PRESS RELEASE: DFI Urges Treasury Department to Prioritize Education Freedom in Federal K-12 Scholarship Tax Credit Rulemaking

WASHINGTON—The Defense of Freedom Institute for Policy Studies (DFI) submitted a recommendation urging the U.S. Department of the Treasury to prioritize the Federal K-12 Scholarship Tax Credit (FSTC) in its 2026-2027 rulemaking and guidance calendar.

Authorized by the One Big Beautiful Bill Act (OBBBA), the FSTC will expand education freedom by allowing taxpayers to receive a dollar-for-dollar tax credit of up to $1,700 for donations made to K-12 scholarship granting organizations (SGOs). This tax credit is set to begin in 2027, making prompt guidance critical for carrying out the law in the timeline set by Congress.

DFI’s letter recommends the Treasury Department act in line with congressional intent to expand education freedom nationwide by:

1. Granting SGOs sufficient time for implementation. 
   In conversations with education leaders across the country, DFI has found that SGOs will need at least six months after being included on a state list of eligible organizations to raise funds for scholarships to be granted in 2027.
   
2. Interpreting “located in a state” to mean registered to do business in the state and in compliance with state law.
   This reduces the administrative burden on SGOs and the IRS.
   
3. Allowing each member of a married couple filing their taxes jointly to receive the $1,700 tax credit for their donation.
   Limiting a married couple’s tax benefit to $1,700 creates a “marriage penalty” that ultimately harms not the couple, but students who could benefit from scholarships.
   
4. Extending the time window for states to opt in to the FSTC in its first year. 
   An extension would offer newly elected governors taking office in 2027 to opt in to the credit. It would also grant states more time to identify SGOs and allow SGOs more time to raise funds before the start of the 2027-2028 school year.
   
5. Preventing governors from unfairly picking and choosing which SGOs are permitted to operate in their states. 
   Once a state opts in, any SGO that fulfills the requirements of the OBBBA should be permitted to participate. Otherwise, politics could get in the way of what is best for students.

DFI’s letter builds on its prior efforts to expand education freedom through the FSTC, including a public comment on the Treasury Department’s forthcoming proposed rulemaking.

DFI Senior Policy and Regulatory Counsel Paul Zimmerman said, “DFI is urging the Treasury to deliver on the promise Congress made when it created the FSTC. The overwhelming public interest in this tax credit, and the exponential impact it can make for students in a matter of months, underscores the pressing need for Treasury to explain to the public how it will carry out the law.”

To read DFI’s letter, click here.