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 limitations and providing for termination of authority; providing for education options tax credits; establishing the Accountability for Diverted Tax Dollars Restricted Account; providing for scholarship granting organizations, for application by eligible contributors, for scholarships, for educational improvement programs, for low-achieving schools, for school participation in program and for original jurisdiction; and imposing duties on the Department of Community and Economic Development, the Department of Education, the Department of Revenue, the Auditor General, the Independent Fiscal Office and the State Treasurer.

PRIOR PRINTER'S NO. 3598 PRINTER'S NO. 3651
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No. 2632
Session of
2026
INTRODUCED BY RIVERA, TIBURCIO, MADDEN, STEELE, PIELLI,
MAZZOCCO, WEBSTER, BRADFORD, SANCHEZ, CEPEDA-FREYTIZ, PROBST,
SCHWEYER, SHUSTERMAN, D. WILLIAMS, OTTEN AND CIRESI,
JUNE 12, 2026
AS RE-REPORTED FROM COMMITTEE ON APPROPRIATIONS, HOUSE OF
REPRESENTATIVES, AS AMENDED, JUNE 22, 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 limitations and providing for termination of
authority; providing for education options tax credits;
establishing the Accountability for Diverted Tax Dollars
Restricted Account; providing for scholarship granting
organizations, for application by eligible contributors, for
scholarships, for educational improvement programs, for low-
achieving schools, for school participation in program and
for original jurisdiction; and imposing duties on the
Department of Community and Economic Development, the
Department of Education, the Department of Revenue, the
Auditor General, the Independent Fiscal Office and the State
Treasurer.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Section 2006-B(a)(1) introductory paragraph, (i)
and (ii) and (2) of the act of March 10, 1949 (P.L.30, No.14),
known as the Public School Code of 1949, amended November 12,
2025 (P.L.244, No.47), are amended and the subsection is amended
by adding a paragraph to read:
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Section 2006-B. Limitations.
(a) Amount.--
(1) [The] For fiscal years prior to the 2027-2028 fiscal
year, 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
$590,000,000 in a fiscal year. The following shall apply:
(i) No less than [$375,000,000] $303,000,000 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] $146,500,000 of the
total aggregate amount shall be used to provide tax
credits for contributions from business firms to
educational improvement organizations.
* * *
(2) [The] For fiscal years prior to the 2027-2028 fiscal
year, the total aggregate amount of all tax credits approved
for contributions from business firms to opportunity
scholarship organizations shall not exceed $90,000,000 in a
fiscal year.
(3) No tax credit may be approved under this article for
the 2027-2028 fiscal year or a fiscal year thereafter.
* * *
Section 2. The act is amended by adding a section to read:
Section 2014-B. Termination of authority.
(a) Applications.--The department may not accept an
application for a tax credit under this article for the 2027-
2028 fiscal year or a fiscal year thereafter.
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(b) Approval.--The department may not approve a tax credit
under this article for the 2027-2028 fiscal year or a fiscal
year thereafter.
(c) Construction.--Nothing in this section shall be
construed to affect the validity, use, administration,
reporting, review, enforcement or recapture of a tax credit
approved under this article for a fiscal year prior to the 2027-
2028 fiscal year.
Section 3. The act is amended by adding an article to read:
ARTICLE XX-B.1
EDUCATION OPTIONS TAX CREDITS
Section 2001-B.1. Scope of article.
This article relates to education options tax credits.
Section 2002-B.1. 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:
"Account." The Accountability for Diverted Tax Dollars
Restricted Account established under section 2003-B.1(f).
"Applicable tax." Any of the taxes due under Article III,
IV, VI, VII, VIII, IX, XV or XX of the Tax Reform Code of 1971
or a tax under Article XVI of the act of May 17, 1921 (P.L.682,
No.284), known as The Insurance Company Law of 1921.
"Applicant." An eligible early childhood student or eligible
student who applies for a scholarship.
"Assessment." The Pennsylvania System of School Assessment
test, the Keystone Exam, an equivalent local assessment or
another test established or approved by the State Board of
Education or the General Assembly to meet the requirements of
section 2603-B(d)(10)(i), or required under the Every Student
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Succeeds Act (Public Law 114-95, 129 Stat. 1802) or its
successor statute or another test required to achieve other
standards established by the Department of Education for the
public school or school district under 22 Pa. Code § 403.3
(relating to single accountability system).
"Attendance boundary." A geographic area of residen ce used
by a school district to assign a student to a public school .
"Average daily membership." As defined in section 2501(3) .
"Business firm." An entity authorized to do business in this
Commonwealth and subject to taxes imposed under Article III, IV,
VI, VII, VIII, IX, XV or XX of the Tax Reform Code of 1971 or a
tax under Article XVI of The Insurance Company Law of 1921. The
term does not include a pass-through entity the purpose of which
is making contributions under this article.
"Career and technical school." A public secondary school
established under Article XVIII.
"Contribution." A donation of cash, personal property or
services, the value of which is the net cost of the donation to
the donor or the pro rata hourly wage, including benefits, of
the individual performing the services.
"Department." The Department of Community and Economic
Development of the Commonwealth.
"Early childhood program." An early learning and development
program for children under six years of age, including any of
the following:
(1) A child care center as defined under 55 Pa. Code §
3270.4 (relating to definitions).
(2) A group child care home as defined under 55 Pa. Code
§ 3280.4 (relating to definitions).
(3) A family child care home as defined under 55 Pa.
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Code § 3290.4 (relating to definitions).
(4) A program of instruction for three-year-old, four-
year-old, five-year-old or six-year-old students, other than
kindergarten, that uses a curriculum aligned with the
curriculum of the school with which it is affiliated and
provides any of the following:
(i) A minimum of two hours of instructional and
developmental activities per day for at least 60 days per
school year.
(ii) A minimum of two hours of instructional and
developmental activities per day for at least 20 days
over the summer recess.
"Early childhood scholarship program." A program that
provides scholarships to eligible early childhood students to
attend an early childhood program operating within this
Commonwealth. The term includes a program that has an
application and review process for making awards to eligible
early childhood students and awards scholarships to eligible
early childhood students without limiting availability to
students of one school or one building within a school district
or nonpublic school.
"Early childhood student." An individual who meets all of
the following:
(1) Is younger than compulsory school age as defined in
section 1326.
(2) Is a resident of this Commonwealth.
(3) Attends an early childhood program.
"Economically disadvantaged scholarship program." A program
that provides scholarships to eligible students who meet any of
the following:
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(1) Reside within the attendance boundary of a low-
achieving school.
(2) Attend a school that is on the list published by the
Department of Education under section 2003-B.1(b)(3).
"Educational improvement program." An advanced academic or
similar program that is operated by or in conjunction with a
public school, including a chartered school as defined in
section 1376.1, a private school approved under section 1376 or
an intermediate unit, is not part of the regular academic
program of the school and enhances the curriculum or academic
program of the school. The term includes a program or activity
that otherwise meets this definition and has any of the
following characteristics:
(1) Integrates with the instructional program of the
school.
(2) Supplements, reconstructs or involves a major
revision to the curriculum or academic program of the school.
(3) Provides a different focus, delivery, methodology or
skill training than is provided in a typical academic program
of the school, including Internet-based and distance learning
technologies.
(4) Is offered separately from the school curriculum or
academic program.
(5) Is offered before or after school hours, on
weekends, as a year-round program or as an extension of the
school year.
(6) Is offered as a standards-based program of
instruction that operates outside of the length and time
requirements of the school but meets the minimum hours or
days of instruction required by State law.
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(7) Uses specialized instructional materials,
instructors or instruction not provided by the school.
(8) Uses internships and other work-based learning
opportunities for a student that supplement the student's
curriculum or academic program and provide the student with
the opportunity to apply the knowledge and skills learned in
the academic program.
(9) Offers instruction or programming that provides
credits or advanced placement at a two-year or four-year
college or university authorized by the Department of
Education.
(10) Reconfigures, renovates or equips a facility owned
by a public school to create a specialized environment that
is integral and necessary to the operation of an educational
improvement program.
(11) Offers a career and technical education program or
another occupational-oriented program approved by the
Secretary of Education.
(12) Provides special education programs or services.
(13) Has any other similar characteristic approved by
the Secretary of Education.
"Elementary school." A school that is not a secondary
school.
"Eligible contributor." A business firm or pass-through
entity.
"Eligible early childhood student." An early childhood
student, including an eligible student with a disability, who is
enrolled in an early childhood program and is a member of a
household with a household income of not more than the maximum
annual household income.
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"Eligible nonprofit entity." An organization that is exempt
from Federal taxation under section 501(c)(3) of the Internal
Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. § 501(c)(3))
and located in this Commonwealth.
"Eligible student." A school-age student, including an
eligible student with a disability, who is enrolled in a school
and is a member of a household with a household income of not
more than the maximum annual household income.
"Eligible student with a disability." An early childhood
student or school-age student who meets all of the following:
(1) Has been identified, in accordance with 22 Pa. Code
Ch. 14 (relating to special education services and programs),
as a child with a disability as defined in 34 CFR 300.8
(relating to child with a disability).
(2) Needs special education and related services.
(3) Is enrolled in an early childhood program or in a
schoo l.
(4) Is a member of a household with a household income
of not more than the maximum annual household income.
"Family member." A parent, stepparent, child, stepchild,
spouse, domestic partner, brother, sister, stepbrother or
stepsister.
"Fiscal year." The Commonwealth's fiscal year beginning July
1 and ending June 30.
"Household." An individual living alone or with any of the
following:
(1) A spouse.
(2) A parent and the parent's unemancipated minor
children.
(3) Other unemancipated minor children who are related
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by blood or marriage.
(4) Other adults or unemancipated minor children living
in the household who are dependent upon the individual.
"Household income." All money or property received of
whatever nature and from whatever source derived. The term does
not include any of the following:
(1) Periodic payments for sickness and disability other
than regular wages received during a period of sickness or
disability.
(2) Disability, retirement or other payments arising
under workers' compensation acts, occupational disease acts
and similar legislation by any government.
(3) Payments commonly recognized as old-age or
retirement benefits paid to an individual retired from
service after reaching a specific age or after a stated
period of employment.
(4) Payments commonly known as public assistance or
unemployment compensation payments by a governmental agency.
(5) Payments to reimburse actual expenses.
(6) Payments made by employers or labor unions for
programs covering hospitalization, sickness, disability or
death, supplemental unemployment benefits, strike benefits,
Social Security or retirement.
(7) Compensation received by United States servicemen
serving in a combat zone.
(8) Payments received from a governmental agency to
relieve the economic effects of the COVID-19 pandemic.
"Kindergarten." A one-year formal educational program that
occurs during the school year immediately prior to first grade.
The term includes a part-time and full-time program.
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"Low-achieving school." A public school that ranked in the
lowest 15% of the school's designation as an elementary school
or a secondary school based on combined mathematics and reading
scores from the assessment administered in any of the previous
five school years and for which the Department of Education has
posted results on the Department of Education's publicly
accessible Internet website. The term does not include a charter
school, cyber charter school or career and technical school.
"Maximum annual household income." The amount calculated as
follows:
(1) Subject to adjustment under paragraphs (2), (3) and
(4), $120,000.
(2) For each eligible student and , eligible early
childhood student AND DEPENDENT MEMBER OF THE HOUSEHOLD , the
amount under paragraph (1) plus 10% of the amount under
paragraph (1).
(3) For each eligible student with a disability, the
amount calculated by multiplying the applicable amount under
paragraph (1) by 1.5.
(4) Beginning July 1, 2029, the department shall
annually adjust the income amount under paragraph (1) by the
percentage change in the minimum wage under the act of
January 17, 1968 (P.L.11, No.5), known as The Minimum Wage
Act of 1968, from the preceding calendar year.
"Nonpublic school." A nonprofit school, other than a public
school, in which a resident of this Commonwealth may legally
fulfill the compulsory school attendance requirements under this
act and which meets the requirements of Title VI of the Civil
Rights Act of 1964 (Public Law 88-352, 42 U.S.C. § 2000 et
seq.).
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"Parent." An individual who is a resident of this
Commonwealth and meets any of the following:
(1) Has legal custody or guardianship of a student.
(2) Keeps a student in the individual's home and
supports the student gratis as if the student were a lineal
descendant of the individual.
"Participating nonpublic school." A nonpublic school that is
eligible under section 2011-B.1 to accept recipients.
"Participating public school." A public school in a school
district that is eligible under section 2011-B.1 to accept
recipients. The term does not include a low-achieving school.
"Pass-through entity." A partnership as defined in section
301(n.0) of the Tax Reform Code of 1971, a single-member limited
liability company treated as a disregarded entity for Federal
income tax purposes or a Pennsylvania S corporation as defined
in section 301(n.1) of the Tax Reform Code of 1971. The term
includes a pass-through entity that owns an interest in a pass-
through entity. The term includes a qualified Subchapter S
trust. The term includes a pass-through entity the purpose of
which is making contributions under this article and whose
shareholders, partners or members are composed of owners or
employees of business firms.
"Public school." A public prekindergarten at which
compulsory attendance requirements do not apply or a public
kindergarten, elementary school, secondary school or career and
technical school at which the compulsory attendance requirements
of this Commonwealth may be met and which meets the applicable
requirements of Title VI of the Civil Rights Act of 1964 (Public
Law 88-352, 42 U.S.C. § 2000 et seq.).
"Qualified Subchapter S trust." As defined in section
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1361(d) of the Internal Revenue Code of 1986.
"Recipient." An applicant who receives a scholarship.
"Scholarship." An award under a scholarship program,
economically disadvantaged scholarship program or early
childhood scholarship program to pay tuition and school-related
fees to attend a participating public school, participating
nonpublic school or early childhood program.
"Scholarship granting organization." An eligible nonprofit
entity that has been approved by the department to operate a
scholarship program, early childhood scholarship program,
economically disadvantaged scholarship program or educational
improvement program under this article.
"Scholarship program." A program that provides scholarships
to eligible students to attend a participating public school or
participating nonpublic school located in this Commonwealth. The
term includes a program that has an application and review
process for making awards to eligible students and awards
scholarships to eligible students without limiting availability
to students of one school or one building within a school
district or nonpublic school.
"School." Any of the following that meets the applicable
requirements of Title VI of the Civil Rights Act of 1964:
(1) A public or nonpublic prekindergarten.
(2) A public or nonpublic kindergarten, elementary
school or secondary school at which the compulsory attendance
requirements of this Commonwealth may be met.
"School age." Children from the earliest admission age to a
school's kindergarten program or, if no prekindergarten or
kindergarten program is provided, the school's earliest
admission age for beginners, until the end of the school year in
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which the student attains 21 years of age or graduates from high
school, whichever occurs first.
"School district of residence." The school district in which
a student's primary domicile is located.
"School-related fees." Fees charged by a school to all
students for books, instructional materials, technology
equipment and services, uniforms, activities and concurrent
enrollment programs under Article XVI-B.
"Secondary school." A school with an eleventh grade.
"Student." An individual who meets all of the follo wing:
(1) Is school age.
(2) Is a resident of this Commonwealth.
(3) Attends or is about to attend a school.
"Tax Reform Code of 1971." The act of March 4, 1971 (P.L.6,
No.2), known as the Tax Reform Code of 1971.
"Tax year." A taxpayer's annual accounting period or, if a
return is made for a period of less than 12 months, the period
for which the return is made.
Section 2003-B.1. Administration and accountability.
(a) Duties of department.--The department shall have the
following duties:
(1) Establish guidelines necessary to implement this
article.
(2) Establish the process through which and criteria by
which an eligible nonprofit entity may apply and receive
approval to operate as a scholarship granting organization.
(3) Develop guidelines, in consultation with the
Department of Education, for the eligibility of an
educational improvement program.
(4) Establish the process through which an eligible
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contributor may apply for a tax credit under section 2005-
B.1.
(5) By January 1 of each year, publish a list of
scholarship granting organizations approved to operate during
the following fiscal year.
(6) Monitor scholarship granting organizations for
compliance with this article and publish compliance
information on the department's publicly accessible Internet
website in a downloadable spreadsheet format.
(7) Publish reports in accordance with section 2013-
B.1(e) .
(8) No later than November 1, 2028, and each November 1
thereafter, in consultation with the Department of Revenue,
publish a list in a downloadable spreadsheet format on the
department's publicly accessible Internet website of the
contributions of each eligible contributor made under this
article by scholarship granting organization and by program
category, including scholarship program, economically
disadvantaged scholarship program, early childhood
scholarship program or educational improvement program, as
applicable.
(b) Duties of Department of Education.--The Department of
Education shall have the following duties:
(1) Publish the lists of participating nonpublic schools
and participating public schools under section 2011-B.1 on
the Department of Education's publicly accessible Internet
website in a downloadable spreadsheet format.
(2) Annually publish a list of low-achieving schools
under section 2010-B.1 on the Department of Education's
publicly accessible Internet website in a downloadable
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spreadsheet format.
(3) For the purposes of economically disadvantaged
scholarship programs, annually determine and publish a list
of participating nonpublic schools that meet both of the
following criteria:
(i) The participating nonpublic school is located in
a zip code with a median household income, based on the
most recent census data, of less than half the maximum
annual household income.
(ii) The participating nonpublic school has a
tuition rate below the median tuition rate based on data
submitted under section 2011-B.1.
(c) Duties of Department of Revenue.--The Department of
Revenue shall have the following duties:
(1) Review applications as provided under section 2005-
B.1.
(2) No later than November 1, 2028, and each November 1
thereafter , provide the General Assembly with a list of the
10 shareholders, partners or members of pass-through entities
with the highest aggregate amount of contributions under this
article for the prior fiscal year.
(3) By June 30 of each year, provide the General
Assembly with a list of the 10 shareholders, partners or
members of pass-through entities with the highest aggregate
amount of contributions under this article.
(d) Duties of Auditor General.--The Auditor General shall
have the following duties:
(1) Conduct a compliance audit of the affairs and
activities of a scholarship granting organization.
(2) Conduct a compliance audit of a participating
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nonpublic school related to the requirements under section
2011-B.1.
(3) Publish the audits under paragraphs (1) and (2) on
the Auditor General's publicly accessible Internet website.
(e) Duties of Independent Fiscal Office.--The Independent
Fiscal Office shall have the following duties:
(1) Beginning with information reported for the 2027-
2028 fiscal year, publish on its publicly accessible Internet
website a report of a review of the education options tax
credit established under this article every five years.
(2) Include all of the following in the report under
paragraph (1):
(i) The costs of providing the tax credit, including
administrative costs to the Commonwealth and lost
revenues to the Commonwealth.
(ii) An analysis of eligible contributors by
contributions made, region and type.
(iii) An analysis of scholarship granting
organizations by contributions received, region and type
of program supported.
(iv) An analysis of the data reported under section
2013-B.1.
(v) To the extent possible, an analysis of changes
in educational outcomes.
(vi) Recommendations on how the tax credit could be
more efficiently implemented or evaluated.
(f) Account.--
(1) The Accountability for Diverted Tax Dollars
Restricted Account is established as a restricted account in
the General Fund.
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(2) Money in the account is appropriated on a continuing
basis as follows:
(i) 40% to the department to offset costs associated
with administering this article.
(ii) 20% to the Department of Revenue to offset
costs associated with administering this article.
(iii) 20% to the Auditor General to offset the costs
of conducting audits under subsection (d).
(iv) 20% to the Department of Education to offset
costs associated with administering this article.
(3) The State Treasurer may accept appropriations,
transfers, gifts, donations, legacies or other revenues,
including allowable Federal funds, for deposit into the
account. Interest that accrues in the account shall remain in
the account.
Section 2004-B.1. Scholarship granting organizations.
(a) Requirements.--
(1) A scholarship granting organization shall have the
following duties:
(i) Contribute at least 90% of its annual cash
receipts to a scholarship program, early childhood
scholarship program, economically disadvantaged
scholarship program or educational improvement program,
or contribute at least 85% of its annual cash receipts if
the scholarship granting organization reports an annual
Internal Revenue Service program expense percentage of
greater than 90% on the scholarship granting
organization's Internal Revenue Service Form 990 filing.
(ii) Provide an application and review process for
scholarship applicants that includes a means of verifying
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household income, which may include submission of the
household members' most recently available Federal or
State tax returns, if the household members are required
to file the returns.
(iii) Refrain from earmarking a contribution by an
eligible contributor for a specific student.
(iv) Refrain from providing a scholarship to a
family member of a person receiving compensation from or
involved in the governance of the scholarship granting
organization.
(v) Refrain from awarding a scholarship to an
applicant for enrollment in a home education program
under section 1327.1.
(vi) Refrain from awarding a scholarship to an
applicant to attend a school that is not on the list
under section 2011-B.1.
(vii) Timely report the information required under
section 2013-B.1 to the department.
(viii) Remit 2% of its total contributions under
this article to the department for deposit into the
account.
(ix) Maintain separate accounts in its budget to
facilitate monitoring and auditing of the use of
contributions.
(2) For purposes of paragraph (1)(i), a scholar ship
granting organization contributes its annual cash receipts to
a scholarship program, early childhood scholarship program,
economically disadvantaged scholarship program or educational
improvement program when the scholarship granting
organization expends or otherwise irrevocably encumbers the
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funds for distribution during the then-current fiscal year of
the scholarship granting organization or during the next
succeeding fiscal year of the scholarship granting
organization.
(b) Allowable uses for contributions not used to fund
scholarships or educational improvement programs.--A scholarship
granting organization may use contributions not used to fund
scholarships or educational improvement programs for any of the
following:
(1) Overhead costs directly related to the
administration of a scholarship program, early childhood
scholarship program, economically disadvantaged scholarship
program or educational improvement program, including any of
the following:
(i) Personnel costs for employees who work regularly
in the Commonwealth.
(ii) Operational costs for office space located in
this Commonwealth.
(2) Payment for third-party household income validation
related to maximum annual household income requirements.
(3) Another use deemed appropriate by the department for
the purposes of this article.
(c) Noncompliance.--A scholarship granting organization,
including its successor organization, that fails to comply with
subsection (a) or uses contributions for a purpose not
authorized under subsection (b) may not participate in the
education options tax credit program for the two fiscal years
immediately following the fiscal year in which the scholarship
granting organization failed to meet the requirement.
Section 2005-B.1. Application by eligible contributors.
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(a) Application.--
(1) An eligible contributor shall apply to the
department on a form and in a manner determined by the
department for an education options tax credit for
contributions to a scholarship granting organization under
section 2006-B.1.
(2) The department may accept applications for tax
credits available during a fiscal year no earlier than July 1
of each fiscal year.
(3) At a minimum, the application must include the
eligible contributor's name, address, status as a business
firm or pass-through entity and contribution amount by
program under section 2007-B.1(a).
(4) The department shall make tax credits under this
article available on a first-come, first-served basis within
the limitation specified under section 2007-B.1(a).
(5) The department shall maintain a waiting list
consisting of each eligible contributor that chooses to be
included on the list and whose application has not been
conditionally approved because all available tax credits have
been awarded.
(b) Review.--
(1) The department shall provide the Department of
Revenue with the list of eligible contributors that submitted
an application under subsection (a).
(2) The Department of Revenue shall conduct compliance
checks on the eligible contributors submitted by the
department under paragraph (1) and take the following
actions:
(i) If the taxpayer is compliant, communicate a
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clearance status to the department.
(ii) If the taxpayer is not compliant, issue a
noncompliance letter to the taxpayer and provide the
taxpayer with a reasonable opportunity to resolve the
compliance issue.
(iii) If the taxpayer does not resolve the
compliance issue, communicate a final noncompliance
status to the department, and the taxpayer shall be
ineligible for the tax credit.
(c) Conditional approval.--
(1) Subject to the limitations under sections 2006-B.1
and 2007-B.1, upon receipt of a clearance status under
subsection (b)(2)(i), the department shall notify the
eligible contributor that conditional credits have been
reserved and shall inform the eligible contributor of the
requirements under subsection (d).
(2) Unless otherwise requested by the eligible
contributor and agreed to by the eligible contributor and the
department, and unless all authorized credits have already
been awarded, the department shall give written notice of its
conditional approval to each eligible contributor that
submitted a completed application under subsection (a) by
August 30, or 30 days following receipt of the completed
application, whichever is later.
(3) If the department fails for a period of at least 10
days to timely transmit a written notice required under this
subsection, the affected eligible contributor may bring an
action for injunctive or other appropriate relief in
Commonwealth Court.
(d) Contributions.--To receive a tax credit under this
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article, an eligible contributor shall make the contribution to
a scholarship granting organization that appears on the list
required under section 2003-B.1(a)(5) no later than 60 days
after the date of the conditional approval notice received under
subsection (c).
(e) Proof of contribution.--
(1) An eligible contributor shall provide proof of
contribution to the department on a form and in a manner
determined by the department.
(2) If an eligible contributor does not make a minimum
of 50% of the full amount of the conditionally approved
contribution, the eligible contributor's tax credit
application may not be approved in the immediately succeeding
fiscal year.
(3) Upon receiving satisfactory proof of contribution,
the department shall notify the Department of Revenue.
(f) Reallocation.--Unawarded tax credits may not be
reallocated to any of the categories of programs.
(g) Application in the alternative.--At the time of
application for a tax credit under this article, the department
shall advise an eligible contributor that the eligible
contributor may elect that its application for a particular tax
credit will, in the alternative, be deemed an application
received by the department on the same date as the preferred
application, but for a different tax credit authorized under
this article if the eligible contributor's preferred choice of
tax credit is not available. If an eligible contributor does not
receive its preferred choice of tax credit, the department shall
promptly consider the eligible contributor's alternative
application for a different tax credit authorized under this
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article.
Section 2006-B.1. Tax credits.
(a) Award.--In accordance with section 2007-B.1, th e
Department of Revenue shall grant a tax credit against an
applicable tax to an eligible contributor for which the
Department of Revenue has received notice under section 2005-
B.1(e)(3) as follows:
(1) The tax credit shall not exceed 75% of the total
amount contributed during the tax year by an eligible
contributor to a scholarship granting organization for a
scholarship program.
(2) The tax credit shall not exceed 90% of the total
amount contributed during the tax year by an eligible
contributor to a scholarship granting organization for an
early childhood scholarship program or educational
improvement program.
(3) The tax credit shall not exceed 99% of the total
amount contributed during the tax year by an eligible
contributor to a scholarship granting organization for an
economically disadvantaged scholarship program.
(4) The tax credit shall not exceed $750,000 annually
per eligible contributor for contributions made to
scholarship granting organizations for scholarship programs,
early childhood scholarship programs or educational
improvement programs.
(5) Subject to section 2007-B.1(a)(4) and (c), no annual
limit per eligible contributor shall apply to contributions
made to scholarship granting organizations for economically
disadvantaged scholarship programs.
(b) Combination of tax credits.--In accordance with section
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2007-B.1, an eligible contributor may receive tax credits from
the Department of Revenue in a tax year for any combination of
contributions to scholarship granting organizations. An eligible
contributor may not receive tax credits in a tax year in excess
of $750,000 for combined contributions to scholarship granting
organizations for scholarship programs, early childhood
scholarship programs or educational improvement programs.
(c) Pass-through entity.--
(1) A pass-through entity may elect in writing to
distribute for no consideration all or a portion of the
credit to shareholders, members or partners in proportion to
the percentage interest of the shareholder, member or partner
in distributions from the pass-through entity. The
shareholders, members or partners may use the credits in the
tax year in which the contribution is made or in the tax year
immediately following the year in which the contribution is
made. The election shall designate the tax year in which the
distributed credits are to be used and shall be made
according to procedures established by the Department of
Revenue. A pass-through entity that received a distribution
from a pass-through entity under this paragraph may make a
distribution under this paragraph.
(2) A pass-through entity and a shareholder, member or
partner of a pass-through entity may not claim the credit
under this section for the same contribution.
(3) A shareholder, member or partner may not carry
forward, carry back, obtain a refund of, sell or assign the
credit.
(4) An individual shareholder, partner or member may
apply a credit distributed under this section to income
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taxable under Article III of the Tax Reform Code of 1971 to
the shareholder, partner or member, to the spouse of the
shareholder, partner or member or to both, if both the
shareholder, partner or member and the spouse report income
on a joint personal income tax return.
(d) Restriction.--No credit granted under this section may
be applied against a tax withheld by an employer from an
employee under Article III of the Tax Reform Code of 1971.
Section 2007-B.1. Limitations.
(a) Amount.--The total aggregate amount of all tax credits
approved for contributions from eligible contributors to
scholarship granting organizations shall not exceed $680,000,000
in the 2027-2028 fiscal year and each fiscal year thereafter.
The total aggregate amount shall be allocated as follows:
(1) No less than $273,000,000 $375,000,000 of the total
aggregate amount shall be used to provide tax credits for
contributions from eligible contributors to scholarship
granting organizations for scholarship programs.
(2) No less than $146,500,000 $74,500,000 of the total
aggregate amount shall be used to provide tax credits for
contributions from eligible contributors to scholarship
granting organizations for educational improvement programs.
(3) No less than $60,500,000 $30,500,000 of the total
aggregate amount shall be used to provide tax credits for
contributions from eligible contributors to scholarship
granting organizations for early childhood scholarship
programs.
(4) No less than $200,000,000 of the total aggregate
amount shall be used to provide tax credits for contributions
from eligible contributors to scholarship granting
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organizations for economically disadvantaged scholarship
programs.
(b) Activities.--No tax credit may be approved for
activi ties that are a part of an eligible contributor's normal
course of business.
(c) Tax liability.--
(1) Except as provided in paragraph (2), a tax credit
granted for a tax year may not exceed the tax liability of an
eligible contributor.
(2) In the case of a credit granted to a pass-through
entity which elects to distribute the credit under section
2006-B.1(c), a tax credit granted for a tax year and
distributed to a shareholder, member or partner may not
exceed the tax liability of the shareholder, member or
partner.
(d) Tax credit use.--A tax credit not used by an eligible
contributor in the tax year the contribution was made or in the
tax year designated under section 2006-B.1(c) may not be carried
forward or carried back and is not refundable or transferable.
Section 2008-B.1. Scholarships.
(a) Nontaxable income.--A recipient's scholarship shall not
be considered taxable income for purposes of Article III of the
Tax Reform Code of 1971.
(b) Financial assistance.--A recipient's scholarship shall
not constitute an appropriation or financial assistance to the
school or early childhood program attended by the recipient.
(c) Amount.--The combined amount of the scholarship awarded
to a recipient and additional financial assistance provided to
the recipient may not exceed the tuition rate and school-related
fees for the participating public school or participating
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nonpublic school that the recipient attends or will attend.
Section 2009-B.1. Educational improvement programs.
A scholarship granting organization may provide funds to an
educational improvement program that meets the requirements
established by the department in consultation with the
Department of Education.
Section 2010-B.1. Low-achieving schools.
(a) List.--By February 1 of each year, the Department of
Education shall publish on the Department of Education's
publicly accessible Internet website a list of the low-achieving
schools for the following school year.
(b) Notice.--By February 1 of each year, the Department of
Education shall notify each school district identified as having
at least one low-achieving school and shall furnish the school
district with a list of the low-achieving schools located within
the school district.
(c) Average daily membership.--
(1) A recipient who was enrolled in the recipient's
school district of residence or in a charter school, regional
charter school or cyber charter school when the recipient
first received a scholarship under an economically
disadvantaged scholarship program shall continue to be
counted in the average daily membership of the school
district for one year after enrolling in a participating
public school or participating nonpublic school.
(2) During the year referenced in paragraph (1) and each
school year thereafter, a school district of a participating
public school in which the recipient is enrolled may not
include the recipient in the school district's average daily
membership.
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Section 2011-B.1. School participation in program.
(a) Notice.--
(1) By November 1 of each year, a school district with a
public school that wishes to be a participating public school
for the following fiscal year shall notify the Department of
Education. The notification must include all of the
following:
(i) Each school within the school district that the
school district intends to make a participating public
school.
(ii) The amount of tuition and school-related fees
attributable to each available seat. The amount under
this subparagraph may not exceed the amount calculated
under section 2561.
(2) By November 1 of each year, a nonpublic school that
wishes to be a participating nonpublic school for the
following fiscal year shall notify the Department of
Education and shall submit to the Department of Education, on
a form developed by the Department of Education, all of the
following:
(i) The amount of tuition and school-related fees
attributable to each available seat for the nonpublic
school for the current school year.
(ii) The complete list of application and admissions
requirements used by the nonpublic school to determine
whether a student is accepted to enroll in the nonpublic
school.
(iii) The nonpublic school's institutional financial
aid policy.
(iv) The nonpublic school's policies regarding the
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expulsion and suspension of pupils.
(v) The nonpublic school's total enrollment for the
previous school year.
(vi) The number of students who applied and were not
accepted to enroll in the nonpublic school in the
previous school year.
(vii) The number of students who were unenrolled
from the nonpublic school at the initiation of the
nonpublic school in the previous school year, not
including students who graduated.
(b) List.--By January 1 of each year, the Department of
Education shall publish on the Department of Education's
publicly accessible Internet website the complete list of
participating public schools and participating nonpublic schools
that provided satisfactory notice and information required under
subsection (a). The published list shall be subject to the
following:
(1) An eligible student may not receive a scholarship to
attend a school that is not on the list.
(2) The list shall include the information provided by
each public school under subsection (a)(1).
(3) The list shall include the information provided by
each nonpublic school under subsection (a)(2).
(4) The list may not include a nonpublic school that
discriminates on a basis that is illegal under Title VI of
the Civil Rights Act of 1964 (Public Law 88-352, 42 U.S.C. §
2000 et seq.).
(c) Participating public school criteria.--The following
criteria shall apply to a participating public school:
(1) Except as otherwise provided in this article, a
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school district shall enroll students in a participating
public school on a lottery basis from a pool of recipients
who meet the application deadline set by the Department of
Education until the participating public school fills the
school's available seats. The pool may not include a
recipient who:
(i) Has been expelled or is in the process of being
expelled under section 1317.2, 1318 or 1318.1 and
applicable regulations of the State Board of Education.
(ii) Has been recruited by the school district or
its representatives for athletic purposes.
(2) Enrollment of recipients may not place the school
district in violation of a valid and binding desegregation
order.
(3) Priority shall be given to:
(i) An existing recipient.
(ii) A recipient who is a sibling of a student
currently enrolled in the school district.
(d) Participating nonpublic school criteria.--The following
criteria shall apply to a participating nonpublic school:
(1) The participating nonpublic school may not
discriminate on a basis which is illegal under Federal or
State laws applicable to nonpublic schools.
(2) The participating nonpublic school shall comply with
section 1521.
(3) The participating nonpublic school or its
representatives may not recruit a student for athletic
purposes.
(e) Student rules, policies and procedures.--
(1) Prior to enrollment of a recipient, a school
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district of a participating public school or a participating
nonpublic school shall inform the recipient's parent of the
rules, policies and procedures of the participating public
school or participating nonpublic school, including academic
policies, disciplinary rules and administrative procedures of
the participating public school or participating nonpublic
school.
(2) Enrollment of a recipient in a participating public
school or participating nonpublic school shall constitute
acceptance of the rules, policies and procedures of the
participating public school or participating nonpublic
school.
(f) Transportation.--
(1) Transportation of recipients shall be provided to
the extent required under section 1361.
(2) Reimbursement shall be as follows:
(i) Transportation of a recipient attending a
participating public school shall be subject to
reimbursement under section 2541.
(ii) Transportation of a recipient attending a
participating nonpublic school shall be subject to
reimbursement under sections 2509.3 and 2541.
(g) Institutional financial aid.--A participating nonpublic
school may not use a recipient's scholarship award to reduce or
supplant the amount of institutional financial aid provided by
the participating nonpublic school, except if the recipient's
scholarship award exceeds the recipient's total cost of tuition
and school-related fees.
(h) Tuition rates.--
(1) A school district of a participating public school
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may not charge a recipient a higher tuition rate or school-
related fee than the school district would have charged to a
similarly situated student who is not receiving a
scholarship.
(2) Notwithstanding section 2561, a school district of a
participating public school may charge a recipient a tuition
rate that is lower than that charged to a student who is not
receiving a scholarship.
(3) A participating nonpublic school may not charge a
recipient a higher tuition rate or school-related fee than
the participating nonpublic school would have charged to a
similarly situated student who is not receiving a
scholarship.
(i) Construction.--Nothing in this article shall be
construed to:
(1) Prohibit a participating nonpublic school from
limiting admission to a particular grade level, a single
gender or areas of concentration of the participating
nonpublic school, including mathematics, science and the
arts.
(2) Authorize the Commonwealth or an agency, officer or
political subdivision of the Commonwealth to impose an
additional requirement on a participating nonpublic school
that is not otherwise authorized under this article or other
laws of this Commonwealth or to require a participating
nonpublic school to enroll a recipient if the participating
nonpublic school does not offer appropriate programs, is not
structured or equipped with the necessary facilities to meet
the recipient's special needs or does not offer a particular
program requested.
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Section 2012-B.1. Original jurisdiction.
The Pennsylvania Supreme Court shall have exclusive and
original jurisdiction to hear a challenge or to render a
declaratory judgment concerning the constitutionality of this
article. The Pennsylvania Supreme Court may take an action the
court deems appropriate, consistent with the Pennsylvania
Supreme Court's retaining jurisdiction over the matter, to find
facts or to expedite a final judgment in connection with a
challenge or request for declaratory relief.
Section 2013-B.1. Reporting.
(a) Programs providing scholarships .-- Each scholarship
granting organization that operates a scholarship program,
economically disadvantaged scholarship program or early
childhood scholarship program shall annually report to the
department, by scholarship program, economically disadvantaged
scholarship program and early childhood scholarship program, all
of the following information based on the immediately preceding
fiscal year by October 1 of each year:
(1) The number of scholarships awarded to applicants
with a household income that does not exceed 50% of the
maximum annual household income, disaggregated by program
category.
(2) The number of scholarships awarded to applicants
with a household income that is greater than 50% but does not
exceed 75% of the maximum annual household income,
disaggregated by program category.
(3) The number of scholarships awarded to applicants
with a household income that is greater than 75% but does not
exceed 100% of the maximum annual household income,
disaggregated by program category.
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(4) The total amount of contributions received from
eligible contributors granted a tax credit under this article
during the immediately preceding fiscal year.
(5) For each scholarship awarded to an applicant:
(i) An indicator of whether the recipient was an
eligible early childhood student, eligible student or
eligible student with a disability.
(ii) An indicator of whether the recipient was in an
early childhood program, in grades kindergarten through
eight or in grades nine through 12.
(iii) The dollar amount of the scholarship award.
(iv) The dollar amount of tuition and school-related
fees paid by the student after the scholarship award was
applied.
(v) The year in which the scholarship award was
used.
(vi) The name of the recipient's school district of
residence.
(vii) The name of the school or early childhood
program that the recipient attended.
(b) Educational improvement programs.--Each scholarship
granting organization that operates an educational improvement
program shall annually report the following information based on
the immediately preceding fiscal year to the department by
October 1 of each year:
(1) The total amount of contributions received from
eligible contributors granted a tax credit under this article
during the immediately preceding fiscal year.
(2) A description of each educational improvement
program supported by the scholarship granting organization.
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(3) The amount distributed to each educational
improvement program supported by the scholarship granting
organization.
(c) Scholarship granting organizations.--Each scholarship
granting organization shall annually report to the department,
based on the immediately preceding fiscal year, the use of
contributions not used to fund scholarships or educational
improvement programs, disaggregated by eligible use under
section 2004-B.1(b). The department may request supporting
documentation.
(d) Forms.--The information required under subsections (a),
(b) and (c) shall be submitted on a form provided by the
department. No later than August 1 of each year, the department
shall distribute the forms to each scholarship granting
organization required to make a report under this section.
(e) Publication.--Beginning November 1, 2028, and each year
thereafter, the department shall annually publish a downloadable
spreadsheet on the department's publicly accessible Internet
website containing the information required under subsections
(a), (b) and (c). To protect student privacy and prevent the
identification of students, the department may not disclose the
names of scholarship award recipients.
Section 4. The transition from Article XX-B of the act to
Article XX-B.1 of the act shall be as follows:
(1) Article XX-B of the act shall continue to apply to a
tax credit approved for a fiscal year prior to the 2027-2028
fiscal year, a contribution made under an approval issued for
a fiscal year prior to the 2027-2028 fiscal year, a report
required for a fiscal year prior to the 2027-2028 fiscal year
and an administrative, enforcement, tax or reporting matter
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arising from a tax credit or contribution under Article XX-B
of the act.
(2) The addition of Article XX-B.1 of the act shall
apply to tax credits approved for the 2027-2028 fiscal year
and each fiscal year thereafter.
Section 5. This act shall take effect immediately.
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