The Federal Scholarship Tax Credit: What You Need to Know
The Federal Scholarship Tax Credit Is Moving Forward: What You Need to Know About the Rulemaking Process
What many first knew as the Education Credit for Children Act (ECCA) is now more commonly being referred to as the Federal Scholarship Tax Credit (FSTC). While the name may be shifting, the goal remains the same: to expand educational opportunity for students across the country.
This new federal credit, created under the 2025 One Big Beautiful Bill (OBBB), will allow taxpayers to support scholarships for K-12 students and receive a dollar-for-dollar credit on their federal taxes. It represents the most significant national step toward expanding educational access in decades.
But before the program can launch, it must go through the federal rulemaking process, a required step to define how it will be implemented.
What Does “Subject to Federal Rulemaking” Mean?
Rulemaking is how agencies turn federal law into operational reality. The law sets the framework, but the rulemaking process determines the details. These details include:
- How Scholarship Granting Organizations (SGOs) will be certified
- What reporting and accountability standards will be required
- How taxpayers will claim the federal credit
- How funds will reach students and schools
- Compliance, audit, and transparency requirements
The purpose of rulemaking is to ensure that the program runs fairly, consistently, and responsibly across all participating states.
Rulemaking Has Officially Begun
The U.S. Department of the Treasury and the Internal Revenue Service (IRS) have formally begun drafting the administrative rules for the Federal Scholarship Tax Credit. This process includes:
- Internal drafting and review
- Release of proposed rules
- A public comment period
- Revisions and finalization
This is a lengthy but essential step. It ensures clarity for states, schools, scholarship organizations, and taxpayers. It also prevents confusion and prevents any group from misinterpreting the law.
RedefinED Is Actively Involved
RedefinED, alongside other leading scholarship and education organizations across the country, is directly collaborating with partners working with the Treasury Department during this process.
Our role includes:
- Helping ensure that the rules reflect the realities schools face
- Advocating for clear, efficient procedures for donors
- Encouraging transparency and accountability standards that support trust
- Making sure the needs of students remain at the center of the process
We are not waiting to see how the policy unfolds. We are helping shape its implementation so that it will work effectively for students, families, schools, and donors nationwide.
Why This Matters
The Federal Scholarship Tax Credit has the potential to reshape access to education in the United States. When implemented well, it can:
- Expand scholarship access for students who need it most
- Bring more funding into public and private school educational support programs
- Reduce financial barriers for families
- Encourage community partnership and generosity
This is a national opportunity, but the benefit will vary based on how well each state participates. The rulemaking process is where clarity and fairness are built in.
What Comes Next
After Treasury releases proposed rules, the public will be invited to submit comments. This is a powerful opportunity for schools, SGOs, families, and advocacy organizations to make their voices heard.
We will keep you informed every step of the way, including:
- When the proposed rule is released
- How to provide meaningful public comment
- State-level updates, including Pennsylvania’s participation decision
The potential is enormous. And the work is already underway.
This is a pivotal moment for educational access in America. RedefinED is committed to ensuring that families and schools are prepared, informed, and positioned to benefit.
More to come soon.
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