Annual State Reporting and Ongoing Monitoring

Section 25F requires that SGOs file annual reports with the state in which they are approved. The statute requires annual reporting but leaves the content and format to each state. Multi-state SGOs face different reporting requirements in each state.

What states typically require

While state reporting requirements vary, most states with established SGO approval frameworks require annual reports covering:

Financial information. Total revenues received in the year, total scholarship disbursements, overhead costs, and a computation of the 90/10 ratio. Some states require audited financial statements above certain revenue thresholds.

Scholarship data. Total number of scholarships awarded, the income verification status of recipients, the schools attended by recipients, and confirmation that the multi-school distribution requirement was satisfied.

Compliance certifications. Board certifications that the no-earmarking policy was followed, that the award process was conducted arm's-length, and that the organization remains in compliance with the federal structural requirements.

Donor information. Some states require aggregate data on donation amounts and the number of donors who contributed; others require more detailed donor reporting. Review your specific state's requirements carefully.

Reporting deadlines matter

State annual reporting deadlines are hard deadlines — they are not subject to extension in most states' frameworks. Missing a reporting deadline is a compliance failure that can trigger a state review or, in severe cases, suspension of the SGO's approved status.

An SGO that loses approved status between its reporting deadline and the date the deficiency is corrected has a problem: donors who contributed during that window may lose their tax credits retroactively. This is the outcome that makes reporting deadline management critically important.

Regulatory monitoring as an ongoing requirement

The Section 25F regulatory environment will continue to evolve through 2027 and beyond. The IRS will issue proposed regulations, receive comments, and publish final regulations. States will continue to develop and refine their opt-in frameworks. Congressional modifications to the program are possible.

For organizations operating an SGO, regulatory monitoring is not a one-time activity — it is an ongoing requirement. Changes to IRS guidance may require updates to donor receipt formats, income verification methodology, or governing documents. State framework changes may alter annual reporting requirements or approval renewal procedures.

Organizations that do not have staff dedicated to tracking Section 25F regulatory developments should have an infrastructure partner who does. The cost of a compliance failure from a missed regulatory change is almost always higher than the cost of maintaining current awareness of the regulatory landscape.

Building a compliance calendar

A compliant SGO operates against a recurring compliance calendar. The key items:

• Annual state reporting deadline (varies by state — typically six months after fiscal year-end)
• 90/10 ratio monitoring (monthly — not just at year-end)
• IRS documentation maintenance (ongoing — audit trail for all donations and scholarship awards)
• Board annual compliance review (typically Q1 each year)
• Platform and process review (annually — verify that systems remain current with regulatory requirements)
• Regulatory change monitoring (continuous — follow IRS rulemaking on Section 25F)

This calendar should be maintained explicitly and systematically. The organizations that run compliant SGOs sustainably are the ones that treat compliance as a scheduled operational function, not an annual scramble.