It’s the final chapter of a story that runs through a Phoenix statehouse, a Florida governor’s desk, a catastrophic hurricane, and four Supreme Court decisions.
In the autumn of 2005, hundreds of thousands of schoolchildren from New Orleans and the Gulf Coast were scattered across the country with no schools to return to.
But Congress did something it had never really done before. In the Hurricane Education Recovery Act, signed that December, it sent federal emergency dollars to whatever school took a displaced child in, including public, private, or religious.
The aid was temporary, born of catastrophe, and mostly forgotten. But a precedent had quietly been set: when it mattered most, federal money could follow a child.
Twenty years later, on July 4, 2025, that precedent became permanent policy.
Tucked into the One Big Beautiful Bill Act as Section 70411 was the Education Freedom Tax Credit (EFTC) — the first federal tax credit in American history for donations to K–12 scholarship organizations.
It reads like a new idea. It is anything but. To understand the EFTC, you have to go back to the early days of education policy reform.
Early Blueprints and Scaling in Florida
In 1997, Arizona adopted the nation’s first tax-credit scholarship program: a dollar-for-dollar state credit, initially capped at $500, for donations to nonprofit School Tuition Organizations.
The design included a detail that should sound familiar, where organizations were required to spend at least 90% of donations on scholarships.
That 90% rule, written in Phoenix nearly three decades ago, sits almost verbatim in the federal statute today.
The idea was immediately sued. In January 1999, the Arizona Supreme Court upheld the program in Kotterman v. Killian, reasoning that a credit against taxes owed is not government spending, it is a taxpayer’s own money, directed by the taxpayer. That distinction, between a voucher funded by the state and a scholarship funded by private donors, became a critical legal distinction.
In 2001, Governor Jeb Bush signed the Florida Tax Credit Scholarship into law. It started modestly but it did not stay modest.
The organization that grew up to administer it, Step Up For Students, today serves hundreds of thousands of students, and the program marked its 25th anniversary this month as one of the largest scholarship engines in the world. Georgia followed in 2008 with its GOAL program; Pennsylvania, Iowa, Indiana, and more than a dozen other states built their own versions. By 2025, tax-credit scholarships were educating children in roughly twenty states — a quarter-century of proof that the mechanism worked.
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The Courts Clear the Road
Each expansion drew a lawsuit, and each lawsuit ended the same way. In Zelman v. Simmons-Harris (2002), the U.S. Supreme Court held that school choice programs serving genuinely private choices don’t violate the Constitution. In Arizona Christian School Tuition Organization v. Winn (2011), it turned back a challenge to Arizona’s credit itself. In Espinoza v. Montana Department of Revenue (2020) and Carson v. Makin (2022), it went further, ruling that states offering school choice cannot exclude religious schools from it. By the mid-2020s, the constitutional questions that had shadowed the movement for decades were, as a practical matter, settled.
Washington Finally Moves
The federal government was the last holdout.
A $5 billion federal scholarship credit championed by Education Secretary Betsy DeVos in 2019 never reached a vote.
Its successor, the Educational Choice for Children Act, that included champions like Senator Tim Scott, Senator Bill Cassidy, and Senator Ted Cruz, was introduced building support each time but never crossing the line.
What finally carried it through was the 2025 budget reconciliation package, where the provision — now known as the Education Freedom Tax Credit — became law with a presidential signature on Independence Day.
The federal version is the state blueprint, on a nationalized scale. It’s a dollar-for-dollar credit of up to $1,700 per taxpayer for donations to Scholarship Granting Organizations (SGO).
Within a year, 30 states had opted in.
Why the History Matters
For a donor deciding whether to trust a brand-new federal program, the history is the point.
The EFTC is not an experiment. It is the twenty-ninth year of an experiment that succeeded, was tested in state legislatures, refined by hurricane-era necessity, and stress-tested in the Supreme Court four times.
What’s new isn’t the machine. What’s new is that, starting January 1, 2027, every taxpayer in a participating state finally gets a seat at it.
The AFC Scholarship Fund was built to carry that 25-year legacy into the program’s first national chapter.
Arizona created the first program in 1997 — a dollar-for-dollar state credit for donations to scholarship organizations, with a 90% scholarship spending rule that the federal EFTC uses today.
Repeatedly. Zelman (2002), Winn (2011), Espinoza (2020), and Carson (2022) collectively upheld school choice programs and the tax-credit scholarship mechanism.
It applies the same donor-credit model at the federal level — up to $1,700 per taxpayer — and is available in every state that opts in, rather than only where a state legislature created its own program.
