The U.S. Department of the Treasury and Internal Revenue Service released new proposed regulations on October 1, outlining how the Federal Scholarship Tax Credit program will operate when it begins January 1, 2027.
The new federal program allows taxpayers to receive a federal tax credit for qualifying contributions to scholarship granting organizations, which can then provide scholarships to eligible students for qualified elementary and secondary education expenses. Individual taxpayers may claim a credit of up to $1,700.
The newly released guidelines establish rules that:
· Make it easier for eligible families to qualify by simplifying income and eligibility requirements.
· Prevent participating states from placing additional restrictions on scholarship granting organizations beyond federal requirements.
· Allow more scholarship organizations, including multistate organizations, to participate.
· Allow unused credits to be carried forward for up to five years.
· Establish reporting, verification and audit requirements aimed at preventing fraud, duplicate payments, and misuse of scholarship funds.
The U.S. Treasury and the IRS also released companion temporary regulations providing states and scholarship granting organizations with procedures needed to prepare for the program’s 2027 launch. Those rules address state elections, certification of scholarship organizations, electronic registration, donor acknowledgements and reporting requirements.
Thirty states have already formally elected to participate in the program for 2027, but Illinois has not.
Senate Republicans have repeatedly called on Gov. JB Pritzker to opt Illinois into the program and have introduced legislation that would allow Illinois families to participate. The program is funded through private contributions incentivized by a federal tax credit and does not reduce existing state appropriations for Illinois public schools.
Pritzker previously pointed to wanting established federal rules as one reason for not committing Illinois to the program. With those rules now released, Senate Republicans say that explanation is no longer on the table and are pushing the Governor to opt in.
They argue that continued inaction would leave Illinois families on the sidelines while families in dozens of other states gain access to scholarships that could help cover educational expenses.
For families struggling to afford additional educational resources, a scholarship could open doors that otherwise remain closed. Now that the rules are out, Governor Pritzker should opt Illinois in to the program and give parents and students access to these opportunities.
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