Last week, the Treasury Department and the Internal Revenue Service published regulations explaining how the new Federal Scholarship Tax Credit program will work. The program, established as part of the One Big Beautiful Bill Act, gives taxpayers a credit for donating to certified “scholarship granting organizations” (SGOs), which then use the money to fund either private school tuitions or tutoring and other educational expenses for public school students.
Starting on January 1, 2027, the program could reach 11 million donors and raise $26 billion in scholarships by 2030, according to official estimates. In so doing, it could expand school choice in states that still don’t have local programs allowing parents to choose the best education for their kids. Currently, 30 states have opted in to the program, including five with Democratic governors.
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New York State Governor Kathy Hochul has said that she intends to opt in, too, but was waiting for the regulations to be published. Commendably, she made this commitment even as the teachers’ union launched an aggressive campaign aiming to change her decision. Now the regulations are available, and it’s time for Hochul to keep her word.
The new regulations contain several pieces of good news for parents. First, married couples filing jointly can now redirect up to $3,400 of their federal tax liability to scholarship-granting organizations. Second, the regulations clarify that states opting in to the program cannot impose requirements on scholarship-granting organizations in addition to the federal law. That means governors won’t be able to limit eligibility.
Students attending any type of school are eligible as long as their household’s income is below 300 percent of their area’s median gross income. In New York, this would mean an annual-income cutoffs of $309,000 in Bronx County or $510,000 in Westchester County.
More than 2.7 million students could be eligible for these scholarships, making New York the state with the fourth-largest student population of eligible recipients. Democrats for Education Reform, a pro-SGO group, estimates that 30 percent of New York taxpayers could raise more than $1.5 billion for scholarships. (DFER released these estimates before the regulations were issued, so the total would be even higher with the married-couple allowance.)
For New York, the SGO credit could be a lifeline for students struggling to receive a basic education in their current schools. The last state test results showed that 52 percent of students in grades 3–8 are not reading at grade level. Forty-three percent can’t do math at grade level.
The program will allow the families of these children either to apply for a scholarship to a different school or use the funds to supplement schooling with additional educational opportunities. Children’s Scholarship Fund President Darla Ronfo has said that offering enhanced tutoring to all fourth-graders in New York reading below grade level would cost $1,500 per student; this new program could support that.
Former Virginia Governor Glenn Youngkin is working to convince the 20 states that have declined to opt in to the program not to waste this opportunity and let their residents’ donations go to other states. At a Manhattan Institute event in New York City last week, he reminded the audience that parents have a constitutional right to direct their kids’ education: “The Supreme Court has come back time and time and time again that these are parents’ fundamental rights.”
Governor Hochul’s education legacy is in jeopardy. During her tenure, the education budget has ballooned to $40 billion per year with no gains in academic outcomes for students; New York lowered its state test standards; and the state recently eliminated the high school exam.
Opting in to the Federal Scholarship Tax Credit program offers a chance for an about-face. If Hochul keeps her promise, New Yorkers will remember her as the governor who helped expand educational opportunities for the state’s neediest students.