By Rianna Saslow
Summary: As part of the One Big Beautiful Bill Act, Congress created the first national education tax credit program, which will provide a dollar-for-dollar tax credit for donations to scholarship granting organizations (SGOs). States have a unique opportunity to use the program’s flexibilities to their advantage: invest in research-backed extended learning opportunities that complement a student’s experience in public schools.
The statute as written seems to give states ample control over SGOs and allows funding to flow to both private and public schools–creating a pathway to invest in tutoring, STEM enrichment, and supplemental special education services that support students well beyond private school scholarships. One of the biggest opportunity gaps that exists in our education system is access to after-school learning, clubs, and tutoring, which are only available to those who can pay for them. During the pandemic, we saw states expand access to high impact tutoring and experience a major return on investment. We know that extended learning gives children the extra time and personalized experience they need to catch up–an absolutely vital investment as two thirds of our nation’s class of 2024 were behind when they graduated.
As districts navigate the fiscal cliff and states struggle to balance budgets following an onslaught of federal cuts, we simply can’t afford to leave this funding on the table. This new federal tax credit presents a crucial opportunity for state advocates to add extended learning opportunities to student programming. If designed with evidence-based practices and student needs at the center, it could open the door for greater access and stronger outcomes for all learners.
In July 2025, Congress passed a variation of the Educational Choice for Children Act (ECCA) as part of the One Big Beautiful Bill Act, introducing the nation’s first-ever national tax credit-funded scholarship program under Section 70411. To participate, states must “opt in” by having the Governor submit an annual list of eligible Scholarship Granting Organizations (SGOs) operating within the state to the IRS. Eligible SGOs must be nonprofit organizations that allocate at least 90% of all tax-credit-qualified donations directly to scholarships for students. These scholarships must cover only “qualified educational expenses” as defined by IRS Code Section 530(b)(3)(A), which includes a range of allowable academic and enrichment costs such as tutoring, curriculum materials, and extended learning programs.
Under 530 (b)(3)(A) is a section of US Statute that covers Coverdell Education Savings Accounts. In it, it describes eligible uses of elementary and secondary expenses which are the following (emphasis added):
“(i)… expenses for tuition, fees, academic tutoring, special needs services in the case of a special needs beneficiary, books, supplies, and other equipment which are incurred in connection with the enrollment or attendance of the designated beneficiary of the trust as an elementary or secondary school student at a public, private, or religious school,
(ii) expenses for room and board, uniforms, transportation, and supplementary items and services (including extended day programs) which are required or provided by a public, private, or religious school in connection with such enrollment or attendance, and
(iii) expenses for the purchase of any computer technology or equipment or Internet access and related services, if such technology, equipment, or services are to be used by the beneficiary and the beneficiary’s family during any of the years the beneficiary is in school. Clause (iii) shall not include expenses for computer software designed for sports, games, or hobbies unless the software is predominantly educational in nature.”
Under Section 70411 of the One Big Beautiful Bill Act, a person can donate up to $1,700 to a certified scholarship-granting organization (SGO), as defined by the state, and get a dollar-for-dollar federal tax credit in return—meaning their tax bill is reduced by the same amount. The SGO then gives that money (minus up to 10% for administrative costs) to families as scholarships to help cover K-12 educational expenses. These can include private school tuition, tutoring, or even technology costs for students in either public or private schools.
Taxpayers in every state are eligible to receive the credit, but only families in states that opt into the program are eligible to benefit from scholarships. Eligibility for scholarships is limited to families making less than 300% of the median gross income for their area – meaning families in the wealthiest parts of the country can make over $500,000 annually and still qualify.
The law includes no sunset and no aggregate cap. The Joint Committee on Taxation has estimated that the program will add approximately $26 billion to the national debt over the next decade, but the Institute on Taxation and Economic Policy (ITEP) claims that the actual cost could exceed $51 billion annually if private school advocates successfully convince voucher supporters to take up the tax credit. By comparison, we only spend a combined $33 billion on the two largest federal discretionary K-12 programs (Title I-A grants for high-poverty schools and IDEA grants for students with disabilities).
The law as written grants significant control and flexibility to states. States ultimately have the choice of whether or not they want to opt-in to the program, and they have ample discretion over the list of approved SGOs. The precise language states:
“(A) In general.—Not later than January 1 of each calendar year (or, with respect to the first calendar year for which this section applies, as early as practicable), a State that voluntarily elects to participate under this section shall provide to the Secretary a list of the scholarship granting organizations that meet the requirements described in subsection (c)(5) and are located in the State.
(B) Process.–The election under this paragraph shall be made by the Governor of the State or by such other individual, agency, or entity as is designated under State law to make such elections on behalf of the State with respect to Federal tax benefits.”
This language suggests that a Governor could opt-in to the program and limit SGOs to only those funding vendors and services to public school students. Instead of establishing a program that diverts public dollars to private schools, these funds could theoretically establish a system of extended learning opportunities (ELOs) that provide supplementary services that would help public school students thrive. Seemingly, state leaders can also place additional accessibility and accountability requirements on SGOs that the federal statute failed to establish–such as prohibiting SGOs from discrimination, requiring them to publish transparent information on student performance, or adding more stringent eligibility requirements to target the lowest-income families.
However, the Treasury Department still has some power through the rulemaking process, which may determine whether states are actually able to restrict SGOs and/or participating schools beyond the initial statute. Experts disagree on the extent of Governors’ power.
Jim Blew, cofounder of the Defense of Freedom Institute for Policy Studies, calls on the Treasury Department to clamp down on state flexibilities:
“Governors should be prevented from adding requirements not found in the federal law, such as prohibiting SGOs from focusing on specific student groups or educational approaches. Similarly, new governors should not be allowed to remove an organization from a state’s list unless that organization falls out of legal compliance.”
Meanwhile, Robert Luebke, Director of the Center for Effective Education at the John Locke Foundation, claims that a degree of state control is needed to tailor each program to local needs:
“State officials charged with administering programs must have the authority to write the rules for the programs they operate. Does the state want a program focused on students from lower-income households or a universal program? States must also be able to decide accountability requirements, testing requirements, and metrics to assess academic progress for schools that enroll scholarship students.”
Ultimately, both the rulemaking process and any subsequent lawsuits during implementation will impact the discretion of Governors. The rulemaking process will include an opportunity for public input, making it critical to hold the Treasury Department accountable for the Administration’s commitment to returning education to the states.
Many states may be tempted to opt out of the program entirely for fear that it would only advance private school choice. However, unless the Treasury Department decides to dramatically (and hypocritically) restrict state authority during the rulemaking process, the statute currently allows each state the flexibility to design a program in a way that reflects its own values. At a time when the federal government is making historic disinvestments in education, healthcare, and other social services, all states are struggling to balance their budgets. States simply can’t afford to leave money on the table, and they should take advantage of ECCA’s flexibility to support public schools as other federal funding sources fail them.
For example, states could encourage SGOs that expand access to academic enrichment opportunities such as tutoring, STEM enrichment, and other academic supports. Funds could also be used towards mental health services and expanded special education supports, such as diagnostic evaluations, specialized therapies, and assistive technologies that aren’t always available through school-based services alone.
These services aren’t just hypothetical; in fact, many states have already established highly effective programs like high-impact tutoring in response to pandemic-related learning loss. However, after the expiration (and preemptive cancellation) of federal ESSER grants, states are scrambling for dollars to keep these successful programs running.
For example, Colorado’s tutoring program is scheduled to sunset in 2026. Meanwhile, states like Louisiana, Virginia, Michigan, and Maryland were able to extend their programs through short-term funding solutions that will expire in the coming years. So far, Tennessee is the only state that has created a permanent solution by building tutoring into their K-12 funding formula. All of these states relied on federal ESSER dollars to create and scale their high-impact tutoring programs, and ECCA might be just the solution they need to continue financing these vital programs. Meanwhile, some states like New York that have struggled to establish statewide tutoring programs can leverage ECCA dollars to finance these long overdue student supports.
It’s convenient to point to data about parent support for private school choice. It’s true that a strong majority of parents support the concept of voucher or tax credit programs, although this support dwindles when families are faced with additional tuition costs or subjected to discrimination on the basis of sexuality or disability (all of which are permitted through systems of private school choice).
Nonetheless, public support for extended learning opportunities is even stronger. While 71% of parents broadly support using public funds for school choice, 83% of parents support extended learning opportunities, and an overwhelming 90% of parents support expanding access to tutoring programs for public school students. Clearly, parents want these additional supports, and states finally have a way of financing them.
The passage of ECCA gives state leaders a historic opportunity to invest directly in public school students, providing the tutoring, enrichment, and mental health supports they need to thrive. Now is the moment for proactive, student-centered implementation–ensuring that this federal tax credit goes beyond the limits of private school vouchers and instead becomes a tool for access and opportunity.
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