1 national standard: under Treasury's §25F rules, states cannot add their own conditions for SGOs

The Education Freedom Tax Credit will run on one set of rules in every participating state. The temporary regulations Treasury and the IRS released on October 1, 2026 say that a state "may not require SGOs to operate in a manner that is more restrictive than the requirements set forth in section 25F(c)(5), such as by limiting the type of school that scholarship recipients may attend or the types of qualified elementary or secondary education expenses for which scholarship funds may be used." The provision, § 1.25F-5T(e)(2), is titled "Prohibition on additional State requirements or discretionary exclusions," and because it sits in the temporary regulations, not only in the proposed rule, it applies from September 1, 2026 and governs the 2027 SGO lists states are building now. Our full breakdown of the rules covers the rest of the package.

What "located in" means. §25F asks each participating state to list the qualifying SGOs "located in" it. The temporary rules define that term: an organization is located in a state "if the organization is authorized to do business in the State and is in compliance with the generally applicable State laws and requirements for charitable organizations in the State, including provisions for transparency, accountability, and fraud prevention." No headquarters or in-state staff is required. Treasury considered the opposite view, that "located in" should mean a physical presence, and chose the registration standard as "consistent with the legislative purpose of section 25F to increase access to scholarship funds." An established SGO can therefore register in several participating states and appear on each of their lists.

What states still do. The rule does not take states out of the job. Under § 1.25F-5T(e)(1), a participating state must require SGOs to meet its generally applicable charity laws, including whatever it takes to do business and solicit donations there, and must impose "application, documentation, and financial reporting requirements" reasonably tailored to support the state's certifications and to "facilitate the prevention and detection of fraud or abuse," including duplicate awards to the same student for the same expense. The limit is on purpose, not on rigor: those requirements "must be reasonably related to determining whether an organization is located in the State, meets the requirements of section 25F(c)(5) and the operational requirements in section 25F(d), and satisfies the generally applicable State requirements for charitable organizations."

Every qualifying SGO gets listed. When a state makes its election, it must certify that its list "includes every organization located in the State" that qualifies and is seeking inclusion. A state can remove an SGO during the year only after determining, "through a procedure providing due process to the organization," that it no longer qualifies, and it must certify that its procedures before and after a removal "are fairly administered and afford due process." The IRS keeps a check on the states too: under § 1.25F-5T(e)(3), state procedures "are subject to Federal review," and on finding "a pattern of irregularities or noncompliance" the IRS may require a state to change them. Treasury's announcement put the point plainly: the rules "would not permit a State to use discretionary certification standards to exclude otherwise qualifying SGOs."

For families, a uniform rule means a scholarship works the same way in every participating state: it can pay for any qualified expense at any school that counts under state law, and the list of SGOs a family can turn to is not narrowed by state policy. For SGOs, it means an organization built to the federal requirements can qualify wherever it is registered, without rebuilding its program for each state. And SGOs keep their own missions. Treasury's explanation says an SGO "may narrow its own focus and adopt more stringent requirements," such as limiting scholarships to subjects like science or foreign languages, or to students from households below 80 percent of area median income. The limit applies to what a state may require, not to what an organization chooses.

The question has been open since Treasury previewed the rules in June, when we asked whether §25F would be a federal floor or a federal ceiling. The temporary rule answers it as a ceiling. That has consequences for the few states that had planned around the other answer. Vermont's Act 164 directs its governor to decline participation if federal rules override the state's conditions; Oregon Gov. Tina Kotek cited this limit when she declined in June; and Rhode Island Gov. Dan McKee said he might support participation if the program were limited to uses such as tutoring and technology. Treasury counts 30 states that had elected to participate as of August 2026.

The regulation also leaves states' other obligations in place. Treasury's explanation notes that nothing in §25F or the temporary rules alters a state's duty to follow other federal and state law, naming the Individuals with Disabilities Education Act as an example. The same text appears in the proposed rule, which is open for comment until December 1, 2026; the proposed version is archived on our proposed regulations page.

If you are forming an SGO, register in each state where you plan to raise and award money, meet that state's charity filing rules, and apply to its list ahead of the February 15, 2027 deadline for 2027 lists. Our free SGO Builder walks through formation, the federal SGO list explainer covers how listing works, and the states page shows where each state stands.