); and
(ii) maintains one or more separate accounts
exclusively for qualified contributions in order to
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prevent the comingling of qualified contributions with
other amounts.
(2) Certification by the scholarship organization that
the scholarship organization complies with all of the
following:
(i) Provides scholarships to 10 or more students who
do not all attend the same school.
(ii) Spends not less than 90% of the income of the
scholarship organization on scholarships for eligible
students.
(iii) Does not provide scholarships for any expenses
other than qualified elementary or secondary education
expenses as defined under 26 U.S.C. § 530(b)(3)(A)
(relating to Coverdell education savings accounts).
(iv) Provides a scholarship to eligible students
with a priority for:
(A) students awarded a scholarship the previous
school year; and
(B) after application of clause (A), any
eligible students who have a sibling who was awarded
a scholarship from the scholarship organization.
(v) Does not earmark or set aside contributions for
scholarships on behalf of any particular student.
(vi) Verifies the annual household income and family
size of an eligible student who applies for a scholarship
to ensure that the student meets the requirements of 26
U.S.C. § 25F(c)(2)(A) and limits the awarding of a
scholarship to an eligible student who is a member of a
household for which the income does not exceed the amount
established under 26 U.S.C. § 25F(c)(2)(A).
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(vii) Does not award a scholarship to any
disqualified person as determined under the rules of 26
U.S.C. § 4946(a) (relating to definitions and special
rules).
(d) Compliance status.--
(1) By September 1, 2026, and each September 1
thereafter, the department shall notify each scholarship
organization of its compliance status and whether the
scholarship organization will be included on the official
list submitted to the United States Secretary of the Treasury
under subsection (b).
(2) After a scholarship organization is initially
determined to be compliant under this section, the
scholarship organization shall be deemed compliant and remain
on the list submitted to the United States Secretary of the
Treasury each year.
(3) The department may perform random audits to ensure
that a scholarship organization remains compliant with this
section.
(4) If the department determines that a scholarship
organization is not compliant with this section, the
department may remove the scholarship organization from the
list submitted to the United States Secretary of the
Treasury.
(e) Guidelines.--
(1) Within 60 days of the effective date of this
subsection, for the implementation of this subsection, the
department shall issue guidelines for the implementation of
this section.
(2) The department may not add requirements to the
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guidelines beyond what is required under 26 U.S.C. § 25F.
(3) The department shall transmit the guidelines to the
Legislative Reference Bureau for publication as a statement
of policy in the next available issue of the Pennsylvania
Bulletin and shall post the guidelines on the department's
publicly accessible Internet website.
Section 3. This act shall take effect immediately.
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