A state can join a federal program before anyone has written down exactly how that program works. That is roughly where things stand in June 2026.
Governors and legislatures in dozens of states have made their formal elections to participate in the Education Freedom Tax Credit (EFTC). Scholarship organizations are incorporating, hiring and building accounting systems. And the Treasury Department has not yet published the proposed regulations that will tell them how to do most of it.
The short answer for anyone wondering what is still missing: the law exists, the sign-up process for states exists, but the operating rules for donors and scholarship organizations are still in draft. Treasury has said it intends to issue proposed regulations, and as of early June 2026 they had not been published.
Two Tracks That Haven’t Met Yet
It helps to picture the federal scholarship tax credit as moving along two separate tracks.
On the first track, states decide whether to participate. Treasury and the IRS released Revenue Procedure 2026-6 and Form 15714 on Dec. 12, 2025, creating the only process a state may use to make what the guidance calls an advance election, the formal step that makes it a covered state for 2027. (citation needed)
On the second track are the substantive rules: what a donor must keep in their files, how a nonprofit that awards scholarships verifies a family’s income, how the credit interacts with other parts of the tax code. That track is behind.
The IRS opened the door to public input with Notice 2025-70 on Nov. 25, 2025, and the comment window closed a month later, on Dec. 26, 2025. Comments came in. Proposed regulations did not follow immediately.
The 90% Question That Shapes Every Scholarship Organization
The statute requires a Scholarship Granting Organization (SGO), a nonprofit that collects qualified contributions and awards K-12 scholarships, to spend at least 90% of its income on scholarships.
The catch is that the law does not define “income.”
Does it include investment returns? Money carried over from a prior year? Only contributions received in the current year? Each reading produces a different number, and therefore a different compliance obligation.
There is a second layer. An organization operating in more than one state does not yet know whether the 90% test applies state by state or across the whole organization. Nor is it settled what it means for a scholarship recipient, or the organization itself, to be “located in” a state.
These are not abstractions. They determine how a scholarship organization sets up its books on day one, and rebuilding a chart of accounts after the fact is expensive and slow. For more on how that threshold works in practice, see our explainer on the 90% rule.
What Donors Still Don’t Know
Several open items sit closer to the individual taxpayer.
The most asked question involves married couples. Treasury has not issued final guidance confirming how the $1,700 cap applies to a joint return. The prevailing reading is a single $1,700 per return rather than a doubled amount for two spouses, but that reading is not formally settled.
Also pending: what documentation a donor must keep to substantiate a qualified contribution, and how the credit coordinates with the Alternative Minimum Tax.
And the mechanics of income eligibility remain open. The statute ties scholarship eligibility to a household income ceiling of 300% of Area Median Gross Income, measured against the prior calendar year, but the exact method an organization must use to verify that figure awaits the proposed regulations.
Until those answers arrive, the honest posture is that eligible taxpayers may qualify for a dollar-for-dollar federal tax credit of up to $1,700 beginning with contributions made on or after January 1, 2027. Nothing about the amount, the timing or the treatment should be described as final.
Why the Delay Isn’t a Warning Sign
Rulemaking of this kind is deliberately slow, and the sequence is standard.
An agency issues a notice inviting comment. It reads the comments. It drafts proposed regulations, publishes them in the Federal Register, opens another comment period, then issues final rules.
Be the First to Know
Get notified when the Education Freedom Tax Credit launches so you don’t miss the opportunity to support K–12 students while benefiting from a federal tax credit.
A new credit written into the tax code in 2025 and taking effect in 2027 leaves roughly 18 months for that entire cycle. That is a compressed timeline by federal standards, not a leisurely one.
Here’s why that matters: a rushed rule that has to be corrected later would be worse for donors and scholarship organizations than a rule that arrives a few months after people started asking for it.
The Startup-Year Wrinkle Nobody Planned For
One detail in the statute deserves more attention than it has gotten.
For the 2027 startup year, the law directs states to submit their list of qualifying scholarship organizations “as early as practicable” rather than by a fixed date. The precise deadline mechanics are left to future guidance.
That phrasing gives states flexibility. It also means a family in a participating state cannot yet know when the approved organizations in their state will actually be named.
The result? Two states that opted in on the same day could reach families months apart. Our piece on why no state has certified SGOs yet walks through that gap in more detail.
What This Means If You’re a Donor, a Parent or an Organization
For a taxpayer thinking about 2027 giving, the practical advice is patience with preparation. Nothing can be contributed under this credit before January 1, 2027, so there is no window closing and no reason to act on incomplete information.
For a family hoping a scholarship becomes available, the useful thing to track is not the federal rulebook but your own state: whether it has elected in, and when it expects to publish its list of approved organizations.
For an organization building toward becoming an SGO, the working approach most advisers describe is the conservative one. Build to the statute and the existing notices, assume the stricter reading of ambiguous terms, and document the reasoning behind each choice.
None of these groups benefits from guessing. All of them benefit from knowing which questions are still open.
Where AFC Scholarship Fund Fits
We are preparing to serve donors and families in participating states when the program becomes available on January 1, 2027. We also publish what we do not yet know, because a reader who understands the open questions is better equipped than one who was handed false certainty.
If you want the plain-language version of the program itself, start with how the Education Freedom Tax Credit works.
What to Watch Next
The single most consequential development still ahead is publication of the proposed regulations.
When that happens, it opens another public comment period and is likely to resolve most of the open questions at once: the definition of income, the multistate test, the “located in” standard, joint-filer treatment and donor recordkeeping.
Watch for it, read the summary Treasury publishes alongside it, and check whether your state has appeared on a covered-state list.
The story is not finished. It is closer to the middle than the end.
Sign up for updates to follow what Treasury publishes next and what it means for donors and families in your state.
No. As of June 2026, Treasury had issued advance-election procedures for states but had not published the proposed regulations that govern donors and scholarship organizations. Proposed regulations come before final regulations, and each stage includes a public comment period.
That is not settled. The prevailing reading of the statute is a single credit of up to $1,700 per return rather than a doubled amount for two spouses (Treasury rules pending). Formal confirmation is expected in the proposed regulations.
The statute requires a Scholarship Granting Organization to spend at least 90% of its income on scholarships. The law does not define "income," so it is unclear whether the figure includes investment returns, prior-year carryover or only current-year contributions.
The statutory effective date has not changed. Qualified contributions may begin on or after January 1, 2027, and eligible donors would claim the credit later, when filing. Timing of state approval lists may still vary by state.
There is nothing to contribute yet, so the useful steps are informational: confirm whether your state has elected to participate, learn how the credit differs from a deduction and watch for the proposed regulations when they publish in the Federal Register.
