Last Thursday, the U.S. Treasury Department (Treasury) issued proposed regulations for the Federal Scholarship Tax Credit that was placed into federal law through the One Big Beautiful Bill Act (HR 1) in 2025 and is schedule to take effect in 2027. Since the law’s passage, States have been in the process of determining whether to participate in the new program with 30 States currently opting in. States have until January 1, 2027 to decide and States must opt into the federal education tax credit program each year. The regulations were issued last week in two forms: 1) as an Interim Final Rule (IFR)  for 2027; and 2) as a proposed Rule for future years. While the IFR and Rule mirror each other in substance, the IFR -intended to immediately support State planning- takes effect as issued; while the Rule supports longer-term implementation. Treasury could change either in response to public comments which are due on December 1, 2026. 

The Federal education tax credit allows individual taxpayers to redirect up to $1,700 of federal tax liability to scholarship-granting organizations (SGOs), which may provide K-12 vouchers to children in families with incomes up to 300 percent of the area median gross income. The IFR and proposed Rule re-establish the purpose of the new tax credit according to the HR 1 and include key definitions and a framework for States to implement the program through approved SGOs. As part of the requirements, the regulation dictates how Governors need to compile the list of SGOs that will be authorized to provide vouchers in their State—and includes prohibitions against States imposing or adding additional oversight, reporting requirements, accountability measures, civil rights protections or other restrictions on SGOs. Additionally, SGOs will not be required to monitor student outcomes, and participating schools will not be held to standards comparable to those that apply to public schools. The regulations include a “safe harbor” for “special needs” students in low-income areas; however, except for household income, no detail is provided regarding how a school would “select” the qualifying child(ren) or the types of services that would qualify for reimbursement. Treasury requested input on the safe harbor provisions. The regulations also explain how taxpayers can get the tax credit, including the clarification that joint taxpayer households may each claim the $1,700 credit, for a total of $3400 per household. COPAA is reviewing the Rule and plans to make informed comments by the December 1 deadline. COPAA also joined civil rights and disability partners last week in a joint letter urging Governors [who have not yet opted in] to reject participation in the Federal tax credit program. To read more about COPAA’s work regarding the impacts of voucher programs on the education and civil rights of students with disabilities, see the 2026 report, Private School Choice Programs: Is There a Seat for Students with Disabilities?