The Treasury Department and the IRS are requesting comments on the implementation of a new federal tax credit scholarship program under the One Big Beautiful Bill Act designed to support school choice initiatives and students with education-related expenses.
This new credit applies to contributions to scholarship granting organizations that serve elementary and secondary school students from low- and middle-income families.
The OBBBA established a new tax credit scholarship program that is primarily intended to assist K-12 students with the cost of attending private schools but also includes additional types of educational expenses. Participation in the program is left to each state’s discretion.
Beginning Jan. 1, 2027, individual taxpayers can claim a nonrefundable federal tax credit under Section 25F of the Internal Revenue Code for cash contributions to SGOs providing scholarships for elementary and secondary education expenses. The credit allowed to any taxpayer is limited to $1,700.
Scholarship funds will be managed by SGOs, defined under the OBBBA as tax-exempt 501(c)(3) organizations, including educational nonprofits, universities, and churches. SGOs will send donated funds to families to be used for eligible educational expenses. SGOs may retain up to 10% of the income from the scholarship funds to cover administrative costs.
For contributions to an SGO in a state or the District of Columbia that’s eligible for the Section 25F credit, the state must first choose to participate by providing the IRS with a list of the SGOs located in the state that satisfy the SGO requirements, according to the IRS.
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Notice 2025-70, which was issued on Nov. 25, announces that the Treasury Department and the IRS intend to issue proposed regulations and are currently seeking comments from interested parties on issues that should be addressed in the forthcoming regulations.
Specifically, Treasury and the IRS are seeking comments on the following issues:
- A participating state’s required annual certification of SGOs within the state that meet the statutory requirements to qualify as an SGO;
- Policies and procedures implemented by electing states to ensure that the required certification is accurate and complete;
- Issues involving single-state organizations, organizations that may fundraise and award scholarships in more than one state, and organizations operating under other fact patterns that may wish to qualify as SGOs; and
- SGOs’ reporting and recordkeeping requirements.
Those interested in providing comments are asked to use the Federal e-Rulemaking portal (indicate “IRS-2025-0466”) by Dec. 26, 2025. Paper submissions should be sent to: Internal Revenue Service, CC:PA:01:PR (Notice 2025-70), Room 5503, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044.
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