WASHINGTON — The Internal Revenue Service has moved its Dec. 15 public hearing on the new federal scholarship tax credit to a telephone-only format, according to a notice filed Tuesday for publication in Thursday’s Federal Register, as the agency’s proposed rules for the program draw more than 22,000 public comments.
The proposed regulations, published Oct. 2, would put into operation Section 25F of the tax code, created by the One Big Beautiful Bill Act that President Trump signed on July 4, 2025. Beginning Jan. 1, 2027, individuals in states that opt in can claim a dollar-for-dollar federal credit of up to $1,700 for cash donations to approved scholarship granting organizations, or up to $3,400 for married couples filing jointly, according to the IRS program page.
The Treasury Department and the IRS say the rules are needed to “make the section 25F credit operable” and give “clarity to taxpayers, States, and SGOs.” Their own economic analysis projects that the 30 participating states will have 600 to 700 scholarship organizations by 2030 and that more than 11 million taxpayers will give about $26 billion a year, enough to fund 2 million full-time scholarships of about $12,000 or 5 million part-time scholarships of $4,500 annually. The agencies cite research finding that school choice can raise test scores and college enrollment, “particularly for students from economically disadvantaged backgrounds.”
As of Wednesday, the public had filed 22,499 comments on the proposal, according to the Federal Register’s tally, and 22,477 had been posted on Regulations.gov docket IRS-2026-1354. A Washington Inquisitor review of the docket found that 11,375 of the posted comments, just over half, contain the same sentence describing the credit as “a nationwide private school voucher system,” the opening line of a form letter that urges repeal of the program and asks the Treasury to defer to state oversight. Written comments are due Dec. 1.
What changed this week
The notice, signed by Regina L. Johnson of the IRS Office of Associate Chief Counsel, says the 10 a.m. Dec. 15 hearing “has been changed to a telephonic-only hearing.” It gives no reason for the change. People who want to testify must send an outline of their topics and the time they need by Dec. 1, and each speaker will get 10 minutes. Requests to listen in by phone are due by 5 p.m. Dec. 10. Under the original notice, the hearing would be canceled if no outlines arrive by Dec. 1.
How the credit would work
The statute and the proposed rules set the basic mechanics. The credit is nonrefundable, so it cannot exceed a donor’s tax bill, but unused amounts carry forward for up to five years. A donation that earns the credit cannot also be deducted as a charitable contribution. Contributions must be in cash, which the proposal defines to include checks, cards, electronic transfers and payroll deductions in U.S. dollars, but not digital assets. Donors claim the credit on Form 8525, the IRS says.
Several of the proposal’s choices favor taxpayers and the organizations, by the agencies’ own description:
| Issue | What the proposal would do | Treasury’s stated reason |
|---|---|---|
| State credits | Subtract any state tax credit from the donation first, then apply the $1,700 cap | Avoids discouraging states that already offer credits; “benefits taxpayers” |
| Spending rule | Organizations whose activities are at least 85% scholarship granting can meet the 90%-of-income test using only their Section 25F account | Recognizes “legitimate administrative costs” |
| Income limit | Households up to 300% of area median gross income, measured under Section 8 housing rules and adjusted for family size | Matches the statute’s reference to Section 42 |
| Simplified eligibility | Students qualify if a household member receives SNAP, TANF, WIC, Section 8 or SSI, or if they are in foster care | Reduces “administrative burden” |
| State role | States may not add requirements or pick and choose among qualifying organizations for their lists | Gives organizations “the maximum flexibility permitted under the statute” |
| Spending checks | Organizations may verify scholarship spending through approved “digital wallet” payment platforms | Responds to stakeholder requests |
| Oversight | Annual audit, reporting and recordkeeping requirements for organizations | Ensures funds go to qualified expenses |
The proposal would require organizations to spend at least 90% of their income on scholarships, serve at least 10 students who do not all attend the same school, and keep donations in segregated accounts. A student must be eligible to enroll in a public school. The income ceiling is three times the local median, and the preamble says an organization may choose to focus on lower-income students, for example those below 50% of the area median.
The rules also define where an organization is “located,” a question that drew competing comments in response to the IRS’s earlier Notice 2025-70. According to the preamble, many groups argued that registration to do business in a state should be enough, warning that requiring an in-state headquarters or staff would “significantly hinder effective multistate SGOs,” while others said a physical presence should be required if state law calls for it. Under the proposal, an organization listed by more than one state would keep a separate Section 25F account for each, and a donor could direct a gift to the account for any of those states.
Which states are in
The credit is available only in states whose governor, or another official designated under state law, elects to participate and submits a list of approved organizations. The IRS list of participating states, last updated Oct. 22, shows 30 states for 2027.
| Region | States |
|---|---|
| South | Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, Oklahoma, South Carolina, Tennessee, Texas, Virginia, West Virginia |
| Midwest | Indiana, Iowa, Kansas, Missouri, Nebraska, North Dakota, Ohio, South Dakota |
| West | Alaska, Colorado, Idaho, Montana, Nevada, Utah, Wyoming |
| Northeast | New Hampshire |
In the Washington region, Virginia has opted in. Maryland and the District of Columbia are not on the list, which means donors there cannot yet claim the credit for gifts to local scholarship groups. The Treasury’s August economic analysis also counted 30 states.
Inside the 22,000 comments
The docket’s pace shows how quickly the comments came in. More than 21,000 were posted in the first four weeks after the proposal appeared, and the flow has since slowed to a trickle.
| Posting period | Comments posted | Share of total |
|---|---|---|
| Oct. 2–12 | 11,324 | 50.4% |
| Oct. 13–27 | 10,315 | 45.9% |
| Oct. 28–Nov. 4 | 758 | 3.4% |
| Nov. 5–11 | 80 | 0.4% |
| Total | 22,477 | 100% |
The form letter accounts for most of the opposition. Its text says federal vouchers “will worsen student academic outcomes, fund discrimination with public dollars, exacerbate racial segregation” and “primarily subsidize tuition for wealthier families whose children are already enrolled in private schools.” It adds that while the program is in effect, “regulations should defer to state authority for providing necessary oversight and regulation.” The Texas State Teachers Association, an affiliate of the National Education Association, filed that text under its own name.
A search of the posted comments found 11,658 that mention “public education,” compared with 23 that use the phrase “school choice” and five that use “educational freedom.” Keyword counts measure wording, not position, and some supporters of the program may use other language.
Supporters have also weighed in. The Johns Hopkins Institute for Education Policy said it “supports educational pluralism and state participation in the Federal Scholarship Tax Credit” and urged reporting and data provisions “so that implementation and student outcomes can be measured.” A California group, the Interfaith Statewide Coalition, wrote that students from low-income homes “need options and equitable opportunities to succeed, the same as wealthy families.”
Other organizations that have filed include the New York State School Boards Association, whose comment is an attachment, and several local teachers’ associations. Neither New York nor California is a participating state.
What comes next
After comments close Dec. 1 and the hearing on Dec. 15, the Treasury and the IRS will decide what to change before issuing final rules. The law applies to tax years ending after Dec. 31, 2026, and participating states must submit their lists of approved organizations by Jan. 1 each year, or for 2027, “as early as practicable,” through the IRS’s state portal.
The proposal estimates no unfunded mandate on states because participation is voluntary. A companion set of temporary regulations, TD 10057, was published the same day. The rule is signed by Frank J. Bisignano, the IRS’s chief executive officer.
By the agencies’ own numbers, the stakes are large: $26 billion a year in credited gifts and up to 2 million students a year by 2030. Whether that happens will depend on how many more states opt in, how many taxpayers donate, and how the final rules settle the questions the public is now debating.
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