It’s Go Time for Governors Stalling on the School Choice Tax Credit – Inside Sources

The rules are here. Students are ready. Now, governors need to get out of the way.

The Treasury Department just released the 2027 regulations for the Federal Scholarship Tax Credit, the school-choice initiative signed into law last year.

In three months, families can start applying for scholarship funds so their children can access educational options that might otherwise be out of reach. Starting January 1, individuals in every state can give money to scholarship-granting organizations and get a federal tax credit up to $1,700.

Life will begin to change for thousands of students and families.

In a major win for students, Treasury decided that the $1,700 cap applies to the taxpayer, not the tax return. A married couple filing jointly can claim a $3,400 federal tax credit — no penalty for being married. Donors can also contribute in installments through payroll deductions.

Treasury also made a good-faith effort to include as many children as possible.

Homeschool and microschool students in 22 states where the state considers them enrolled in a “school” are eligible to use scholarship funds for qualified expenses. These students in other states will be discussed during public comment for the permanent rules.

Treasury estimates that after three years, $26 billion could be raised annually, which could fund 2.2 million scholarships.

In other words, the federal government has done its part. Now, 20 states plus the District of Columbia need to do theirs.

Students in these states can’t apply for scholarships because their governors haven’t decided to participate.

Colorado’s Jared Polis and New York’s Kathy Hochul put children over politics when they opted into the federal tax credit. Other governors are stalling. Some want to cherry-pick and limit students’ options for schools and educational resources, while others say they are being cautious. Can’t be too cautious when private money is donated voluntarily to help students in public and private schools learn, or so it seems, listening to empty excuses.

Treasury’s rules are clear. The time for talk is over.

Individuals in these non-participating states can still donate and claim the federal tax credit, but their money will go to scholarship organizations serving children in other states whose governors opted in.

Indiana’s largest scholarship organization is advertising to Illinois taxpayers. Their message is simple: if Illinois won’t participate, Illinoisans can send their generous donations to Indiana, claim a federal tax credit, and help Hoosier kids succeed.

Illinois leaders may not think participating is worth it. Tell that to an eighth-grader in a Chicago public school, one of the 57 percent of children who can’t read at grade level, or a fifth-grader, one of the 73 percent who can’t do math at grade level.

Those children could use help getting tutors, books, special needs services, and paying fees for supplies and school activities, but sorry, even though plenty of generous individuals in Chicago would gladly donate funds for scholarships, Illinois’ governor hasn’t budged.

The most common objection is that public schools would be harmed. That argument ignores the law and Treasury’s rules, which make clear that public school students are every bit as eligible for scholarships as private and religious school students. Scholarship organizations in many states are preparing to work directly with public schools.

A public school is not harmed when its students get additional educational resources and succeed.

Meanwhile, 30 states have chosen to participate. Many have scholarship organizations ready to get started.

Governors who have not opted in should contact Treasury now. The Treasury rules are simple and easy to follow. Three months is not much time for scholarship organizations to prepare, but it’s enough to get started.

More work is needed to make the Federal Scholarship Tax Credit a strong source of education funding long into the future. The 2027 rules are final, and proposed rules for 2028 can be relied on in 2027. For the next two months, Treasury will accept public comment on all rules released this week.

Treasury has given us a great start, maximizing the number of eligible children and the amount of dollars that can flow to them.

Leaders in 30 states are ready. It’s go time for the ones still dragging their feet.