RALEIGH — President Donald Trump signed his first major piece of legislation into law on Independence Day, delivering on a wide range of campaign promises, including making his tax cuts permanent and enacting no tax on tips.
Trump’s One Big Beautiful Bill (OBBB) also introduces a nationwide school choice program through a federal tax credit for individuals contributing to scholarship granting organizations (SGOs).
The new federal tax credit allows U.S. citizens or residents to claim up to $1,700 annually for cash contributions to SGOs that fund scholarships for eligible K-12 students in participating states. The credit supports expenses like tuition and books, and any unused credit can be carried forward for up to five years.
Eligible students come from households with incomes up to 300% of the area median gross income and are eligible for public school enrollment. According to the U.S. Census Bureau data for 2023, the average median family income in North Carolina was $70,804, putting the eligibility range at upward of $212,400.
The SGO must meet specific requirements, such as being a 501(c)(3) organization, maintaining separate accounts for qualified contributions, spending at least 90% of its income on scholarships, and prioritizing students who previously received or have siblings who did.
SGOs must meet strict requirements, including undergoing annual audits by independent certified public accountants and ensuring no scholarships are awarded to disqualified persons to prevent “self-dealing.”
Some of the relevant language in the OBBB was altered by the Senate before Trump signed the bill, including the process for states opting into the tax credit program and SGO involvement.
According to the new law, states must decide by Jan. 1 each year to participate and transmit the list of qualified SGOs to the federal government. Additionally, the selection of SGOs is to be made “by the Governor of the state or by another individual, agency, or entity designated under state law to make such elections on behalf of the state with respect to federal tax benefits.”
That language in the OBBB could be problematic for North Carolina, as Democrats in the state have opposed school choice expansion, including Democratic Gov. Josh Stein.
However, Senate Leader Phil Berger (R-Eden), who has championed school choice in the state, issued a statement on X that he plans to introduce a measure to allow North Carolina to participate.
“I will write legislation to enable North Carolina to take part in President Trump’s School Choice Plan, allowing taxpayers to write off contributions to organizations that fund private school scholarships,” Berger wrote in part.
One organization, Parents for Educational Freedom in North Carolina (PEFNC), is already positioned as a qualifying SGO. PEFNC, which just celebrated its 20th anniversary, has been a leader in school choice advocacy in the state, particularly for the Opportunity Scholarship program (OSP) and Students with Disability grants.
PEFNC President Mike Long told North State Journal he acknowledges the issue with the state “opt-in” language and that national school choice advocates would likely work to change the provision and raise the maximum donor amount before the law’s current effective date.
“The bottom line is it does not cost the state of North Carolina anything for an SGO to grant these scholarships to families that need them,” Long said. “So the argument is, why would anybody in the state oppose something like that?”
The new tax credit program could stack with the OSP, allowing families to close any financial gaps in affording private school tuition and other expenses covered.
Long said his organization would encourage families to apply for the OSP first.
“If a family, let’s say, gets a $7,200 scholarship from the Opportunity Scholarship program, but the tuition to the school they want to go to is $9,500, they could apply with the SGO for the difference,” Long said. “So that’s how, and that’s, in my opinion, how we as an SGO would operate it. We would stack it on top of OSP.”
The OSP provides scholarships based on household income using a four-tiered system, with the largest amounts going to lower-income families under Tier One, which offers a maximum amount of $7,676 a year. The average private school tuition in the state is around $11,105, according to the website College Transitions.
There are more than 880 private schools in North Carolina, of which over 600 participate in the OSP. During the 2024-25 school year, 135,738 students in North Carolina were enrolled in a private school. For the same school year, there are 80,470 OSP recipients, according to data from the N.C. Education Assistance Authority, which oversees the program.
In addition to the tax credit, the OBBB also expands the use of 529 accounts to include elementary, secondary and religious school expenses such as tuition, curriculum materials, books, online resources, tutoring, standardized test fees and educational therapies for students with disabilities.
Another investment opportunity for families tucked in the OBBB is “Trump Accounts,” where the federal government will deposit $1,000 into a tax-deferred, low-cost index fund account for each eligible child born between Jan. 1, 2025, and Jan. 1, 2029. Additional annual contributions of up to $5,000 can be made to the account. Those funds can be used for expenses ranging from college tuition to a house down payment once the child reaches the age of 25.
