As of Aug. 25, no state has certified eligible scholarship-granting organizations (SGOs) for the Education Freedom Tax Credit (EFTC), which begins on Jan. 1, 2027. SGOs are the organizations that distribute EFTC scholarships to students, but the federal guidance determining their operating rules and the distribution of funds is still forthcoming from the Department of the Treasury. Thirty-one states have indicated that they would participate in the program.

On July 30, 13 education organizations – all of which work either in or with public schools – wrote to the Treasury to encourage it to adopt policies addressing what they said were numerous factors blocking SGOs from starting up or participating at all.

Because public schools provide services free of charge to families, there is debate about how public school students can benefit from the EFTC. Click here to read more about those debates.

The letter said its proposed policies aim to expand opportunities for EFTC benefits to public school students, as well as those attending private schools or homeschooling.

The July 30 letter said the Treasury should:

• Allow states to include SGOs on their list that have not yet received federal approval for 501(c)(3) status. 
• Allow allSGOs to measure their income by the amount held in a segregated EFTC account. 
  • Federal law requires SGOs operating under this program to use 90% of their income on scholarships (known as the 90/10 rule). In a preview of the regulations, Treasury said that organizations with “activities [that] are largely scholarship-granting activities” would be likely able to measure the 90/10 rule by a safe harbor account. The letter said that this exemption should apply to all SGOs.
• Defer to states' definitions of school, therefore allowing pre-kindergarten students to benefit and giving states maximum flexibility.
• Define qualified elementary or secondary education expenses broadly, and allow access to these expenses at any time, so long as they are related to enrollment in school.
  • The OBBBA adopted the same definition of "qualified elementary and secondary expense" for the EFTC as that enumerated for Coverdell education savings accounts. The letter urged the Treasury to broadly define phrases such as "expenses... incurred in connection with the enrollment or attendance ... at a public, private, or religious school."
• Broadly define the Coverdell requirement that supplemental items and services are "required or provided" by a student’s school. 
  • The letter said the definition should include expenses delivered by a school’s full-time staff and/or by school or district subgrantees, contractors, or partners. It encouraged the Treasury to allow eligible services or goods to be delivered off school grounds. The letter also said that the Treasury should allow services required by the school to be provided by others, and that a school may require supplemental goods and services for all students or just some students.

About the program

The EFTC was enacted as part of the One Big Beautiful Bill Act (OBBBA) in 2025. It is a dollar-for-dollar tax credit, allowing individuals to receive federal tax credits for donations up to $1,700 to authorized SGOs. If a taxpayer donates more than $1,700, they will not receive additional credits for the amount over $1,700. The total amount of credits the program can offer is not capped. SGOs distribute the donated scholarship funds to eligible families. In order to qualify for scholarships, students have to live in households earning no more than 300% of the area's median gross income and be eligible to enroll in K-12 schools.

Learn more about the program here.

What's next

Most states that have opted in to participate have not created a website or portal about the program, and the ones that have – including Colorado, Idaho, and Nebraska – say they are waiting for the U.S. Treasury to issue regulations. The Treasury said it would issue them by the end of September. 

Some states that haven't indicated that they will participate have said they are also waiting for the regulations before deciding whether to take part.