The Policy Behind Section 25F

Section 25F did not emerge from nowhere. It is the culmination of a decades-long policy debate about the role of private and supplemental education in American public life — and specifically about who should bear the cost of expanding access to those options for families who cannot afford them.

Before the OBBBA: state-level programs

Before the One Big Beautiful Bill Act, scholarship tax credit programs were entirely a state matter. Many states had enacted their own scholarship tax credit programs, education savings account programs, and publicly funded voucher mechanisms. The design, eligibility rules, and scale of these programs varied enormously across states.

The state-level programs proved popular enough to build a substantial base of evidence — and to develop a network of scholarship organizations, legal expertise, and administrative infrastructure — before the federal program existed. The states that moved quickest on Section 25F opt-in legislation were largely the states that already had this infrastructure.

What the federal program adds

The Section 25F federal credit does three things the state-level programs could not do on their own:

It nationalizes the financial incentive. A donor's federal tax liability is relevant everywhere. The federal credit provides the same incentive to a donor in Florida (which already had a large state credit program) as to a donor in a state with no existing program.

It standardizes the compliance requirements. Federal law provides a uniform set of structural requirements — the 501(c)(3) primary mission test, the no-earmarking rule, the multi-school distribution requirement, the 90/10 spending ratio — that apply in every participating state.

It creates a floor for participating states. States can add requirements above the federal baseline, but they cannot undercut it. An SGO in a participating state must meet both the federal requirements and any additional state requirements.

The regulatory gap to know about

Section 25F was enacted in 2025. The IRS has not yet issued final implementing regulations. This means the program begins in 2027 with statutory requirements that are clear, final regulations that are not yet issued, and a compliance landscape that will continue to evolve through the first years of the program.

Organizations that are operational in 2027 will be navigating this evolving landscape. Having infrastructure partners who track regulatory developments is not optional — it is one of the basic requirements of operating a compliant SGO in the current environment.