IRS mulls regulations for tax credits for scholarships

The Internal Revenue Service and the Treasury Department are asking for comments on regulations they plan to propose for a new tax credit under the One Big Beautiful Bill Act for donating to organizations that give scholarships to low-income and middle-income K-12 students attending qualified private and parochial schools.

In Notice 2025-70, which the IRS and the Treasury issued Tuesday, they requested comments on the new tax credit for individual contributions to “scholarship-granting organizations.” The nonrefundable tax credit provides up to $1,700 per year and is on a dollar-for-dollar basis for tax years starting after Dec. 31, 2026.

Qualifying scholarship-granting organizations will typically be 501(c)(3) nonprofits that offer scholarships to eligible K–12 students. To qualify for the new tax credit, the SGO will need to have an income-based scholarship program where at least 90% of its income is spent on scholarships for K–12 students from low-income households. Students will have to come from households with incomes at or below 300% of the area’s median gross income and be eligible for public school enrollment. Any unused tax credit can be carried forward for up to five years. The federal credit will be reduced by any state-level tax credit received for the same contribution. 

For contributions to an SGO in a state or the District of Columbia to be eligible for the new tax credit, the state will need to first choose to participate by providing the IRS with a list of the SGOs located in the state that satisfy the SGO requirements.

The Treasury and the IRS intend to issue proposed regulations on the tax credit and are looking for comments from interested parties on issues that should be addressed in the forthcoming regs. They’re specifically asking for comments on a participating state’s required annual certification of SGOs within the state that meet the statutory requirements to qualify as an SGO; policies and procedures implemented by electing states to ensure the required certification is accurate and complete; issues involving single-state organizations, organizations that may fundraise and award scholarships in more than one state, and organizations operating under other fact patterns that may wish to qualify as SGOs; and SGOs’ reporting and recordkeeping requirements.

They’re encouraging commenters to use the Federal e-Rulemaking portal to submit comments (indicate “IRS-2025-0466”) by Dec. 26, 2025. Paper submissions can be sent to: Internal Revenue Service, CC:PA:01:PR (Notice 2025-70), Room 5503, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044.