NC lawmakers enact education tax-break bill, adopting Trump policy by overriding Stein veto

North Carolina lawmakers on Wednesday voted to conform state law to a new federal law passed under Republican President Donald Trump, giving tax breaks to people who donate to educational scholarship programs.

The legislation, known as House Bill 87, became law after the Republican-controlled state Senate voted 30-19 to override a veto that Democratic Gov. Josh Stein. The House of Representatives voted to override Stein’s veto last month. 

The new tax break was included in Trump’s signature legislation known as the “One Big Beautiful Bill,” which Trump signed in July. It allows a nonrefundable dollar-for-dollar tax credit of up to $1,700 for donations to a “scholarship granting organization.” 

House Bill 87 grants the North Carolina State Educational Assistance Authority — the agency that oversees state school vouchers — the task of certifying and listing “scholarship granting organizations” that qualify for the tax credit.

Democratic critics fear the new tax credit will diminish the amount of funding available for public education. Minority Leader Sydney Batch, D-Wake, said the vote serves as a “distraction” from the fact that Republican legislative leaders haven’t adopted a comprehensive state budget to properly fund public education or provide substantive raises to teachers. 

Senate leader Phil Berger and House Speaker Destin Hall last month announced a 'starting point' for a budget deal that would include raises for teachers. Berger, R-Rockingham, dismissed critics’ concerns over education funding as “Trump Derangement Syndrome."

Stein, in vetoing the bill last year, said that he wanted to opt into the program only after the federal Treasury Department approved rules governing it. It hasn't done that yet. He also said he wanted to adopt a policy that could benefit public schools.

Sen. Jay Chaudhuri, D-Wake, echoed Stein’s concerns during a brief debate of the bill Wednesday, saying: “We are being asked to opt into a program built on an unfinished foundation.”

State Sen. Michael Lee, R-New Hanover, acknowledged that the federal government has offered “limited guidance” for administering the tax break but said he believes states will receive the information they need before the 2027 tax year — when it goes into effect.

Stein issued a statement after the Senate’s vote, saying he hopes to opt-in to the program in a way that can benefit public school students. Education Secretary Linda McMahon said last month that states will be able to put conditions on scholarship organizations, though the federal Treasury Department will first make rules that govern the program

“We are working on a solution to make it easy for North Carolinians like me who want to direct their federally reimbursed donations to scholarship-granting organizations that directly benefit public school students, and I look forward to sharing more once the federal guidance has been provided,” Stein said.