The Federal Scholarship Tax Credit (FSTC) launches January 1, 2027. With proposed Treasury and IRS regulations now out, states and scholarship granting organizations (SGOs) have a calendar to work from and not much time to build.
That was the focus of a recent GSVtv Podcast conversation, “Decoding the Treasury Regs: What’s Next for the Federal Scholarship Tax Credit.”
Heidie Nesset, vice president of implementation at yes. every kid. foundation, joined Jorge Elorza, CEO of Democrats for Education Reform, and Leslie Hiner, senior advisor for legal policy at EdChoice. Electra Frelinghuysen, director of product at GSV Summit, moderated.
What the regs mean
The proposed rules confirm that individuals can donate up to $1,700, and married couples filing jointly can donate up to $3,400. In many states, this could mean billions of dollars each year, with a wide range of eligible uses to support K–12 students, from tutoring and transportation to ed tech, special education services, and private school tuition. Governors from all 50 states and the mayor of D.C. can opt in.
What states should do now
Heidie’s advice was to start now and assign clear owners to the work. For states, that begins with building a certification process. Under the 2027 calendar, a state’s advance election (its opt-in) is due January 1, and its list of qualifying SGOs is due February 15.
States should establish a simple application and review process with clear criteria and sufficient time for organizations to apply. The rules call for an inclusive approach.
“Rather than treating this like a competition, it truly is a certification process,” Heidie said, and states should identify every SGO that qualifies and wants to be listed.
What SGOs should do now
SGOs should first decide which states they’ll operate in and confirm they meet each state’s requirements. That includes being a 501(c)(3) organization that is not a private foundation, as well as any applicable state charity rules.
Regarding documentation, Heidie pointed to the rules’ requirement for separate accounts and records for each state, a means of verifying student eligibility, and written policies on scholarships, donor restrictions, and financial controls.
Newer organizations should include these requirements in their governing documents and procedures, since that is the proof states will look for during certification.
SGOs should also prepare their donor systems. This involves registering through the IRS portal described in the proposed rules, having the required donor numbers and acknowledgments ready within the stated time periods, and recording and routing every contribution to the right account. Early 2027 is a strong window to begin fundraising, and these steps need to be part of the regular workflow from day one.
Looking ahead
Heidie closed on a realistic note. “From an implementation perspective, I do expect a few growing pains, but hopefully a lot of learning comes with that,” she said.
In her view, a strong measure of success will be how quickly states, SGOs, and families’ real experiences are used to improve the process, so more families can engage with this scholarship opportunity.
Her advice for the months ahead was the same as at the start: “Start now, identify your owners at each part of the process, and get moving.”
Watch the full conversation and learn more about our EFTC resources for states and SGOs.
