Minnesota Should Opt Into the Federal Scholarship Tax Credit!

Minnesota Should Opt Into the Federal Scholarship Tax Credit!

Congress recently passed the first Federal Scholarship Tax Credit, which would provide millions of dollars in educational resources for students across the U.S. For Minnesota's students to benefit, Governor Walz must opt in or the Legislature must pass a bill to opt Minnesota into the program. 

Why Minnesota Should Opt in:

• Zero cost to Minnesota: Opting into the Federal Scholarship Tax Credit will not cost our state anything. A state’s only obligation is to decide to opt in and submit the list of eligible scholarship organizations by January 1, 2027, and by January 1 of each subsequent year.
  
• Keeps dollars in state: Failure to opt in leaves behind Minnesota kids. It will cause local dollars to leave our state through donations made by Minnesota taxpayers to Scholarship Granting Organizations (SGOs) in other opt-in states where they are eligible for the tax credit. This will cause our state’s kids to lose out on scholarship opportunities for their educational achievement. Keep these scholarship dollars here for our kids!
  
• Benefits all children: This program will help both public and private school students. Local nonprofit SGOs and public-school foundations can receive donations to fund tuition, tutors, and other supplemental learning opportunities, potentially generating hundreds of millions of dollars to strengthen educational achievement.

How it works:

Individual taxpayers can receive a dollar-for-dollar tax credit on their federal tax return for donations (up to $1,700 per year) made to K-12 Scholarship Granting Organizations (SGOs) or public-school foundations. These organizations must use the authorized donations to provide scholarships for tuition, tutoring, special needs, supplies/technology, and other education expenses for both public and private school students.

The Governor of each state, or designee provided by law, must opt into this federal opportunity. States must notify the U.S. Treasury of their decision to opt in and then submit a list of eligible SGOs by Jan. 1, 2027, and by January 1 of each subsequent year. A State Legislature can pass a law commanding the Governor or another state officer to opt in and submit the list of eligible SGOs.

What Happens Next?

Governors are currently weighing whether to opt their state into this educational opportunity. If their state allows, they can do so unilaterally or by direction of the Legislature. If a state does not elect to opt in, SGOs in the state may not promise donors a tax credit to receive funds and grant scholarships to kids under this law. Individual taxpayers, however, can still receive a tax credit by giving to SGOs in states that have opted in.

The Treasury Department has created a tool for states to opt in and is formulating regulations for this federal educational opportunity. In states where governors have already indicated that they will opt in, SGOs are preparing to utilize this opportunity. Similarly, parents are gearing up in expectation of the new options their children may have.

View the Federal Scholarship Tax Credit One-Pager in PDF form

• school choice