Question
I saw that the U.S. Department of the Treasury is seeking input on the new Federal Scholarship Tax Credit (FSTC) program. Can my state or school submit comments?
Answer
Yes. Treasury is seeking input from those at the state and school level, including those with experience in state school choice programs. Comments are due by December 26, 2025, via the Federal e-Rulemaking portal. Another comment period will follow when proposed rules are released in early 2026.
States and schools can help shape the FSTC rules by sharing their on-the-ground experience and practical insights, including explaining how existing school choice programs work in your state, the lessons that Treasury can take and apply to the FSTC program, how the FSTC program may conflict with current state programs and how to eliminate or mitigate that conflict, and how to avoid unnecessary compliance burdens and impacts on scholarship granting organizations (SGOs), schools, and families. You may comment on a variety of issues, including:
- How do existing state programs ensure SGOs comply with requirements? What reporting and record-keeping requirements exist and how are those balanced against administrative burden?
- How do SGOs in your state verify household income?
- What information are SGOs in your state required to provide to donors regarding any tax implications of their donation?
- Does your state program require SGOs to spend a set percentage of funds on scholarships and how is that percentage measured? You can explain the benefit of allowing the percentage to be calculated over more than one year and based on the amount of donations to the scholarship program versus all funds received by the organization for other purposes.
- Does your state program have different requirements than the federal program in areas such as SGO operations, income eligibility, or requirements for participating schools? You can explain how your state program is structured and why an organization should be able to be an eligible SGO for their state program and the federal program even if the programs have different rules.
- When a state opts in to the FSTC program, SGOs can only provide scholarships to students within the state. Treasury has indicated it believes the student’s state of residence determines where the student can participate in this program. If your school has out-of-state students, explain why it is important that at minimum, students who receive a scholarship from an SGO in their home state can use that scholarship at a school in another state.
- How can Treasury establish rules that will encourage charitable giving and the provision of scholarships?
For more information on the FSTC program and how to submit comments, read this NAIS legal advisory.
This article is for informational purposes only and does not constitute legal advice.
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