Treasury and IRS issue the rules for the federal scholarship tax credit, and scholarship charities must register before Jan. 1
Temporary rules published Oct. 2 require scholarship granting organizations to register in a new IRS portal, give donors a unique donor number and report gifts each year. Proposed rules would bar states from adding stricter requirements. Comments are due Dec. 1.
Washington. The Treasury Department and the Internal Revenue Service on Oct. 1 issued the rules for the new federal tax credit for gifts to nonprofits that give scholarships to schoolchildren. The package has two parts: temporary regulations that take effect Dec. 1 and set the procedures states and scholarship granting organizations need now, and proposed regulations covering the rest of the credit. Both appeared in the Federal Register on Oct. 2.
The credit, Section 25F of the Internal Revenue Code, starts Jan. 1, 2027. An individual may claim up to $1,700 a year for cash gifts to a scholarship granting organization on a participating state's list, and married couples filing jointly up to $3,400, the IRS said. Thirty states have opted in.
What scholarship organizations must do now
Under the temporary rules, an organization must register electronically in a new IRS portal, as soon as possible and preferably before it appears on any state's list. It gives its name, employer identification number, address, year of formation, a contact person and its tax year. Registration gives it instructions for creating a unique donor number in a format all such organizations share, so donors need not hand over Social Security numbers.
By Jan. 31 of the following year, the organization must send each donor a written acknowledgement with its EIN, the total the donor designated for the credit, the donor's unique number and a statement of any goods or services given in return. By Feb. 28 it reports each donor's name, address and total to the IRS through the portal. A state electing for 2027 must file Form 15714 by Jan. 1, 2027, and may send its list of organizations by Feb. 15, 2027. The temporary rules expire on Oct. 1, 2029.
What the proposed rules would change
The proposed rules would bar participating states from imposing operating requirements on these organizations stricter than the law's, including limits on the kinds of schools students may attend or the expenses scholarships may pay, and from using discretionary certification standards to exclude organizations that otherwise qualify. A safe harbor would let an organization take part in several states if at least 85 percent of its activities are granting scholarships; Treasury and the IRS estimate it could bring in about 450 more organizations.
By 2030, the agencies estimate, 600 to 700 organizations could take part, with more than 11 million taxpayers giving nearly $26 billion a year for as many as 2.2 million scholarships. Comments on the proposed rules are due Dec. 1. A public hearing is set for Dec. 15 and will be canceled if no one asks to speak by Dec. 1.
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