Thirty states have opted into the federal scholarship tax credit, and the charities that will run it await Treasury's rules
Starting Jan. 1, 2027, a credit of up to $1,700 covers gifts to scholarship granting organizations that a participating state lists. Treasury said it would propose the rules by the end of September; none had appeared by Sept. 28, and Washington's governor is waiting for them.
Washington. Thirty states have told the Internal Revenue Service they will take part in 2027 in a new federal tax credit for gifts to nonprofits that give scholarships to schoolchildren, the agency's list showed as of Sept. 14. Those nonprofits are still waiting for the rules: the Treasury Department said in June it expected to propose them by the end of September, and none had appeared by Sept. 28.
The credit, Section 25F of the Internal Revenue Code, comes from the tax law President Trump signed on July 4, 2025. Starting Jan. 1, 2027, an individual may claim a credit equal to cash contributions to a scholarship granting organization, up to $1,700 a year. A gift claimed for the credit cannot also be deducted, and the money must fund scholarships only in the state that lists the organization.
What the organizations must do
The organization must be a 501(c)(3) public charity, not a private foundation, on a participating state's list. It must keep the contributions in separate accounts, spend at least 90 percent of its income on scholarships, serve 10 or more students who do not all attend the same school, and give priority to returning students and then their siblings. It must verify that each student's household earns no more than 300 percent of the area median gross income.
Previewing the rules on June 9, Kevin Salinger, a deputy assistant secretary for tax policy, said an organization would count as located in a state if it is authorized to do business there and follows the state's general rules for charities. Each would need an annual audit by an independent party, or, if small, by an internal committee unrelated to management, and would give each donor a unique number so donors need not share Social Security numbers.
How states join
The governor, or an official that state law designates, makes the election. Since Jan. 1, states have been able to file Form 15714, an advance election for 2027, before sending their lists of organizations; the IRS will set the deadline for the lists in later guidance. Virginia filed first, on Jan. 9, according to Ballotpedia. In Kansas, Kentucky and North Carolina, legislatures opted in by overriding the governors' vetoes.
In Washington, Gov. Bob Ferguson has not said publicly whether the state will join; his communications director, Brionna Aho, said he would wait for the final rules, the Washington State Standard reported on Sept. 18. The governors of Oregon, New Mexico and Hawaii have declined, the Standard said. Taxpayers in states that stay out may still give to organizations in states that take part, but students there cannot receive the scholarships.
About this story
501c3.help wrote this story from the sources listed with it, not from material an organization sent. Our editors approved it on Sept. 29, 2026. Stories in The Nonprofit Herald are free, and nothing is asked in return. Editorial rules.
Found an error? Write to [email protected] and we will correct it.