EFTC in South Dakota

South Dakota is participating in the federal Educational Choice for Children Act scholarship program. Also known as the Federal Scholarship Tax Credit (FSTC), the program was enacted as IRC §25F and takes effect January 1, 2027.

Governor: Larry Rhoden; Republican
Status: Opted in
Program begins: January 1, 2027; Federal tax credit live

Thank Governor Rhoden

What EFTC means for South Dakota

Because Governor Larry Rhoden has opted South Dakota into EFTC, families in South Dakota will be eligible for scholarships funded through the program when it goes live on January 1, 2027. Designated Scholarship Granting Organizations (SGOs) in South Dakota will receive donations from federal taxpayers and distribute them as scholarships to qualifying K-12 students.

Donors in South Dakota, and anywhere else in the country, can claim a federal income tax credit of up to $1,700 per tax return for contributions to a qualifying SGO, beginning January 2027. The credit is non-refundable and capped, but it lets taxpayers redirect federal income tax that would otherwise go to the U.S. Treasury into scholarships for students in their own community.

South Dakota's participation means federal tax dollars contributed by South Dakota residents stay in South Dakota, supporting families here rather than flowing to scholarship organizations in other states.

Frequently asked questions about EFTC in South Dakota

Does South Dakota participate in EFTC?

Yes. Governor Larry Rhoden has opted South Dakota into the program, making South Dakota families eligible for scholarships when the program begins on January 1, 2027.

Who is the governor of South Dakota and what is their position on EFTC?

Governor Larry Rhoden (Republican) has opted the state in.

Can South Dakota residents donate to an SGO and claim the federal tax credit?

Beginning January 1, 2027, any U.S. taxpayer can claim a federal income tax credit of up to $1,700 per tax return for donations to a qualifying Scholarship Granting Organization, regardless of the state they live in. South Dakota residents can give to SGOs in South Dakota and the scholarships will fund South Dakota students.

When does the EFTC program begin?

The Educational Choice for Children Act program begins on January 1, 2027. Donations made on or after that date are eligible for the federal tax credit. Each participating state's governor must submit a list of qualifying Scholarship Granting Organizations to the U.S. Treasury by January 1 of each participating year.

Becoming an SGO in South Dakota

To operate as a Scholarship Granting Organization (SGO) in South Dakota under the federal Education Freedom Tax Credit, an organization must meet the §25F requirements that apply in every participating state, plus anything South Dakota adds on top. Here is the current picture.

Certification status: Not yet published, awaiting federal guidance

How South Dakota opted in: Gov. Rhoden's executive advance election (announced November 14, 2025)

Federal requirements (apply in every state)

Be a 501(c)(3) nonprofit that is not classified as a private foundation.
Spend at least 90% of the income you receive on scholarships, the remaining 10% is the only budget for all administration, including fundraising.
Award scholarships to 10 or more students who attend more than one school.
Do not earmark or reserve contributions for a specific, named student.
Serve students in households at or below 300% of area median gross income.
Appear on your state's certified SGO list, which the state submits to the U.S. Treasury.

South Dakota-specific requirements

South Dakota has not published SGO requirements beyond the federal rules yet. Certification mechanics are gated on Treasury’s proposed §25F regulations, expected by the end of September 2026, so watch for South Dakota’s application window to open after that.

Gov. Rhoden said the program still needs federal guidance before South Dakota can stand it up.

Sources: Dakota News Now: Rhoden says state will opt into the federal program (November 14, 2025)

Full walkthrough: how to start an SGO. The intake, income verification, receipting, and disbursement a compliant program needs can run on software built specifically for the §25F workflow.

Scholarship Granting Organizations in South Dakota

2 Scholarship Granting Organizations currently serve South Dakota through state tax-credit scholarship programs and national networks, the organizations most likely to administer the federal EFTC here once official §25F lists are certified.

Browse SGOs in South Dakota →