Treasury hasn't answered the five governors' §25F questions. Here's what the published rules already say

Treasury hasn't publicly answered the five governors. On October 22, Maura Healey of Massachusetts, Gavin Newsom of California, Ned Lamont of Connecticut, Gretchen Whitmer of Michigan and Mikie Sherrill of New Jersey asked Treasury Secretary Scott Bessent for written answers on the Education Freedom Tax Credit (§25F) before deciding on 2027. Nineteen days later, Newsom's office has not received a response, EdSource reported on November 10, and the January 1, 2027 deadline for a state's advance election, IRS Form 15714, hasn't moved (temp. § 1.25F-5T(c)(3)(i)(B)(1)). Much of what they asked already has an answer on paper. We checked each of the letter's 12 questions against the statute, Treasury's temporary regulations (T.D. 10057), which take effect without a comment period and apply from September 1, 2026, and its proposed regulations (REG-117199-25), which aren't final but may be relied on for 2027 contributions. We don't speak for Treasury; where the text is silent, we say so. By our count, the rules answer one question outright, answer seven in part and leave four open.

Can a state require SGOs to protect student data? Still open. Neither set of rules mentions student data, privacy or data security, though SGOs will hold sensitive family records: the direct income check runs on pay stubs, tax returns, IRS transcripts and W-2s (prop. § 1.25F-3(c)(6)(iii)(A)). What the rules set is the frame any such requirement would have to fit. A participating state must hold SGOs to “all generally applicable State requirements for charitable organizations” (temp. § 1.25F-5T(e)(1)(i)) and must impose application, documentation and financial-reporting requirements reasonably tailored to its certifications and to fraud prevention ((e)(1)(ii)). It may not require SGOs to “operate in a manner that is more restrictive than” §25F(c)(5) ((e)(2)). The text doesn't say which side of those lines a data-protection rule falls on. Donor data is handled differently: donors never give an SGO their Social Security number, because Treasury concluded that collecting it “might result in unnecessary exposure of sensitive taxpayer information” (how the donor number works).

Who oversees a multistate SGO headquartered in another state? The rules answer this: every state that lists it, wherever its headquarters is. An organization is “located in” a state if it is authorized to do business there and complies with the state's charity laws, “including provisions for transparency, accountability, and fraud prevention” (temp. § 1.25F-1T(a)(10)). Each listing state makes the same certifications for a multistate SGO that it makes for a local one, after determining whether the organization is single-State or multistate, reviewing its audit and annual certifications, and investigating any failure to provide them (temp. § 1.25F-5T(d)(3)). The proposed rules give each state its own piece to check. A multistate SGO keeps a separate §25F account for every state that lists it, takes donor designations by state, meets the 90% spending test and the other operating rules separately for each account (prop. § 1.25F-3(c)(3)), reports separately for each (prop. § 1.25F-4(d)(3)(iii)) and gives its audit to every listing state (prop. § 1.25F-4(e)(1)). A state's account funds only students who live in that state (prop. § 1.25F-3(c)(7)). If one state removes the SGO after a due-process review, it stays on the IRS list for the other states where it still qualifies (temp. § 1.25F-5T(d)(7)(iii)(B) and (d)(8)(iii)(B)). Treasury has asked for comments on “any other certifications that should be required for a multistate SGO.”

What will the IRS share with states? Partly. Most of what a state reviews comes straight from the SGO, not from the IRS: a copy of the annual certification and report it files with the IRS (prop. § 1.25F-4(d)(4)), its annual financial and programmatic audit (prop. § 1.25F-4(e)(1)), a separate third-party audit if it uses the low-income-area tutoring safe harbor (prop. § 1.25F-3(c)(6)(iii)(C)(2)), and, until it first reports to the IRS, copies of whatever it sends there (temp. § 1.25F-5T(d)(4)(iv)). From the IRS, the rules provide the public IRS SGO list, which shows each removal with its date (temp. § 1.25F-5T(d)(9)), and the list of states with advance elections ((c)(3)(iii)). The IRS's FSTC page, last updated October 23, says the IRS “will assist states” in checking that an organization is a 501(c)(3) public charity. The proposed rules' preamble says that matching what SGOs report about contributions with what donors report matters in part “to facilitate the States' monitoring of SGO compliance.” Neither set of rules says what the IRS will pass along, including the donor-level reports SGOs file by each February 28 (temp. § 1.25F-4T(c)(2)).

Can a state set anti-fraud and financial-integrity rules beyond the federal minimum? Partly. The test is written down; where a particular rule lands isn't. The federal floor sits in the SGO rules: reasonable fraud procedures, systems to catch duplicate awards for the same expense, and set ways for money to reach schools, vendors and families (prop. § 1.25F-3(c)(5)). Above that floor, state requirements aren't optional. A state “must” require application, documentation and financial-reporting requirements reasonably tailored to its certifications and to “facilitate the prevention and detection of fraud or abuse, including the misuse of scholarship funds” (temp. § 1.25F-5T(e)(1)(ii)). The limit: those requirements “must be reasonably related to” whether an organization is located in the state, meets §25F's SGO requirements and satisfies the state's general charity rules “for accountability and fraud prevention,” and no state may make SGOs operate more restrictively than §25F, “such as by limiting the type of school that scholarship recipients may attend or the types of qualified elementary or secondary education expenses” ((e)(2)). Beyond those two examples of what's barred and one of what's expected (duplicate awards), the text doesn't spell out what is “reasonably related,” so a rule written the way the governors describe, leaving eligibility, expenses and an SGO's purpose alone, isn't addressed directly. The IRS can also require a state to change its procedures after finding “a pattern of irregularities or noncompliance” ((e)(3)).

What federal enforcement follows when an SGO breaks the rules? Partly. The statute tells Treasury to write rules “providing for enforcement” of the SGO and state-list requirements (§25F(h)(1)), and the temporary regulations do it through the IRS SGO list. The IRS will remove an organization that loses its 501(c)(3) status or becomes a private foundation, and it may remove one after determining that it failed a §25F requirement or the reporting, recordkeeping or audit rules, a decision the SGO can take to the IRS Independent Office of Appeals (temp. § 1.25F-5T(d)(8)(i) and (ii)). When a state removes an SGO, the IRS removes it from that state's part of the list ((d)(8)(iii)(A)), and gifts made after the removal date aren't treated as qualified contributions (T.D. 10057 preamble). Donors are protected unless they knew of the problem or helped cause it: a donor may rely on the IRS list as it stood on the day of the gift (prop. § 1.25F-2(b)). The §25F rules add no penalties of their own beyond removal, and they don't describe how IRS examinations will run or what happens to money already in a removed SGO's §25F account.

Which tutoring, special-needs, transportation, technology, after-school and summer expenses qualify? Partly, and mostly by the statute itself. §25F(c)(4) borrows the Coverdell list in §530(b)(3)(A), and that list already names much of what the governors asked about: “academic tutoring,” “special needs services in the case of a special needs beneficiary,” computer technology or equipment and internet access, and transportation and “supplementary items and services (including extended day programs)” when they are “required or provided by” a public, private or religious school. Summer programming isn't named. The preamble's one summer example is about timing: a student can get a scholarship the summer before school starts for expenses tied to enrolling later that year. Treasury's October fact sheet gives “tutoring for students attending a local public school, special education services for students with disabilities, books, supplies, and qualifying extended day programs” as examples. The rest, including which programs and providers fit and what counts as a school, waits on separate §530 guidance that Treasury calls “a high priority.” The preamble adds a charity-law limit: an SGO may fund only expenses “reasonably necessary to further the organization's charitable exempt purposes” (what's settled and what isn't).

What do the tutoring safe harbor's standards mean? Still open. Under prop. § 1.25F-3(c)(6)(iii)(C), students a school in a low-income area selects for individual academic tutoring, or for special needs services, count as income-eligible without a household income check, if the school is in a HUD qualified census tract or certifies that at least 80% of its students live in one. The SGO then needs a yearly third-party audit, provided to the state, certifying, among other things, that tutors were “qualified to render the services,” that each student's need was “independently diagnosed by a professional not associated with the provider or vendor of the services,” and that the services “met appropriate quality standards, were provided with a duration and frequency commonly required to produce benefit,” with their impact on each student assessed. The governors asked what each of those standards means, and what counts as academic need. The text defines none of them, nor “individual academic tutoring” itself, and Treasury has asked, about its proposed requirements generally, whether there are “less burdensome alternatives that adequately mitigate the risk of fraud or improper payment of scholarships.” One thing is settled: the safe harbor is optional. An SGO can fund tutoring or special-needs services for a public school student under the ordinary rules, verifying household income directly or through SNAP, TANF, WIC, Section 8 or SSI, or under the foster-child rule (prop. § 1.25F-3(c)(6)(iii)(A), (B) and (D)), and the extra safe-harbor audit then doesn't apply (how the safe harbor works).

Steering scholarships to the students with the most need, and reporting on who gets them. Partly, on both questions. The rules don't address what a state may do to encourage access short of a requirement. They address what it can't require (temp. § 1.25F-5T(e)(2)) and what an SGO may choose. Any SGO may narrow its own focus: Treasury's examples include an SGO that serves only households under 80% of area median gross income (T.D. 10057 preamble) and one that stops at 50% (proposed rules' preamble). For tutoring and special-needs awards, priority can follow need instead of prior awards (prop. § 1.25F-3(c)(8)), and the low-income-area safe harbor is written for students at schools in low-income areas, special-needs students among them. Treasury expects SGOs to “publicize their particular missions” to draw donors. On data, each SGO's annual report, which every listing state receives, gives the number of applicants, the number selected under that safe harbor, the number of scholarships, the highest, lowest and average award, the number of schools recipients attend and spending by expense category (prop. § 1.25F-4(d)(3) and (d)(4)). It doesn't break out recipients' income, geography or disability status. Whether a state may collect that itself isn't addressed directly: the state's own requirements have to be reasonably tailored to its certifications and to fraud prevention (temp. § 1.25F-5T(e)(1)(ii)), and the rules say nothing about a state publishing what it receives.

Is there federal money for state oversight? Still open, and nothing published provides any. §25F and both sets of rules are silent on funding for states. In the proposed rules' federalism analysis, Treasury says states “will incur some costs” but “those costs will not be substantial,” and its unfunded-mandates analysis says any duty “arises from a State's voluntary participation”; the letter points to that reasoning in asking the question. The rules do put some of the review work on SGOs: each one commissions its own annual audit and sends it to the state (prop. § 1.25F-4(e)), and a new SGO can be reviewed on its governing documents and written policies until it has a reporting history (temp. § 1.25F-5T(d)(4)). The one federal step since the letter that comes near this is the Education Department's November 5 proposal to give grant points to projects that help families understand EFTC scholarships. A grant priority carries no money of its own, and this one isn't aimed at state oversight.

When will the rules be final, and what other guidance is coming for 2027? Still open on dates. Partly answered on the rest. The proposed rules would apply to taxable years ending on or after the date final rules are published. Until then, taxpayers, organizations and states “may rely on these proposed regulations for qualified contributions made on or after January 1, 2027,” if they follow them in full and consistently. Kevin Salinger, Treasury's Deputy Assistant Secretary for Tax Policy, said on an October 1 call that final regulations probably won't be in place until 2028, The 74 reported. The temporary regulations expire by October 1, 2029. As for more guidance, the published text says it's coming and names it: the separate §530 guidance on expenses and schools; the area median gross income limits by area and family size, which the IRS will publish each year in the Internal Revenue Bulletin; instructions for the IRS SGO portal, which hasn't opened, and the uniform donor-number format (temp. § 1.25F-4T(b)); and Form 8525, the donor's claim form. Of those, only the §530 guidance has a stated target.

What to watch. The §530 guidance is the piece most of the letter turns on. Salinger said it would be released by the end of the year, and the IRS told Education Week in October it was coming “soon.” Comments on the proposed rules close December 1 (how to comment), and the docket is where anyone, a state included, can ask for changes before the rules are final, such as definitions for the safe harbor's standards. The public hearing is December 15 at 10 a.m. Eastern, and it's canceled if no one sends an outline to speak by December 1. The state calendar runs alongside: advance elections on Form 15714 by January 1, 2027, then SGO lists at the IRS by February 15, 2027 (temp. § 1.25F-5T(c)(3)(ii)(B); the full calendar).

For organizations in these five states. Donors in California, Connecticut, Massachusetts, Michigan and New Jersey can claim the credit in 2027 whatever their governor decides, by giving to an SGO in a participating state. The election decides whether students who live in the state can receive §25F scholarships (how an opt-out moves the money out of state). A public school foundation or nonprofit that wants to be ready can do the slow parts now, and the published rules already settle them: tax-exempt status (a state may list organizations whose 501(c)(3) applications are still pending if it lists every pending applicant that asks, and only if the exemption, once granted, dates back to January 1 of the list year or earlier; temp. § 1.25F-5T(d)(5)), governing documents that expressly require the §25F operating rules ((d)(4)), and a segregated §25F account. Public school groups elsewhere have started: 41 Kentucky districts signed with one statewide SGO, and Colorado's public school foundations are forming their own. Two governors decided on these same published rules: New York's Kathy Hochul joined on October 9, and New Mexico's Michelle Lujan Grisham, who had been waiting on more federal guidance, opted in on November 4. Our guide for public schools and free SGO builder cover each step, and each state's page tracks the decision: California, Connecticut, Massachusetts, Michigan and New Jersey.