After Governor Kay Ivey opted Alabama into the federal Education Freedom Tax Credit on January 16, 2026, the Alabama Department of Revenue published the rules a scholarship-granting organization must meet to be certified, including a 90% scholarship floor and an Alabama-students-only limit.
Governor Kay Ivey (R) signed Executive Order No. 742 on January 16, 2026, opting Alabama into the federal Education Freedom Tax Credit (§25F) and naming the Alabama Department of Revenue (ALDOR) as the agency that will administer the state's part of the program. ALDOR has since published a guidance page, “The Education Freedom Tax Credit Program: Alabama's Part in the Federal SGO Program,” that lays out, for the first time in Alabama, the concrete criteria an organization must satisfy to be certified as a scholarship-granting organization (SGO). The federal credit itself is worth up to $1,700 per taxpayer, claimed dollar-for-dollar for contributions to a qualifying SGO, and it takes effect beginning January 1, 2027. Alabama now joins the roughly fifteen states that have made the election, alongside earlier movers like Virginia and Alaska, both of which opted in by executive action rather than legislation.
The ALDOR page sets out six requirements an organization must meet to be certified in Alabama. It must be a 501(c)(3) nonprofit that is not classified as a private foundation. It must provide scholarships to 10 or more students who attend more than one school. It must spend at least 90% of the income it receives on student scholarships. It cannot earmark or reserve contributions for specific, named students. It may only fund scholarships for students in Alabama. And it must be certified by ALDOR before it can participate. These mirror the federal §25F structure, where scholarships are also means-tested to households earning up to 300% of area median income, a band that determines which students an Alabama-certified SGO can ultimately serve. The page notes one important caveat on timing: ALDOR says it is still awaiting additional guidance from the U.S. Treasury Department before it finalizes application deadlines, so certification is authorized but not yet operationally open.
One figure on the ALDOR page is worth flagging for donors. The page states the credit cap as $1,700 per year for an individual and $3,400 for married couples filing jointly. The $3,400 joint figure is not settled: Treasury has not ruled on whether married couples can claim double the individual cap, and the prevailing reading of the statute is $1,700 per taxpayer regardless of filing status. We walk through why in our analysis of what the §25F statute already settles. Until Treasury says otherwise, donors and operators in Alabama should treat $1,700 per taxpayer as the working number rather than banking on the $3,400 joint figure that ALDOR's page currently cites.
For prospective Alabama SGO operators, the practical takeaway is that the eligibility bar is now legible even if the calendar is not. The 90% scholarship floor, the no-earmarking rule, the ten-students-across-multiple-schools test, and the non-private-foundation requirement are exactly the kinds of compliance lines that have to be designed into an organization's accounting and grant-making from day one, not retrofitted later. That is the same build-versus-retrofit decision playing out in other states, where incumbents have often chosen to stand up a separate, purpose-built federal entity rather than bolt §25F onto an existing state-credit vehicle, as Step Up For Students did in Florida. Operators weighing how to structure an Alabama program can review the requirements alongside our explainers on how the federal credit works and compare structures across the national SGO directory. Meeting the 90% floor and the per-student means-testing cleanly is largely an operations problem, which is why a growing number of operators run §25F programs on software written for the credit from the start.
Alabama's move is a useful marker of where the rollout sits in early 2026: states are opting in and publishing their certification rules, but final deadlines are stalled on the same pending Treasury guidance that has held up several other states. The substantive criteria are now public, so organizations can begin organizing toward certification, but no one can submit an application until ALDOR sets the dates. We track Alabama's status and its certified organizations as they come online on the Alabama state page, and we follow every state's election on the national participation map as the 2027 launch approaches.
