On Feb. 23, 2026, Democrats in the Colorado House of Representatives introduced HB 26-1292, which would establish requirements for schools that receive funds under the federal school choice tax credit scholarship program. As of March 17, Colorado is the only state with a Democratic trifecta that has elected to participate in the program.
While no final guidance establishing the program had been issued as of March 17, the U.S. Treasury issued a notice in November 2025 requesting comments on policies it was considering. The notice said the Treasury was examining guidance that would prohibit states from establishing certain requirements for the tax credit beyond existing guidance that restricts states from setting requirements for scholarship granting organizations. The recently introduced legislation in Colorado would set requirements for schools eligible to receive funds under the program, and it is uncertain whether this bill would conflict with the U.S. Treasury's final guidance.
Background
The One Big Beautiful Bill Act, enacted on July 4, 2025, established the school choice tax credit, which requires states to opt in to participate. Under the program, individuals can receive federal tax credits for donations up to $1,700 to authorized scholarship-granting organizations (SGOs), which then disburse scholarships to students for either public or private school expenses. The U.S. Treasury and Internal Revenue Service (IRS) are responsible for implementing the program.
States must submit a list of eligible SGOs to the U.S. Treasury by Jan. 1 of each year to participate in the program.
On Nov. 26, 2025, the Treasury issued a notice requesting comments seeking specific information about policy proposals it was considering. The notice indicated the Treasury's intention to set certain policies for the program, including requiring states to list all organizations located in the state that have requested to be designated as an SGO and that meet OBBBA's requirements for SGOs. The Treasury's request for comment garnered over 2,400 responses.
What would the Colorado bill do?
As introduced, Colorado HB 26-1292 would:
- Require the state to include all SGOs that are eligible under the One Big Beautiful Bill Act in the list it must provide to the U.S. Treasury.
- Prohibit schools that accept scholarship funds under the program from discriminating against a student's, a student's parents, or a student's family member on several bases listed in the bill.
- Specify that the prohibited discrimination applies to admissions, enrollment, academic performance, access to or participation in educational services, and retention.
- Require participating schools to include the nondiscrimination requirements on their websites, on enrollment forms, and on applications.
- Require participating schools to abide by state and federal laws regarding students with disabilities, including:
- The federal Rehabilitation Act
- The federal Americans with Disabilities Act (ADA)
- The federal Individuals with Disabilities Education Act (IDEA)
- Colorado's Exceptional Children's Educational Act
- Prohibit participating schools from charging a student requiring accommodations under any of the above-listed statutes more tuition or fees.
- Clarify that the bill does not prohibit nonpublic schools receiving funds under the program from maintaining their religious mission, character, governance, instructional philosophy, or from making employment decisions consistent with constitutional protections or offering religious instruction or worship.
- Authorize the State Board of Education, if it finds that a school violated these provisions, to suspend the school's eligibility for funds under the federal program. It grants injured parties the right to file an action in a court of competent jurisdiction.
Colorado legislators referred HB 26-1292 to the Colorado House Committee on Education, and the bill is scheduled for a hearing on March 26.
Arguments about state and school autonomy under the program
Included among debates about the program is whether or not states should be able to tailor the tax credit by authorizing only specific SGOs that support specific educational sectors. SGOs may have specific focuses, like providing scholarships for students with disabilities for educational expenses. SGOs already exist in many states; some SGOs provide services in multiple states. The November 2025 notice indicated that states may not have the authority to reject an SGO's participation in the program so long as it meets OBBBA's requirements.
While the Treasury indicated in the 2025 notice that states would not be able to establish requirements for SGOs beyond what the federal guidance implements, Colorado's HB 26-1292 would set requirements for schools eligible to receive funds under the program, not for the SGOs themselves.
Many education policy professionals have weighed in on how the program should be implemented.
Robert Enlow, CEO of EdChoice, said the Treasury should "[p]rohibit states from adding their own regulations or creating their own new rules for the program... If Treasury allows states to add their own regulations, the federal government could hand these governors and their functionaries a huge tool to exert influence over private schools."
Robert Luebke, Director of the Center for Effective Education in the John Locke Foundation, said that the Treasury should "[e]mpower states to add eligibility and accountability requirements. State officials charged with administering programs must have the authority to write the rules for the programs they operate... Minus this authority, federal regulators with less knowledge of the local landscape fill the gap."
Luebke also said that for the program to thrive, "regulations must protect the principles of religious freedom and institutional autonomy. Religious freedom guarantees the rights of individuals to practice their religion. Institutional autonomy ensures that religious schools can administer schools in ways consistent with their values and mission."
The U.S. Treasury said it would issue the final guidance this year.