‘Big Beautiful Bill’ helps scholarship fund donors

The “Big Beautiful Bill” recently passed by the House and the Senate and signed into law by President Trump includes a provision that allows donors to certain scholarship funds for elementary and high school education expenses to claim a tax credit for donations up to $1,700.

The federal government has long indirectly subsidized charities, including private schools, shuls, and other religious organizations by incentivizing donations to these organizations; it has done so by making the donations tax-deductible. So a government subsidy for contributions to private schools is nothing new. What is new under the recent legislation is that donors now can receive a tax credit, rather than a tax deduction, for contributions up to $1,700 to certain scholarship funds. A tax credit allows you to reduce your taxes by a greater amount than a tax deduction does.

In order to qualify for the credit, contributions must be made to certain scholarship granting organizations, rather than directly to schools. These SGOs will have to comply with a number of requirements, including that they distribute at least 90 percent of contributions as scholarships, grant scholarships to at least 10 students, grant scholarships to students who attend at least two different schools, and distribute scholarship funds only to students whose families earn less than 300 percent of the median income in their geographic area.

The organizations also will not be allowed to earmark contributions to be distributed as scholarships for specific students. States will have to opt in on an annual basis and send a list to the federal government of organizations in the state that are authorized to accept the contributions and distribute scholarships.

Scholarship recipients will be allowed to use the funds for tuition and a variety of other educational expenses, including tutoring, special needs services, education technology, books and supplies, transportation, and extended-day programs. Although families who choose public schools do not incur tuition expenses, they often do incur some of the others, so the new legislation may also benefit those families by reducing their education costs.

“This is the largest ever government support program for families who want to choose nonpublic schools for their children, whether they’re Jewish schools, Catholic schools, or secular private schools,” Nathan Diament, who directs the Orthodox Union’s Advocacy Center, said. It provides more choice to parents by making access to nonpublic schools more affordable. “The legislation also benefits families that use public schools.”

The new rules do not violate Constitutional provisions providing for separation of church and state, Mr. Diament added. “These types of tax credit programs have already existed for many years in states including Florida, Arizona, and Pennsylvania, and they have clearly been upheld by the United States Supreme Court as constitutional.”

It’s hard to forecast how big an impact the new legislation will have on private school affordability, Mr. Diament continued, “but a lot of it is going to be a function of how well we as a community organize.” Significant funds can be raised but it will have to be raised “$1,700 at a time. This is going to be retail fundraising. The OU and others are still sorting out how best to utilize it.”

One of the things the OU is focusing on is “how, as a national organization, can we play the most constructive role, and how can we support or partner with local communities to make sure that we are accessing the maximum benefit, in our case, to the Jewish day school community. If we are well organized, and if we are efficient, then a lot of money can be raised, and that can potentially significantly help parents by increasing the affordability of day school.

“The goal is to make Jewish education more affordable and more accessible for every family that wants it.”