Bush Institute experts Robin Berkley, The Ann Kimball Johnson director of education, and Nina Rees, senior fellow, wrote a letter to the United State Department of Treasury, Internal Revenue Service to comment on the tax credit for individual contributions to Scholarship Granting Organizations under the One, Big, Beautiful Bill.
The George W. Bush Institute appreciates the opportunity to comment on Notice 2025-10 regarding the certification and operational rules for scholarship-granting organizations (SGOs) under the new federal tax credit established by §25F of the Internal Revenue Code.
The Bush Institute supports policies that expand opportunity, strengthen accountability, and ensure all students – regardless of income or ZIP code – can succeed. The new federal tax credit scholarship program has the potential to meaningfully expand educational access for low- and middle-income families nationwide. Fulfilling that promise will require a regulatory framework that is clear, workable, and informed by lessons from successful state programs.
More than 18 states have implemented tax-credit scholarship programs. Many of those states have demonstrated that well-designed SGOs can operate transparently, steward resources responsibly, and expand family choice.
As the Internal Revenue Service develops regulations, we encourage an approach that reflects a focus on:
- Expanding educational options efficiently and expediently, particularly for those students most in need, and promotes responsible oversight and continuous improvement. While the statute allows states and SGOs to serve students from households earning up to 300 percent of the federal poverty level, Treasury should encourage implementation frameworks that prioritize students with the greatest financial need and students with disabilities — groups that historically face the greatest barriers to accessing high-quality educational options. Treasury should further encourage states to promote a diverse and innovative set of participating schools and education service providers, while ensuring that SGOs apply clear, rigorous standards for provider selection and ongoing oversight of student outcomes.
- Supporting the use of allowable administrative funds for high-quality program evaluation and continuous improvement efforts. Although SGOs are limited to using no more than 10 percent of contributions for administrative purposes, Treasury should\ encourage states to gather robust data on student achievement, student well-being, and implementation of programs. States should use this information to strengthen programs over time and generate evidence that can inform broader education policy.
- Fostering a national focus on implementation support to ensure that program execution across states aligns with the intent of the law, which could be supported through voluntary, philanthropy-funded efforts. Key areas of focus for this support should include:
- Promoting a vetted list of high-performing SGOs based on participation and student outcome measures
- Coordinating national fundraising and pooled giving
- Providing technical assistance to emerging SGOs
- Ensuring participation by SGOs serving public school students, especially those from low- and middle-income backgrounds and those with disabilities
- Providing data for research regarding the efficacy of the programs
In addition to these over-arching recommendations, outlined below are more specific comments regarding the rules being drafted:
- State Participation Timeline: Because the credit takes effect January 1, 2027, states need early guidance to enact legislation and administrative systems. Treasury has already released a form for states interested in opting into the program. They should release model participation guidance as soon as possible, including:
- Deadlines for SGO approval
- Minimum documentation required to demonstrate compliance
- Guidance for states adapting existing programs to federal requirements
Clear, early guidance will prevent procedural delays from limiting state participation and ensure scholarships are available in the program’s first year.
- State SGO Approval and Oversight: Treasury should establish minimum federal standards while encouraging strong, workable state oversight. States should be encouraged to adopt:
- Transparent approval criteria and standardized review processes
- Clear timelines for approval, renewal, and revocation
- Public, up-to-date registries of approved SGOs
- Annual recertification tied to financial and program reporting requirements
States should retain flexibility to adopt additional safeguards, such as enhanced audits, reporting, or governance requirements, so long as they do not create unnecessary barriers.
- Income Verification Standards: To ensure low- and middle-income students benefit from this program, Treasury should publish a uniform list of acceptable documentation for verifying the 300 percent AMI threshold, such as:
- Federal tax returns, W-2s, or 1099s
- Pay stubs or employer income verification
- Social Security or unemployment benefit statements
- Scholarship Distribution Reporting and Oversight: Treasury should affirm that states may use standard reporting tools regarding scholarship distribution, participating schools and vendors, and aggregate student demographics. Additionally, Treasury should also encourage states to collect additional aggregate outcome data, such as parent satisfaction, student retention, and student achievement, to promote continual improvement of programs.
- Coordination with Existing State Programs: Treasury should clarify how the federal credit interacts with existing state tax credit scholarship programs, including:
- Whether and how federal and state scholarships may be combined
- How donation eligibility interacts with state tax credits and deductions
- Whether participation in state programs qualifies SGOs for federal approval
- Clear answers are essential for SGOs to operate effectively from day one.
- Consumer Protection: To maintain public trust, Treasury should affirm that states may implement additional consumer protections, including:
- Financial transparency requirements
- Non-discrimination standards consistent with federal and state law
- Data privacy protections for families
- Performance reporting as permitted or required by state law
We look forward to working with you to bring this program to life. Thank you for your consideration.
