Today’s K-12 Dive article, “IRS Proposes Rule for Groundbreaking School Choice Program,” highlights a significant milestone in the implementation of the new federal Education Freedom Tax Credit: The Department of the Treasury and the IRS have released proposed regulations that begin to answer how this unprecedented national program will work when it launches January 1, 2027. Of particular importance for public education, the program is not limited to private-school tuition. Scholarships may also support public-school students through private services including tutoring, services for students with disabilities, reading intervention, books, technology, and other qualifying educational expenses. The proposed regulations also appear to constrain participating states from imposing additional restrictions on the types of schools students may attend or the educational expenses scholarships may fund. State participation is voluntary: To participate, a state must elect into the program and provide the IRS with a list of qualifying SGOs. As of September 14, 2026, 30 states had made an advance election to participate in 2027, while California, Washington, and a number of other states had not yet done so; some states have affirmatively indicated that they do not intend to participate.
For school districts and other public education agencies, this creates both questions and potential opportunities. Scholarship Granting Organizations (SGOs) will play a central role in directing privately contributed, federally tax-credited dollars, and the Department of the Treasury estimates that the program could ultimately generate approximately $26 billion in annual contributions and 2.2 million scholarships. As states and SGOs build the infrastructure for implementation, public school systems should be considering whether—and how—they might participate in this emerging ecosystem, particularly where scholarship dollars could supplement services such as tutoring and supports for students with disabilities. At the same time, significant legal and policy questions remain concerning program oversight, student protections, the relationship between federal and state authority, and the implications for students who use scholarships to move between public and private educational settings. Those questions will warrant close attention as the proposed regulations move through the public-comment process.
The K-12 Dive article can be found here.
The release of the proposed rule for the Education Freedom Tax Credit initiative marks a major development in the controversial program promoted by the Trump administration and approved through 2025’s One Big Beautiful Bill by the Republican majority in Congress.
