On June 18, 2026, Rhode Island became the first state to write a legal gate into the federal scholarship tax credit, requiring both the legislature and the governor to agree before it can join. The state did not decline the program. It changed the number of signatures required to accept it, and in doing so raised a question every other state will eventually face.
In most states, joining the federal Education Freedom Tax Credit (EFTC) has come down to one person and one piece of paper. A governor files an election form with the IRS, and the state is in.
On June 18, 2026, Rhode Island changed that.
Gov. Dan McKee signed H7163 into law that day, creating a rule no other state has: Rhode Island cannot join the federal scholarship tax credit unless the General Assembly passes a participation bill and a governor signs it.
The state did not say no to the program. It changed who is allowed to say yes.
That distinction is the whole story, and its implications reach well past Rhode Island’s borders.
What the Law Actually Does
H7163 does not decline the federal credit. It removes the governor’s ability to enroll the state alone through the IRS advance election, the form a state files to signal it is participating.
Before June 18, a Rhode Island governor could have filed that form at any time. Now the legislature has to act first.
The bill reached McKee’s desk with margins large enough to survive a veto, passing the House 57-13 and the Senate 34-4. Rep. Susan Donovan and Sen. Sam Bell were the lead sponsors.
McKee signed a separate three-year moratorium on new public charter schools the same day.
Why a Governor Signed a Bill Limiting His Own Office
McKee had already made clear he did not intend to opt Rhode Island in. He did not need a law to keep the state out; he only needed to not file the form.
In his signing statement, he wrote that Scholarship Granting Organization (SGO) tax credits, in practice, “redirect public resources toward private institutions,” and that “major decisions with long-term consequences for our students, schools, and taxpayers deserve thoughtful consideration and agreement among Rhode Island’s elected leaders.”
He left a narrow opening. McKee indicated he could support participation if Treasury’s final rules limited how scholarship money is used, naming after-school tutoring, transportation and educational technology rather than private school tuition.
As of publication, Treasury has not published final regulations, so it is not possible to say whether that condition will be met or is even legally available to states.
The Sponsor’s Argument Was About the Next Governor
Bell was direct about the point of the bill, and his explanation is the clearest window into what happened.
“I don’t think Governor McKee would opt in, however, I don’t know what future governors are going to do,” he said.
Read that carefully and the law stops looking like a statement about the credit and starts looking like a statement about time. A single governor’s decision lasts as long as that governor does. A statute outlasts an election.
Who Objected, and What They Argued
Opponents framed the vote as leaving federal dollars unclaimed. Jorge Elorza, the former Providence mayor who now leads Democrats for Education Reform, urged McKee to veto the bill and called participation “such a no-brainer.”
Republican House Minority Leader Michael Chippendale described the law as turning down federal funds the state itself would not have to spend.
That is the arithmetic that keeps the question alive in states that have already closed the door. Under the design of the credit, a participating state commits none of its own revenue. The contribution comes from individual taxpayers, and the credit is claimed against federal income tax.
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How Rhode Island’s Gate Compares With Other States
The pattern here is a shift from personal decisions to structural ones.
Vermont’s H.933 tried to attach conditions to any opt-in. Virginia’s participation, by contrast, still turns on a governor’s renewal decision, which means it can change hands with the office.
Rhode Island went further than either by building a standing legal requirement into state law rather than relying on who holds the pen.
Compare it to Oregon, where Gov. Tina Kotek declined to participate a week earlier, objecting that states would not be permitted to add their own rules for scholarship organizations. Rhode Island’s legislature moved in the opposite direction, worried less about federal limits than about future state permissiveness.
Both actions came from the same underlying uncertainty: nobody yet knows exactly how much room states have to shape a federal credit. That question, whether federal law sets a floor or a ceiling for state restrictions, remains unresolved.
What It Means If You Live in Rhode Island
The practical answer is short. Rhode Island has no path into the program before its January 1, 2027 launch unless the General Assembly passes a participation bill and a governor signs it.
For families in the state hoping for a federally funded scholarship next year, the timeline now runs through the legislature, not the governor’s office.
For residents who were considering a contribution, one open question matters more than the rest: whether a taxpayer in a state that has not opted in may support a qualified scholarship organization elsewhere. Treasury’s final rules are pending, and until they are published, that answer is genuinely unsettled. We walk through what is and isn’t known in our explainer on out-of-state SGO donations.
A gate, it’s worth noting, swings both ways. The same statute that blocks a solo opt-in also gives supporters a defined route: pass a bill.
What the Law Does Not Change
None of this alters how the federal credit works for taxpayers in participating states.
The EFTC became law on July 4, 2025, as part of the One Big Beautiful Bill Act. It created a new section of the tax code, Section 25F, which is why some coverage refers to the program by that number.
The sequence is a charitable one first. An eligible taxpayer makes a contribution to a qualified nonprofit that awards K-12 scholarships, formally called a Scholarship Granting Organization. Later, at filing, that taxpayer may claim a dollar-for-dollar federal tax credit of up to $1,700.
This is a credit, not a deduction. It reduces federal income tax owed dollar for dollar rather than reducing taxable income. It is not a refund, and it is not an immediate offset at the moment of giving.
That figure does not move based on how any state resolves its own participation fight. For the mechanics step by step, see how the Education Freedom Tax Credit works, and for the state-by-state process, how states opt in.
What to Watch Next
Three things will shape what happens from here.
Treasury’s final regulations, still pending as of publication, will define what scholarship funds may be used for. McKee has tied his own openness to that answer.
The Rhode Island General Assembly’s next session becomes the only venue where participation can begin. Sponsors of H7163 built that requirement deliberately.
And other legislatures are watching. If a both-branches gate spreads, the map of participating states will start to reflect statutes rather than signatures, and it will change more slowly in both directions.
The AFC Scholarship Fund is preparing to serve donors and families in participating states when the program opens on January 1, 2027. If you want to understand where your own state stands and what the credit would mean for families in your community, follow our coverage of the state participation map and sign up to find out more.
No. H7163 does not decline the federal credit. It requires the General Assembly to pass a participation bill, and a governor to sign it, before Rhode Island can join. Participation remains legally possible, but it now takes an act of the legislature rather than a single filing by the governor.
A state signals participation to the IRS through an advance election form. In most states that has been handled by the governor, sometimes through an executive order and sometimes by filing the paperwork directly. Rhode Island's new law removes that solo option for its own governor.
Only if the General Assembly passes a participation bill and a governor signs it before then. As of publication, no such bill has been enacted.
No. The maximum credit per eligible taxpayer is set in federal law at $1,700 (Treasury rules pending) and does not vary by state. What varies by state is whether residents can participate at all.
Not as of publication. Final Treasury regulations are still pending, and state certification processes for scholarship granting organizations depend on that guidance. No contributions can be made or credits claimed before the program's January 1, 2027 launch.
