Federal School Voucher Tax Credit: New Regulations Raise Concerns
 On October 1, the U.S. Department of the Treasury and the Internal Revenue Service released proposed regulations for the new Federal Scholarship Tax Credit, commonly called the Education Freedom Tax Credit. The program was created by H.R. 1, the so-called One Big Beautiful Bill Act, signed into law by Trump in July 2025. Beginning in 2027, taxpayers will be able to claim a federal tax credit of up to $1,700 for contributions to qualifying Scholarship Granting Organizations (SGOs).
A4PEP has been following this legislation and its implementation because of its potentially negative impact on public education. The proposed rules establish that SGOs can provide scholarships for “qualified educational expenses” connected to students who attend private, religious, and public schools. They also define requirements for SGOs, including maintaining a separate account for qualifying contributions, serving students at multiple schools, spending at least 90% of qualifying income on scholarships, and meeting reporting and recordkeeping requirements. The regulations also limit the ability of participating states to impose additional requirements on SGOs beyond those established by federal law. States may establish certain procedures related to certification, reporting, fraud, and abuse, but they generally may not condition an SGO’s eligibility on additional restrictions — such as requiring an SGO to serve only public-school students or limiting the types of qualified educational expenses it may fund. The regulations also prohibit states from imposing additional safeguards related to academic quality, civil rights or the administration of scholarship funds. Why A4PEP is concerned These regulations raise significant questions about public accountability, civil rights protections, and the use of public tax expenditures to support private and religious education. We believe that public education is a public good and an essential institution of our democracy. We are concerned that directing federal tax benefits through private scholarship organizations could increase the flow of public resources toward private and religious schools without providing the same level of transparency, oversight, and public accountability expected of public schools. In addition, the regulations do not specify the exact expenses that are covered for public school students, creating uncertainty over how public-school students would benefit.
We agree with dozens of groups calling for states NOT TO OPT IN to the new federal school voucher program, as well as more than 170 state and national civil rights, disability rights, education policy, and religious freedom organizations calling on Congress to repeal the federal voucher program.
Learn more: Colorado’s participation Governor Polis has indicated his intention to participate in the federal program, although it is not mandated. We are working with state leaders to urge Gov. Polis to reconsider the decision and carefully assess its implications for Colorado’s public schools, students, and taxpayers.
We also encourage Phil Weiser, the Democratic nominee for Governor, to continue speaking publicly about the program, its potential impact on Colorado public education, and to reaffirm his previous opposition to the federal vouchers. |
The Network for Public Education (NPE) published a statement in opposition to the federal voucher program. They urge everyone to send letters to their Governor urging them to NOT OPT IN. We believe Governor Polis should no longer opt in, since the new regulations do NOT allow states to provide guardrails on the SGOs, and since it is not clear how public schools will benefit from this program which is primarily designed to expand private and religious school enrollment. NPE explains: “Opting in now creates a blind commitment to a program designed by those who actively undermine public schools. At this point, the regulations are not final, nor has Treasury released its Guidance regarding what expenses will be eligible under the program. That Guidance is expected “by the end of the year,” according to Kevin Salinger at Treasury. Without the Department’s Guidance for what qualifies as an eligible expense, a Governor may opt-in, only to find out that virtually any spending that makes its way to public schools or districts has been disallowed. And then they’re stuck, because it’s clear that once in, states cannot back out until the following year.” |
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