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 tax credits and for limitations, providing for Pennsylvania Learning Investment Tax Credit, for displaced student scholarship program, establishing the Displaced Student Scholarship Fund and providing for compliance with Federal tax credit; and making an editorial change.

PRINTER'S NO. 3584
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No. 2623
Session of
2026
INTRODUCED BY WHITE, M. MACKENZIE, OLSOMMER, CUTLER, COOPER,
KAUFFMAN, STAATS, VEROBISH, BERNSTINE, MENTZER AND ROWE,
JUNE 10, 2026
REFERRED TO COMMITTEE ON EDUCATION, JUNE 10, 2026
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 tax credits and for limitations, providing for
Pennsylvania Learning Investment Tax Credit, for displaced
student scholarship program, establishing the Displaced
Student Scholarship Fund and providing for compliance with
Federal tax credit; and making an editorial change.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Article XX-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 subarticle heading immediately preceding
section 2001-B to read:
SUBARTICLE A
EDUCATIONAL IMPROVEMENT AND OPPORTUNITY
SCHOLARSHIP TAX CREDIT PROGRAMS
Section 2. Section 2005-B(a)(1), (a.1)(1), (b) and (c)(1) of
the act, amended July 11, 2024 (P.L.618, No.55), are amended to
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read:
Section 2005-B. Tax credits.
(a) Scholarship or educational improvement organizations.--
In accordance with section 2006-B, the Department of Revenue
shall grant a tax credit against any applicable tax to a
business firm providing proof of a contribution to a scholarship
organization or educational improvement organization in the
taxable year in which the contribution is made in accordance
with the following:
(1) The tax credit shall not exceed [75% or, in the case
of a contribution to the scholarship organization for
economically disadvantaged schools, 85%] 99% of the total
amount contributed during the taxable year by the business
firm.
* * *
(a.1) Opportunity scholarship organizations.--In accordance
with section 2006-B, the Department of Revenue shall grant a tax
credit against any applicable tax to a business firm providing
proof of a contribution to an opportunity scholarship
organization in the taxable year in which the contribution is
made in accordance with the following:
(1) The tax credit shall not exceed [75%] 99% of the
total amount contributed during the taxable year by the
business firm.
* * *
(b) Additional amount.--Notwithstanding subsections (a)(1)
and (a.1)(1), in accordance with section 2006-B, the Department
of Revenue shall grant a tax credit of up to [90% or, in the
case of a contribution to the scholarship organization for
economically disadvantaged schools,] 99% of the total amount
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contributed during the taxable year if the business firm
provides a written commitment to provide the scholarship
organization, educational improvement organization or
opportunity scholarship organization with the same amount of
contribution for two consecutive tax years. The business firm
must provide the written commitment under this subsection to the
department at the time of application.
(c) Pre-kindergarten scholarship organizations.--In
accordance with section 2006-B, the Department of Revenue shall
grant a tax credit against any applicable tax to a business firm
providing proof of a contribution to a pre-kindergarten
scholarship organization in the taxable year in which the
contribution is made in accordance with the following:
(1) The tax credit shall be equal to 100% of the first
$10,000 contributed during the taxable year by the business
firm and shall not exceed [90%] 99% of the remaining amount
contributed during the taxable year by the business firm. At
the time of application, a business firm may provide a
written commitment to the department to provide the pre-
kindergarten scholarship organization with at least the same
amount of contribution for two consecutive years.
* * *
Section 3. Section 2006-B(a)(1) of the act, amended November
12, 2025 (P.L.244, No.47), is amended to read:
Section 2006-B. Limitations.
(a) Amount.--
(1) The total aggregate amount of all tax credits
approved for contributions from business firms to scholarship
organizations, educational improvement organizations and pre-
kindergarten scholarship organizations shall not exceed
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[$590,000,000] $790,000,000 in a fiscal year. The following
shall apply:
(i) No less than [$375,000,000] $525,000,000 of the
total aggregate amount shall be used to provide tax
credits for contributions from business firms to
scholarship organizations.
(ii) No less than $74,500,000 of the total aggregate
amount shall be used to provide tax credits for
contributions from business firms to educational
improvement organizations.
(iii) The total aggregate amount of all tax credits
approved for contributions from business firms to pre-
kindergarten scholarship organizations shall not exceed
[$30,500,000] $40,500,000 in a fiscal year.
(iv) No less than [$110,000,000] $150,000,000 of the
total aggregate amount shall be used to provide tax
credits for contributions from business firms to increase
the scholarship or pre-kindergarten scholarship by up to
$2,000 or, in the case of a scholarship for a student
attending a secondary school, by up to $4,000, for a
student attending an economically disadvantaged school,
to the extent that the total amount of scholarships, pre-
kindergarten scholarships and opportunity scholarships
will not exceed the lesser of $8,500 or the school's
tuition.
* * *
Section 4. Article XX-B of the act is amended by adding
subarticles to read:
SUBARTICLE B
PENNSYLVANIA LEARNING INVESTMENT TAX CREDIT
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Section 2021-B. Scope of subarticle.
This subarticle relates to the Pennsylvania Learning
Investment Tax Credit.
Section 2022-B. Definitions.
The following words and phrases when used in this subarticle
shall have the meanings given to them in this section unless the
context clearly indicates otherwise:
"Department." The Department of Revenue of the Commonwealth.
"Eligible child." A child of school age who:
(1) Is a resident of this Commonwealth.
(2) Has not yet received a high school diploma.
(3) Currently resides within the attendance boundary of
a public school.
(4) Is eligible to attend a public school.
(5) Is not enrolled in a public school for the taxable
year.
"Nonpublic school." A school, other than a public school
within this Commonwealth, where a resident of this Commonwealth
may legally fulfill the compulsory school attendance
requirements of this act and which meets the requirements of
Title VI of the Civil Rights Act of 1964 (Public Law 88-352, 78
Stat. 241).
"Public school." A school operated by a school district,
intermediate unit, charter school, cyber charter school or area
career and technical school.
"Qualified learning expense." An expense incurred by a
taxpayer that is a parent or legal guardian of an eligible
child, including:
(1) Tuition and fees at a nonpublic school.
(2) Textbooks or curriculum materials.
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(3) Fees for after-school or summer education programs
provided by a nonpublic school.
(4) Tutoring services.
(5) Educational software and applications.
(6) Fees for standardized and nationally recognized
tests, including college admissions tests, advanced placement
examinations and related preparatory courses.
(7) Education services for students with disabilities
from a licensed or accredited practitioner or education
service provider.
(8) Contracted services provided by a public school
district, including specific classroom instruction.
"Tax credit." The Pennsylvania Learning Investment Tax
Credit provided for under this subarticle.
"Tax liability." The liability for taxes imposed under
Article III of the Tax Reform Code of 1971, excluding any tax
withheld by an employer under Article III of the Tax Reform Code
of 1971.
"Tax Reform Code of 1971." The act of March 4, 1971 (P.L.6,
No.2), known as the Tax Reform Code of 1971.
"Taxable year." As defined under section 301 of the Tax
Reform Code of 1971.
"Taxpayer." A resident individual subject to the tax imposed
under Article III of the Tax Reform Code of 1971.
Section 2023-B. Credit for qualified learning expenses.
(a) Creation of tax credit.--For each taxable year beginning
after December 31, 2026, a taxpayer shall be allowed a tax
credit against the tax imposed under Article III of the Tax
Reform Code of 1971 for each eligible child who is not enrolled
in a public school for the taxable year to be used for qualified
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learning expenses.
(b) Amount.--The tax credit under this section shall be
$8,000 per child per taxable year.
(c) Claim of tax credit.--A taxpayer may claim a tax credit
under this section on a return filed under section 330 of the
Tax Reform Code of 1971.
(d) Tax credit refund.--The tax credit under this section
shall be applied against the taxpayer's tax liability. If the
tax credit exceeds the taxpayer's tax liability, the department
shall issue a refund under the procedures specified in section
346 of the Tax Reform Code of 1971.
(e) Distribution of tax credit.--
(1) The department shall allow taxpayers to claim the
tax credit when filing an annual tax return or through
advanced installments.
(2) The department shall prescribe applications for the
purposes of claiming the tax credits in advance and a
deadline by which applications for the advance shall be
submitted.
(3) A taxpayer shall choose to receive the tax credit:
(i) as a direct deposit electronically to a banking
account provided by the taxpayer; or
(ii) by certified mail to a legal address.
Section 2024-B. Regulations.
The Secretary of Revenue may issue rules and promulgate
regulations necessary to implement and administer this
subarticle.
SUBARTICLE C
DISPLACED STUDENT SCHOLARSHIP PROGRAM
Section 2031-B. Definitions.
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The following words and phrases when used in this subarticle
shall have the meanings given to them in this section unless the
context clearly indicates otherwise:
"Applicant." A parent who applies for participation in the
program under section 2033-B on behalf of an eligible student.
"Attendance boundary." As defined in section 2002-B.
"Department." The Department of Education of the
Commonwealth.
"Displaced student scholarship account." A spending account
established and administered by the State Treasury and directed
by a parent for a scholarship recipient that may be used for
qualified education expenses and special education service fees
to attend a participating nonpublic school.
"Displacement-impacted school." A public school that
satisfies one of the following:
(1) Is designated as an overcrowded school under section
2042-B.
(2) Is scheduled for closure, consolidation or
realignment by a school district pursuant to a facilities
plan, restructuring plan or other official action by the
school district.
"Eligible student." A school-age child who:
(1) Is a resident of this Commonwealth.
(2) Has not received a high school diploma.
(3) Resides within the attendance boundary of a
displacement-impacted school or resided within the attendance
boundary of a displacement-impacted school at the time the
State Treasury received written confirmation that the child
accepted an offer of enrollment under section 2033-B.
(4) Satisfies one of the following:
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(i) Attended a public school in this Commonwealth in
the preceding school year.
(ii) Received a scholarship from the program in the
preceding school year.
(iii) Will attend kindergarten for the first time in
the next school year.
"Fund." The Displaced Student Scholarship Fund established
in section 2037-B.
"Instructional capacity." The sum of the room capacity of
each instructional space in a school building.
"Instructional space." A room within a school building that
is regularly used for classroom instruction of students,
including a general education classroom, laboratory and
alternative education classroom. The term shall not include a
temporary or portable classroom.
"Kindergarten." A one-year formal educational program,
whether part time or full time, that occurs during the school
year immediately prior to first grade.
"Nonpublic school." Any school, other than a public school
within this Commonwealth, where a resident of this Commonwealth
may legally fulfill the compulsory school attendance
requirements of this act and which meets the requirements of 42
U.S.C. Ch. 21 Subch. V (relating to federally assisted
programs).
"Parent." An individual who is a resident of this
Commonwealth and:
(1) has legal custody or guardianship of an eligible
student; or
(2) keeps in the individual's home an eligible student
and supports the student gratis as if the student were a
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lineal descendant of the individual.
"Participating nonpublic school." A nonpublic school
offering a program of instruction for kindergarten through grade
twelve, or a combination of grades, that:
(1) notifies the State Treasury of the nonpublic
school's desire to participate in the program; and
(2) provides certification to the State Treasury that
the nonpublic school meets the criteria under section 2040-
B(a).
"Program." The Displaced Student Scholarship Program
established under section 2032-B.
"Public school." A school operated by a school district, an
intermediate unit, area career and technical school, charter
school, regional charter school or cyber charter school.
"Qualified education expense." An expense incurred by a
parent of an eligible student, including:
(1) Tuition, fees, books, supplies and other equipment
incurred in connection with enrollment or attendance of an
eligible student at a nonpublic school.
(2) Academic tutoring incurred in connection with
attendance of an eligible student at a nonpublic school.
(3) Uniforms, transportation and supplementary items and
services required or provided by a nonpublic school in
connection with enrollment or attendance.
(4) Online learning supports and computer technology,
equipment or services used in connection with attendance of
an eligible student at a nonpublic school.
(5) Dual enrollment tuition and fees.
(6) College preparatory activities, including admissions
testing and application fees.
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(7) Other student supports, including special needs
services from a licensed or accredited practitioner or
education service provider.
"Resident school district." The school district in which an
eligible student resides.
"Scholarship." A scholarship that is awarded to an eligible
student under the program.
"Scholarship recipient." An eligible student who is awarded
a scholarship under the program.
"School-age child." A child enrolling in kindergarten or in
grades one through twelve.
"School year." A school term as defined in section 102.
"Special education services fee." A fee charged by a
participating nonpublic school for special education services
for a student with special needs as agreed to by the parent and
the participating nonpublic school.
"State Treasury." The Treasury Department of the
Commonwealth.
"Student with special needs." A child who is subject to an
individualized education program under 20 U.S.C. Ch. 33
(relating to education of individuals with disabilities) and 22
Pa. Code Ch. 14 (relating to special education services and
programs).
Section 2032-B. Displaced Student Scholarship Program.
(a) Establishment.--Beginning with the 2027-2028 school
year, the Displaced Student Scholarship Program is established
as a program in the State Treasury to provide scholarships to
help eligible students pay qualified education expenses and
special education services fees for attendance at a
participating nonpublic school.
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(b) Notice to parents.--
(1) By October 1, and each October 1 thereafter, a
school district shall notify the parent of a student who is
attending or residing within the attendance boundary of the
displacement-impacted school during the school year of the
school's designation.
(2) The notice shall be in a form provided by the State
Treasury, in consultation with the department, and shall
provide the following information regarding the program:
(i) A description of the program.
(ii) Instructions for obtaining information about
applying for a scholarship under the program.
(iii) A list of any school in the school district
that has been designated as a displacement-impacted
school and the reason for the designation.
(iv) Notice of the parent's responsibilities
regarding application to a participating nonpublic school
if the parent seeks to enroll an eligible student in a
participating nonpublic school.
(3) The notice shall be posted on the school district's
publicly accessible Internet website.
(c) Notice to State Treasury.--A school district required to
submit a notice to parents under subsection (b) shall provide
the State Treasury with a list of students whose parents were
provided the notice. The notification shall be made in a manner
and form established by the State Treasury.
Section 2033-B. Application.
(a) Application form.--No later than 30 days after the
effective date of this section, the State Treasury shall develop
an application form that can be accessed from and submitted
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electronically on the State Treasury's publicly accessible
Internet website.
(b) Application and approval process.--
(1) No later than February 1, 2027, and each February 1
thereafter, an applicant may apply to the State Treasury for
a scholarship for the following school year according to
guidelines developed by the State Treasury under section
2038-B. An application shall be approved by the State
Treasury if the student meets the eligibility requirements of
this subarticle.
(2) A renewal application shall be approved by the State
Treasury if the student meets the eligibility requirements of
this article, notwithstanding the residence or income
criteria specified in paragraph (3) of the definition of
"eligible student" in section 2031-B.
(3) A parent may appeal the State Treasury's decision
regarding nonapproval of an application. The appeal shall be
governed by 2 Pa.C.S. Chs. 1 (relating to general
provisions), 5 (relating to practice and procedure) and 7
(relating to judicial review).
(4) No later than April 1, 2027, and each April 1
thereafter, the State Treasury shall notify the applicant
whether a scholarship will be awarded for the following
school year.
(5) For the 2027-2028 school year, scholarships shall be
awarded on a first-come, first-served basis considering money
available in the fund.
(6) For the 2028-2029 school year, and each school year
thereafter, the State Treasury shall give priority for
scholarships to prior year scholarship recipients, and shall
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award scholarships to new applicants on a first-come, first-
served basis considering money available in the fund.
(7) Upon notification by the State Treasury that a
scholarship has been awarded, the applicant shall apply for
enrollment of the scholarship recipient directly to the
participating nonpublic school under an application procedure
developed by the participating nonpublic school.
(8) No later than June 1, 2027, and each June 1
thereafter, a participating nonpublic school shall provide
written confirmation to the State Treasury of scholarship
recipients who have accepted an offer of enrollment for the
following school year and provide the State Treasury with the
amounts to be charged to the scholarship recipient for
qualified education expenses and special education services
fees. The notification shall be made in a manner and form
established by the State Treasury.
(9) The State Treasury may establish a waiting list for
eligible students with approved applications who did not
receive awards due to availability of money in the fund and,
if, by July 1, 2027, and by July 1 each year thereafter,
additional money is available in the fund for scholarships,
may award scholarships to the eligible students on a first-
come, first-served basis.
Section 2034-B. Agreement.
(a) Authorization.--Upon receipt of written confirmation
that a scholarship recipient has accepted an offer of enrollment
under section 2033-B, the State Treasury must enter into or
renew an agreement with the applicant. The agreement shall
provide the following:
(1) The scholarship recipient shall enroll in a
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participating nonpublic school for the school year for which
the agreement applies.
(2) A certain sum of money shall be deposited into a
displaced student scholarship account under section 2035-B on
behalf of the scholarship recipient.
(3) The money in the displaced student scholarship
account may be expended only as authorized under this
article.
(4) The parent shall notify the State Treasury if the
scholarship recipient no longer resides in this Commonwealth
or withdraws or is forced to withdraw from the participating
nonpublic school within 15 days of the change of residency or
withdrawal.
(b) Term of agreement.--Except as otherwise provided under
this article, an agreement entered into under subsection (a)
shall be valid for one school year.
(c) Termination.--
(1) An agreement entered into under subsection (a) may
be terminated early by the parent for any reason.
(2) An agreement entered into under subsection (a) shall
be terminated by the State Treasury for any of the following
reasons:
(i) The parent is found to have engaged in
fraudulent misuse of the displaced student scholarship
account. In such case, the scholarship recipient shall be
ineligible for future participation in the program. The
parent may appeal the State Treasury's decision regarding
termination and student eligibility within 30 days of
issuance of the decision. The appeal shall be governed by
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(relating to practice and procedure) and 7 (relating to
judicial review).
(ii) The scholarship recipient no longer resides in
this Commonwealth.
(iii) The scholarship recipient withdraws or is
forced to withdraw from a participating nonpublic school
prior to the completion of the school year.
(3) If an agreement is terminated under this subsection:
(i) All available money in the displaced student
scholarship account shall revert to the fund.
(ii) The participating nonpublic school shall repay
to the State Treasury for deposit into the fund the full
amount of the scholarship payment, reduced on a pro rata
basis by the tuition, qualified education expenses and
special education services fees owed for the portion of
the school year in which the scholarship recipient was
enrolled.
(iii) The participating nonpublic school may not
require the parent to reimburse the participating
nonpublic school for the amount of the scholarship
returned to the State Treasury.
(d) Renewal.--An agreement entered into under subsection (a)
may be renewed for each school year for the same student.
(e) Multiple agreements.--A parent of more than one child
who is a scholarship recipient must enter into a separate
agreement under subsection (a) for each of the children.
(f) Explanation.--Upon entering into an agreement under
subsection (a) or renewing an agreement under subsection (d),
the State Treasury shall provide the parent with a written
explanation of the authorized uses of the money in the displaced
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student scholarship account.
Section 2035-B. Displaced student scholarship account.
(a) Establishment.--If an agreement is entered into under
section 2034-B(a), the State Treasury shall establish a
displaced student scholarship account for the scholarship
recipient. The displaced student scholarship account shall be
administered by the State Treasury in accordance with this
article.
(b) Deposit.--
(1) Upon establishment of a displaced student
scholarship account, the State Treasury shall deposit a sum
of money for the applicable school year in the displaced
student scholarship account for the scholarship recipient in
accordance with this section.
(2) For the 2027-2028 school year, the sum shall be as
follows:
(i) for a student in half-day kindergarten, $2,500;
(ii) for a student in full-day kindergarten through
grade eight, $5,000;
(iii) for a student in grades nine through twelve,
$10,000; or
(iv) for a student with special needs regardless of
grade level, $15,000.
(3) Beginning with the 2028-2029 school year, and each
school year thereafter, the amounts in paragraph (2) shall be
increased by the greater of the average percentage increase
in the index as defined in section 302 of the act of June 27,
2006 (1st Sp.Sess., P.L.1873, No.1), known as the Taxpayer
Relief Act, for all school districts for the prior school
year and the percentage increase in the appropriation for
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basic education for the prior fiscal year. The State Treasury
shall calculate the increases on an annual basis and shall
submit a notice of the increases to the Legislative Reference
Bureau for publication in the next available issue of the
Pennsylvania Bulletin.
(c) Installments.--The State Treasury shall deposit the
money for each scholarship into a displaced student scholarship
account on a schedule determined by the State Treasury in
consultation with the department.
(d) Payments to participating nonpublic schools.--A parent
may direct payments from the displaced student scholarship
account to a participating nonpublic school on behalf of the
scholarship recipient via an electronic money transfer system or
other method approved by the State Treasury under section 2038-
B.
Section 2036-B. Qualified education expenses.
(a) Authorized use.--Money deposited into a displaced
student scholarship account may be used only to pay for
qualified education expenses and special education service fees
incurred by or associated with the scholarship recipient.
(b) Prohibition.--A participating nonpublic school that
receives a payment for qualified education expenses authorized
under subsection (a) may not refund, rebate or otherwise
directly share any portion of the payment with the parent who
made the payment.
(c) Tax consequences and status of awards.--
(1) The money in a displaced student scholarship account
is not taxable income to the parent or scholarship recipient
under State law.
(2) An award made to, or payment from, a displaced
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student scholarship account may not be construed to be an
appropriation or financial assistance to a participating
nonpublic school.
Section 2037-B. Displaced Student Scholarship Fund.
(a) Establishment.--The Displaced Student Scholarship Fund
is established in the State Treasury. All interest and earnings
received from investment or deposit of the money in the fund
shall be paid into the fund and used for scholarships. Any
unexpended money and interest or earnings on the money in the
fund may not be transferred or revert to the General Fund but
shall remain in the fund.
(b) Funding.--The fund shall consist of the following:
(1) Money that is appropriated, given, granted or
donated by the Commonwealth or any other government or
private agency or person for the purpose established under
this article.
(2) An amount equal to $50,000,000, which shall be
transferred from the General Fund to the fund no later than
15 days after the effective date of this section and each
August 1 thereafter.
(c) Continuing appropriation.--The money in the fund is
appropriated on a continuing basis to the State Treasury for
scholarships.
Section 2038-B. Duties of State Treasury.
(a) List of duties.--The State Treasury shall:
(1) Develop guidelines, in consultation with the
department, as necessary for the administration of this
article.
(2) Make payments to displaced student scholarship
accounts as provided in this article.
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(3) Develop a system that enables a parent to direct
payment to a participating nonpublic school in accordance
with this article.
(4) Develop a process by which a nonpublic school may
inform the State Treasury of the nonpublic school's interest
to participate in the program and demonstrate compliance with
the requirements of this article.
(5) Ensure that eligible students and their parents are
informed annually of the participating nonpublic schools in
the program by posting a list of participating nonpublic
schools on the State Treasury's publicly accessible Internet
website no later than January 1, 2027, and by January 1 of
each year thereafter.
(6) At such time and in such form and manner as
determined by the State Treasury, request and receive
information and data from a public school, resident school
district, participating nonpublic school or applicant
determined to be necessary by the State Treasury to
administer this article.
(b) Third-party administration.--The State Treasury may
contract with a third party to administer the program.
(c) Contracting.--
(1) Notwithstanding any provision of 62 Pa.C.S. Pt. I
(relating to Commonwealth Procurement Code) to the contrary
and in order to facilitate the prompt implementation of this
article, a contract may be awarded for a supply or service
without competition if the State Treasury determines in
writing that the contract is necessary for the implementation
of any provision of this article and is in the best interest
of the Commonwealth. The State Treasury shall provide and
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make publicly available a written justification of any
procurement under this section.
(2) Paragraph (1) shall expire no later than two years
following the issuance of the procurement under paragraph
(1). Procurements issued after that period shall occur in
accordance with other applicable law.
(d) Regulations.--
(1) In order to facilitate the prompt implementation of
this article, regulations determined to be necessary and
promulgated by the State Treasury shall be deemed temporary
regulations and shall expire no later than two years
following the publication of temporary regulations. The State
Treasury may promulgate temporary regulations not subject to:
(i) Section 612 of the act of April 9, 1929
(P.L.177, No.175), known as The Administrative Code of
1929.
(ii) Sections 201, 202, 203, 204 and 205 of the act
of July 31, 1968 (P.L.769, No.240), referred to as the
Commonwealth Documents Law.
(iii) Section 204(b) of the act of October 15, 1980
(P.L.950, No.164), known as the Commonwealth Attorneys
Act.
(iv) The act of June 25, 1982 (P.L.633, No.181),
known as the Regulatory Review Act.
(2) The authority provided to the State Treasury to
adopt temporary regulations under this subsection shall
expire no later than two years following the publication of
the temporary regulations. Regulations adopted after that
period shall be promulgated as provided by law.
Section 2039-B. Auditor General powers.
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The Auditor General may:
(1) Conduct a random audit of displaced student
scholarship accounts.
(2) Refer cases of suspected fraudulent misuse of
displaced student scholarship accounts to the Inspector
General for investigation. If the investigation results in a
finding that rises to the level of criminal activity, the
Inspector General shall refer the matter to the appropriate
law enforcement agency for prosecution.
(3) Notify the State Treasury of cases of suspected
fraudulent misuse that are referred to the Inspector General.
Section 2040-B. Duties of participating nonpublic schools.
(a) Notification requirement.--A nonpublic school that
desires to participate in the program shall notify the State
Treasury by a date and in a manner and form established by the
State Treasury. The notification shall include certification by
the nonpublic school that:
(1) The nonpublic school is a nonprofit entity exempt
from Federal taxation under 26 U.S.C. § 501(c)(3) (relating
to exemption from tax on corporations, certain trusts, etc.).
(2) The nonpublic school complies with the
nondiscrimination policies specified in 42 U.S.C. § 1981
(relating to equal rights under the law).
(3) The nonpublic school complies with the provisions of
sections 111 and 111.1.
(b) Prohibition.--A participating nonpublic school may not
charge a displaced student scholarship recipient a tuition rate,
student-related fees or special education services fees that are
higher than the rates the participating nonpublic school would
have charged to a student who had not received a displaced
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student scholarship.
(c) Reporting requirements.--
(1) A participating nonpublic school shall report in a
manner and form determined by the State Treasury, in
consultation with the department, information regarding
scholarship recipients enrolled in the participating
nonpublic school as follows:
(i) Enrollment and disenrollment.
(ii) Regular attendance.
(iii) Chronic absenteeism.
(iv) Academic progress as measured by advancement to
the next grade level.
(v) Indication of graduation.
(vi) Concurrent or dual enrollment course credits.
(2) The State Treasury shall report the information
regularly to the department on a schedule agreed to by the
State Treasury and the department.
(d) Construction.--
(1) For purposes of this article, a participating
nonpublic school shall be autonomous and is not an agent of
the State Treasury, the department or the Commonwealth.
(2) Neither the State Treasury, the department nor other
State agency may regulate the educational program of a
participating nonpublic school that accepts money from a
scholarship recipient beyond what is necessary to administer
the program.
Section 2041-B. Bar of certain participating nonpublic schools.
(a) Authority to State Treasury.--The State Treasury may bar
a nonpublic school from participation in the program if the
State Treasury establishes that the nonpublic school has:
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(1) routinely failed to comply with the requirements
established in section 2040-B; or
(2) failed to provide a scholarship recipient with the
educational services funded by the recipient's displaced
student scholarship account.
(b) Notice.--If the State Treasury bars a nonpublic school
from participation in the program, the State Treasury shall,
after any appeal is concluded and the State Treasury's decision
is upheld under subsection (c), post the decision on the State
Treasury's publicly accessible Internet website.
(c) Appeal.--A nonpublic school may appeal the State
Treasury's decision to bar its participation in the program
within 30 days of issuance of the decision. The appeal shall be
governed by 2 Pa.C.S. Chs. 1 (relating to general provisions), 5
(relating to practice and procedure) and 7 (relating to judicial
review).
Section 2042-B. Duties of resident school districts.
(a) Overcrowded schools.--A school district shall designate
a school as an overcrowded school when the utilization rate
calculated under subsection (b) exceeds 102.5% of the
instructional capacity of the school.
(b) Calculation.--In making a designation under subsection
(a), a school district shall calculate the utilization rate of
each school as follows:
(1) Divide the total student enrollment at the school by
the instructional capacity of the school building.
(2) Multiply the result of paragraph (1) by 100.
(c) School records.--A resident school district shall
provide a participating nonpublic school that has admitted a
scholarship recipient with a complete copy of the scholarship
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recipient's school record within 10 days of the receipt of
notice from the participating nonpublic school of the
scholarship recipient's enrollment.
Section 2043-B. Report.
(a) Duty to prepare and submit.--Beginning January 31, 2028,
and each January 31 thereafter, the State Treasury, in
consultation with the department, shall prepare and submit to
the General Assembly an annual report on the program.
(b) Contents.--The report shall include the following:
(1) The total number of applications received for the
program.
(2) The total number of applications received for the
program, by resident school district.
(3) The total number of applications approved for the
program.
(4) The total number of applications approved for the
program, by resident school district.
(5) The total number of displaced student scholarship
accounts terminated early.
(6) The total number of displaced student scholarship
accounts investigated for fraud by the Inspector General.
(7) The total number of scholarships awarded to students
attending half-day kindergarten.
(8) The total number of scholarships awarded to students
attending full-day kindergarten through grade eight.
(9) The total number of scholarships awarded to students
attending grades nine through twelve.
(10) The total dollar amount of scholarships awarded.
(11) The total number of applications not approved due
to lack of funding.
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(12) The cost of administration of the program.
(13) Other information the State Treasury deems helpful
to the General Assembly.
SUBARTICLE D
COMPLIANCE WITH FEDERAL TAX CREDIT
Section 2051-B. Definitions.
The following words and phrases when used in this subarticle
shall have the meanings given to them in this section unless the
context clearly indicates otherwise:
"Department." The Department of Community and Economic
Development of the Commonwealth.
"Secretary." The Secretary of Community and Economic
Development of the Commonwealth.
Section 2052-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 shall 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
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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
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), eligible
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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).
(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).
Section 2053-B. Compliance status.
(a) Notification.--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).
(b) Compliance.--After a scholarship organization is
initially determined to be compliant under this subarticle, the
scholarship organization shall be deemed compliant and remain on
the list submitted to the United States Secretary of the
Treasury each year.
(c) Audits.--The department may perform random audits to
ensure that a scholarship organization remains compliant with
this section.
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(d) Removal.--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.
Section 2054-B. Guidelines.
(a) Issuance.--Within 60 days of the effective date of this
subsection, the department shall issue guidelines for the
implementation of this subarticle.
(b) Limitation.--The department may not add requirements to
the guidelines beyond what is required under 26 U.S.C. § 25F
(relating to qualified elementary and secondary education
scholarships).
(c) Notice.--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.
(d) Construction.--
(1) Except as authorized in this section, the department
may not impose any other requirements on, or require other
information to be provided by, qualified scholarship
organizations.
(2) A scholarship from any scholarship organization
qualified by the department under this section that is
received by an eligible student shall not be considered to be
taxable income for the purposes of Article III of the act of
March 4, 1971 (P.L.6, No.2), known as the Tax Reform Code of
1971.
(3) A scholarship from any scholarship organization
qualified by the department under this section that is
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received by an eligible student shall not constitute an
appropriation or financial assistance to the school attended
by the recipient.
Section 5. This act shall take effect immediately.
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