Proposed Regulations under Internal Revenue Code Section 25F (Education Freedom Tax Credit)

Proposed Treasury Regulations under 26 U.S.C. Sec. 25F (forthcoming) | U.S. Treasury | Expected end of September 2026

The U.S. Treasury and IRS have announced that they expect to issue proposed (not yet final) regulations under Internal Revenue Code Section 25F by the end of September 2026. Based on Treasury's June 10, 2026 preview, the proposed rules are expected to address how a Scholarship Granting Organization measures the requirement to spend at least 90% of the organization's income on scholarships (including a possible safe harbor that measures income by amounts held in a Section 25F segregated account), when an SGO is treated as located in a state, how an SGO may operate across more than one participating state while keeping a separate account per state, and how the term school is defined. Treasury has stated that states, scholarship granting organizations, and taxpayers should be able to rely on the proposed regulations for tax year 2027.

Why this matters: For schools and donors, these proposed regulations are the first detailed federal rules expected to explain how the 90% spending requirement, multistate SGO operations, and school designation will work in practice before the credit takes effect for tax years ending after December 31, 2026.