TL;DR
- SGO compliance falls into four buckets: one-time setup, annual filings, continuous/per-transaction duties, and the annual state-list cycle.
- The non-negotiables: keep a segregated §25F account, hold the 90/10 ratio, get an annual independent audit, issue donor acknowledgments with unique donor numbers, and re-appear on each participating state’s list every year.
- Several specifics (audit thresholds, donor-number mechanics, the IRS portal, state-list deadlines) come from Treasury’s June 2026 preview and aren’t final until the proposed regulations publish.
First: the rules aren’t final yet
Treasury previewed the §25F framework in June 2026 and expects proposed regulations by the end of September 2026. The obligations below reflect the statute plus that preview, enough to set up correctly now, but treat exact thresholds and dates as provisional until the rule publishes. We track changes on our news feed and in the proposed-regulations preview.
One-time, at formation
- Incorporate as a nonprofit, get an EIN, and obtain 501(c)(3) status (Form 1023 or 1023-EZ). See how to start an SGO and the startup-cost estimator.
- Open a separate, segregated §25F account from day one, Treasury’s safe harbor for the 90% test depends on it (a separate account per state for multistate SGOs).
- Register for charitable solicitation in each state where you’ll fundraise, and get on each participating state’s SGO list.
Every year
- Independent annual audit (financial + programmatic), furnished to each state on whose list you appear, with a possible internal-committee substitute for smaller SGOs.
- IRS Form 990, due the 15th day of the 5th month after your fiscal year ends (May 15 for calendar-year orgs).
- State reports required by each participating state, plus charitable-solicitation renewals and your corporate annual report / registered-agent renewal.
- Re-appear on each state’s SGO list, the state opt-in is an annual election (see the cycle below).
Continuous / per-transaction
- Hold the 90/10 ratio, at least 90% of income to scholarships, ≤10% administration, tracked per state account. Read the 90/10 deep dive.
- Donor acknowledgments + unique donor numbers issued for each contribution and reported to the IRS.
- Applicant income verification (300% of area median income, or categorical eligibility) before awarding scholarships.
- Observe the §25F operating rules continuously: anti-earmarking, the self-dealing prohibition, and award priorities (renewals, siblings).
The annual state-list cycle
The credit only reaches a state’s residents when that state elects to participate and submits its list of qualified SGOs to the IRS, and that election repeats each year. As an SGO, your job is to stay qualified and on the list in every state you serve, every cycle. Watch the state opt-in tracker for where each state stands.
Quick-reference table
| Obligation | Cadence |
|---|---|
| 90/10 scholarship ratio | Continuous (per state) |
| Donor acknowledgments + unique donor numbers | Per contribution |
| Applicant income verification | Per application |
| Independent audit → each state | Annual |
| IRS Form 990 | Annual (15th day, 5th month after FY end) |
| State reports + charitable-solicitation renewals | Annual (per state) |
| Re-qualify on each state’s SGO list | Annual election cycle |
Frequently asked questions
Does every SGO need an annual audit?
Per Treasury's previewed rules, yes, each SGO would need an annual financial and programmatic audit by a qualified independent third party, furnished to every state on whose list it appears. Treasury indicated smaller SGOs could substitute an internal-committee audit signed under penalties of perjury. The final requirement comes with the proposed regulations.
What is the unique donor number?
Treasury previewed a system where the SGO gives each donor a written acknowledgment carrying a number generated under an IRS-provided method, reports the contribution to the IRS under that number, and the donor reports it on their return. It lets the IRS match credits to real donors and SGOs without donors handing their Social Security number to the SGO.
How often is the 90/10 test measured?
Treat it as continuous, not a once-a-year check. §25F requires at least 90% of income to fund scholarships (≤10% administration). Treasury previewed a segregated-account safe harbor measured per state account, so a multistate SGO should track the ratio per state, not just in aggregate. Our 90/10 calculator can sanity-check it.
Do these dates apply for the 2027 launch?
The program begins for donations made on or after January 1, 2027, and states make an annual election before residents can give to in-state SGOs and claim the credit. Exact state-list deadline mechanics for the startup year are among the items Treasury still needs to finalize, see our timeline and news for updates.
