Keep Public Funds in Public Schools Act
- Sponsor
- Sen. Kelly, Mark [D-AZ]
- Committees
- Finance Committee (primary)
- Last action
- Apr 15, 2026
Bottom line
This bill aims to eliminate federal tax incentives for private school scholarships by repealing specific tax credits and income exclusions, thereby redirecting potential revenue to public education.
What it actually does
This bill proposes to repeal two sections of the Internal Revenue Code of 1986: Section 25F, which provides a tax credit for individual contributions to Scholarship Granting Organizations (SGOs), and Section 139K, which excludes certain scholarship amounts received from SGOs from gross income. The effective date for these repeals is generally for taxable years ending after December 31, 2026, and for amounts received after that date for the income exclusion.
Proponents argue
Proponents argue that federal tax credits for private school scholarships divert public funds and resources away from public schools, which serve the vast majority of students. They contend that these tax incentives disproportionately benefit wealthier families and private institutions, undermining the principle of universal public education. By repealing these credits, the bill aims to strengthen public education by ensuring federal tax revenue supports public schools.
Opponents contend
Opponents would argue that repealing these tax credits would harm students from low-income families who rely on SGO scholarships to access educational opportunities that might not be available in their local public schools. They contend that school choice programs empower parents and provide alternatives for students, and that these tax incentives encourage philanthropic giving to support such choices. Eliminating the credit could reduce funding for these scholarships, limiting options for vulnerable students.
The bill is very short and can be read quickly, making it accessible for immediate understanding.
Section 2(a)
Repeal of Individual Tax Credit for Scholarship Granting Organization Contributions
This provision eliminates Section 25F of the Internal Revenue Code, which currently allows individuals to claim a tax credit for contributions made to qualified Scholarship Granting Organizations. These organizations typically provide scholarships for students to attend private elementary and secondary schools. The repeal means that individuals will no longer receive a federal tax benefit for such contributions, effectively removing a financial incentive for donating to SGOs.
Supporters argue
Supporters argue that repealing this credit ensures that federal tax dollars are not indirectly subsidizing private education, thereby strengthening the public school system. They contend that public funds should be directed towards public institutions that serve all students and that this repeal aligns with that principle.
Critics contend
Opponents would argue that this repeal punishes charitable giving that supports educational choice for families, particularly those in underserved communities. They believe it limits options for students who might thrive in private school environments and reduces the overall pool of educational funding, ultimately harming students.
Tradeoffs
The provision balances the desire to support public education funding with the desire to provide educational choice through private scholarships. It also involves a tension between federal tax policy and state-level education funding mechanisms.
Section 2(b)
Repeal of Gross Income Exclusion for SGO Scholarship Amounts
This provision eliminates Section 139K of the Internal Revenue Code, which currently allows certain scholarship amounts received from Scholarship Granting Organizations to be excluded from a recipient's gross income for federal tax purposes. The repeal means that, in the future, such scholarship amounts may be considered taxable income, depending on other applicable tax laws, potentially increasing the tax burden on scholarship recipients.