The new federal scholarship credit: where California stands

From January 2027, a new federal tax credit will send private money to K–12 scholarships in every state that opts in. California has not, and may not soon. These are the five questions we expect your board and your development office to ask about it, each with the source you would need to answer it.

1. What is it, who qualifies, and when does it start?

Section 25F of the Internal Revenue Code, added by the 2025 reconciliation law. From 1 January 2027, a taxpayer who gives cash to a qualifying scholarship granting organization gets a dollar-for-dollar federal credit of up to $1,700 a year, reduced by any state credit for the same gift. The scholarships go to students in households at or below 300 percent of the area median gross income who are eligible to enroll in a public school, and may pay any expense in section 530(b)(3)(A), including tuition and fees, tutoring, special needs services, books, uniforms, transportation, extended day programs and computer equipment. Treasury said in June it expects proposed regulations by the end of September, and that states, organizations and taxpayers may rely on them for 2027.

2. Where does California stand?

Undecided, and quiet. A state takes part only if its governor, or whoever state law designates, elects to, and each year the state must give Treasury its list of approved scholarship organizations by 1 January, or for 2027, the first year, as early as practicable. The IRS lists 30 participating states as of 14 September 2026, and California is not among them. The governor’s office declined to comment when The 74 asked in July, and ACR 229, an Assembly resolution urging him to opt in, has not been referred to a committee since June. Other Democratic governors have mostly held back: Colorado’s opted in, and New York’s said in May that she plans to once the IRS rules are out, while Oregon, New Mexico, Wisconsin and Arizona declined. Kansas, Kentucky and North Carolina are in only because their legislatures overrode the governor’s veto (Ballotpedia, September 2026).

3. Who is pushing California to opt in?

Catholic schools, most visibly. Students at St. Genevieve Parish Schools in Panorama City mailed 15,000 postcards to the governor in May, and in April met his education policy advisor, Brooks Allen, who by their account told them their timing was good. Their next push is a million postcards on 5 October, with California’s Catholic school superintendents behind it; the chief executive of Democrats for Education Reform has worked with the students, Teach Coalition’s California director has met them, and the California Catholic Conference makes its own case for opting in. The Association of Christian Schools International runs its own letter campaign to the governor, and Representatives Vince Fong (January) and Kevin Kiley (June) have both called on him to opt in. The case against was put most plainly by Wisconsin’s governor, who declined because, he said, it would harm public schools.

4. What does it mean for us while California stays out?

Two things. Your donors can still claim the credit: nothing in section 25F limits where the donor lives. But a qualifying gift must fund scholarships solely within the state where the organization is listed, so a Californian who claims it funds students in Nevada or Texas, not yours. And the question does not close: the election is made each year, and California’s next governor takes office on 4 January 2027, days after the credit begins, with the 2028 list still to decide.

5. What would we need if California says yes?

A partner rather than a fund of your own. A scholarship granting organization must be a 501(c)(3) public charity, keep these gifts in a separate account, spend at least 90 percent of its income on scholarships, and award them to at least ten students who do not all attend the same school. It may not earmark a gift for a particular student, must verify household income, and must give priority first to returning scholarship students and then to siblings of students it has funded. For most schools that means a regional or diocesan organization, and a donor conversation about why a gift cannot follow one child.