The quiet design fight inside the federal Scholarship Tax Credit is whether federal law is a floor states can build on, or a ceiling they have to take as written. Treasury's June preview pointed to ceiling, and that removes the middle path blue-state governors and the teachers' unions were counting on.
Most of the §25F coverage has been a headcount, which states are in, which are out. The more consequential fight is quieter and structural: when a state opts into the federal Scholarship Tax Credit (FSTC / ECCA / §25F), does federal law set a floor that the state can build higher rules on top of, or a ceiling the state has to accept as written? That single question decides whether a participating state can steer the money toward public schools, limit eligible organizations to those serving low-income families, or attach its own academic and accountability tests. Treasury's June 2026 preview pointed clearly toward ceiling.
In remarks on June 9, 2026 and an accompanying release on June 10, Deputy Assistant Secretary for Tax Policy Kevin Salinger previewed the forthcoming proposed regulations. On the question that matters here, Treasury indicated that an organization is “located in” a state if it is authorized to do business there and complies with the state's generally applicable charitable-organization rules for transparency, accountability, and fraud prevention, and that states may not impose organization-specific requirements more restrictive than §25F's own. As Chalkbeat summarized it, states cannot impose “substantive” rules on scholarship groups beyond what federal law sets, a reading that contradicted assurances Education Secretary Linda McMahon had given that states would shape their own programs. Treasury also said “school” will be defined consistent with section 530 to include public, private, and religious K-12 schools as determined under state law.
The floor-versus-ceiling framing is not abstract, it is exactly what the program's opponents asked for. In a formal comment dated December 26, 2025, the National Education Association urged Treasury to acknowledge that federal law sets “a floor, not a ceiling” on state requirements for certifying scholarship organizations, and to require robust state oversight. Vermont went further and legislated the strings directly, with H.933 narrowing eligible organizations to nonprofits serving economically underprivileged students and steering grants toward public and approved independent schools. And several undecided Democratic governors, Gretchen Whitmer in Michigan, Ned Lamont in Connecticut, and Wes Moore in Maryland, had largely been waiting for the federal rules before committing, with public-school priorities clearly on their minds. Treasury's preview points away from all of it.
If the proposed regulations hold this line when they publish, expected by the end of September 2026, the practical effect is to collapse a three-way choice into a binary. A state can opt in on federal terms or stay out; the “opt in but wall it off” option largely disappears. Vermont's own bill anticipates this, directing the Governor to decline participation if federal rules invalidate the state's guidance until the legislature acts again. For donors and Scholarship Granting Organizations, a ceiling is the friendlier outcome: a more uniform national program with fewer state-by-state eligibility traps. We've covered the full preview of the proposed rules and where Democratic governors have landed; current status for every state is on the participation map.
