H.R.750 - Achieving Choice in Education Act; ACE Act (119th Congress)
Summary
H.R.750, the Achieving Choice in Education Act (ACE Act), proposes amendments to the Internal Revenue Code of 1986 to incentivize education. The bill expands the use of 529 accounts to include expenses for homeschooling and additional elementary and secondary education costs. It also increases the limitation on distributions from 529 plans for elementary and secondary school expenses and provides gift tax exclusions for contributions to 529 plans.
Additionally, the bill restricts tax-exempt bonds to states that implement school choice laws, aiming to encourage states to adopt such programs.
This bill seeks to provide more educational options for families and promote school choice through financial incentives and restrictions.
Expected Effects
The ACE Act would likely increase the use of 529 plans for elementary and secondary education, particularly homeschooling. Families could see reduced tax burdens related to educational expenses.
States may be incentivized to adopt or expand school choice programs to maintain access to tax-exempt bonds. This could lead to shifts in funding and enrollment patterns in public and private schools.
Overall, the bill aims to empower parents with greater control over their children's education and promote competition among schools.
Potential Benefits
- Expands educational options for families, allowing them to use 529 plans for a wider range of educational expenses, including homeschooling.
- Provides financial relief to families through increased 529 plan distribution limits and gift tax exclusions.
- Encourages states to adopt school choice programs, potentially leading to improved educational outcomes through competition.
- Supports students with disabilities by including educational therapies as qualified expenses.
- Could stimulate the development of new educational resources and services, such as online materials and tutoring.
Potential Disadvantages
- May disproportionately benefit higher-income families who are more likely to utilize 529 plans and afford private education.
- Could lead to decreased funding for public schools in states that adopt robust school choice programs, potentially harming students in those schools.
- The restriction on tax-exempt bonds could penalize states that do not implement school choice laws, regardless of their educational performance.
- Increased use of 529 plans for elementary and secondary education could reduce funds available for higher education.
- The definition of "school choice programs" may be interpreted differently across states, leading to inconsistencies in implementation.
Most Disadvantaged Areas:
Constitutional Alignment
The ACE Act's provisions related to education appear to align with the general welfare clause of the Constitution's preamble, which aims to "promote the general Welfare." However, the restriction on tax-exempt bonds based on state school choice policies could raise concerns about federal overreach into state education systems, potentially conflicting with principles of federalism.
The First Amendment's Establishment Clause and Free Exercise Clause are relevant, as the bill includes religious schools in the expanded 529 plan usage. The bill must ensure that funds are used in a manner that does not violate the separation of church and state or infringe upon religious freedom.
Congress's power to tax and spend, as outlined in Article I, Section 8, provides the constitutional basis for the tax-related provisions of the bill, including the amendments to the Internal Revenue Code.
Impact Assessment: Things You Care About ⓘ
This action has been evaluated across 19 key areas that matter to you. Scores range from 1 (highly disadvantageous) to 5 (highly beneficial).