What is ECCA? The legislative background of the scholarship tax credit

What ECCA / EFTC / FSTC / §25F is

How the names relate. The Educational Choice for Children Act (ECCA) is the name of earlier scholarship-credit legislation that informed the enacted provision. The program is commonly called the Education Freedom Tax Credit (EFTC), the name Treasury uses in its press materials. The IRS officially refers to it as the Federal Scholarship Tax Credit (FSTC), which is also the title of Treasury’s October 2026 regulations and of Form 8525, the form donors will use to claim the credit. Tax professionals know it by its tax-code section, IRC §25F. (See our quick guide to the program’s names for the full breakdown.)

Whatever you call it, it’s a federal law that creates a nationwide tax credit scholarship program for K-12 education, the first program of its kind at the federal level. Unlike a voucher (where government dollars follow a student to a school), the program works through the tax code: private donors give cash to qualifying nonprofit Scholarship Granting Organizations (SGOs), and in exchange they reduce their federal income tax bill by the amount of their donation, up to $1,700 per taxpayer (up to $3,400 on a joint return when each spouse gives, under Treasury’s proposed regulations). Those SGOs then award scholarships to eligible K-12 students.

Because ECCA is structured as a tax credit rather than direct federal spending on schools, it does not appropriate any new federal money for education. Instead, it lets taxpayers redirect what they would otherwise owe in federal income tax into a scholarship pool.

How the program works

The mechanics involve four parties:

1. Donors, individual U.S. citizens and residents, give cash to a qualifying scholarship granting organization (SGO) and tell the SGO, at the time of the gift, that it is a §25F contribution. Under the proposed regulations, that designation can’t be undone later, and “cash” means currency, check, money order, electronic transfer (including credit or debit card) or after-tax payroll deduction. Stock, securities, other property and digital assets such as crypto don’t count, and neither does an owner’s share of a gift made by a partnership or S corporation.
2. The donor claims a federal tax credit of up to $1,700 per taxpayer on their federal income tax return, using Form 8525 (not yet released) and the unique donor number from the written acknowledgment the SGO must send by January 31 of the following year. The credit is non-refundable, meaning it can reduce the donor’s tax liability to zero but does not produce a refund beyond that; unused credit carries forward for up to five years.
3. The SGO awards scholarships to eligible K-12 students from the donations it receives. The statute requires the SGO to spend at least 90% of its income on scholarships. Under the proposed regulations, “income” means all of the organization’s gross receipts (or, for a single-state SGO using the 85% scholarship-activity safe harbor, the contributions and earnings in its separate §25F account), and each year’s income must be spent by the end of the following year. A multistate SGO must meet the 85% scholarship-activity requirement, maintain a separate §25F account for each covered state, and satisfy the operational requirements separately for each account.
4. Families use the scholarships to pay for qualifying K-12 educational expenses connected with public, private, religious, or charter schools. Treasury’s examples include private-school tuition, academic tutoring, special-needs services, books, supplies, computers and extended day programs; a detailed list awaits separate Treasury guidance under §530. Under the proposed rules, tuition and other charges billed by a school are paid by the SGO directly to the school, and families receive money only as a reimbursement backed by a receipt.

Who benefits

Students and families

K-12 students from eligible households can receive scholarships to help cover educational expenses. Eligibility is set by federal law and is broad: a student must be eligible to enroll in a public school, and household income for the calendar year before the application can be no more than 300% of the area median gross income, adjusted for family size. Treasury estimates that about 95% of U.S. children live in households under that limit. Under the proposed regulations, SGOs can also verify eligibility through a household’s participation in SNAP, TANF, WIC, Section 8 housing or SSI, and eligible foster children automatically satisfy the household-income test without income verification; other eligibility requirements and the SGO’s award process still apply. The student must live in a participating state; the school can be in another state. (More in the source analysis of the income rules.)

Donors

Any U.S. citizen or resident can claim the credit, regardless of income, without itemizing. Eligible donors may offset federal income tax through qualifying gifts into scholarships for kids in their own community (if their state has opted in), or for students in any other participating state.

Schools and educational providers

Schools and qualifying programs that serve scholarship recipients receive new funding through families and SGOs rather than as a direct federal grant. Under the proposed regulations, an SGO pays tuition and other school charges directly to the school, and the school must return any overpayment or payment made in error. Participating states cannot limit which types of schools scholarship students attend.

States

Participation generally creates a scholarship-listing pathway for resident students; it does not guarantee local giving or local spending. Under the temporary regulations, a participating state must list every organization located in the state that asks to be included and meets the federal requirements, and it may not impose SGO rules more restrictive than §25F.

Why state opt-in matters

ECCA is a federal program, but it requires state participation to deliver scholarships to families in that state. The mechanism: each state’s governor (or another state-designated authority) must elect to participate and submit a list of qualifying SGOs located in that state to the IRS. For 2027, the advance election on Form 15714 is due January 1, 2027 and the SGO list is due February 15, 2027; for later years, lists are due by January 1 of the year they cover. Each election covers one calendar year. Without the list, no organization in the state qualifies as an SGO for that year, and students who live there generally cannot receive §25F scholarships. (Our calendar of the new deadlines has the details.)

Donors in a non-participating state can still claim the federal tax credit by giving to an SGO in a state that has opted in; the proposed regulations confirm a donor may give to an SGO on any state’s list, wherever the donor lives. Resident students generally lack a pathway through their home state, subject to the proposed residence exceptions. Eligible students may still attend schools or buy qualified services across state lines.

Want to see which states have opted in? IRS state-participation roster

Timeline and key dates

• July 4, 2025, The federal scholarship credit enacted through §70411 of P.L.119-21, adding IRC §25F; ECCA was precursor legislation.
• December 12, 2025, IRS announced the advance-election procedure, releasing Rev. Proc. 2026-6 and Form 15714 for the state advance election.
• 2026, States file advance elections for 2027. Governors and legislatures debate participation.
• October 1, 2026, Treasury and the IRS release proposed regulations (not final; taxpayers may rely on them for 2027 contributions) and temporary regulations on state elections, SGO registration and donor reporting, which apply without waiting for a comment period.
• December 1, 2026, Public comments on the proposed regulations due. A public hearing is scheduled for December 15, 2026.
• January 1, 2027, Program goes live. Donations on or after this date are eligible for the federal tax credit. Same day: deadline for a state’s 2027 advance election on Form 15714.
• February 15, 2027, Deadline for electing states to submit their 2027 SGO lists. A state that misses it has no qualifying SGOs for 2027.
• January 31, 2028, SGOs must send donors written acknowledgments of 2027 gifts, with each donor’s unique donor number. Donors claim the credit on 2027 returns filed in 2028.
• Annually thereafter, Each election covers one calendar year. States can file an advance election between January 2 and September 30 of the prior year, and submit SGO lists between October 1 and January 1. States can opt in (or out) each year.

For a fully dated roadmap, see the EFTC timeline and key dates.

Caps, limits, and rules

• Donor credit cap: $1,700 per taxpayer per year. Under Treasury’s proposed regulations, released October 1, 2026, married couples filing jointly are treated as two taxpayers, so a joint return can claim up to $3,400 when each spouse makes and designates their own gift. The rules are proposed, not final; Treasury says taxpayers may rely on them for 2027.
• State credits come off first: If a state gives a tax credit for the same gift, the proposed regulations subtract it from the gift before applying the $1,700 cap. A $2,500 gift with a $500 state credit still supports the full $1,700 federal credit. A state tax deduction, as opposed to a credit, generally does not reduce the federal credit.
• Non-refundable: The credit can reduce tax liability to zero but does not produce a refund beyond that. Unused credit carries forward for up to five years.
• No double benefit: The part of a gift that earns the credit can’t also be deducted as a charitable contribution. Any amount above the credit (the $300 on a $2,000 gift, for example) may still be deductible under the normal charitable rules.
• SGO spending rule: An SGO must spend at least 90% of its income on scholarships, measured on all of its gross receipts, and each year’s income must be spent by the end of the following year. Under the proposed regulations, a single-state SGO whose activities are at least 85% scholarship granting can measure that test against its segregated §25F account alone. A multistate SGO must meet the 85% scholarship-activity requirement, maintain a separate §25F account for each covered state, and satisfy the operational requirements separately for each account.
• Eligible students: K-12 students who are eligible to enroll in a public school, live in a participating state, and come from a household with income no more than 300% of the area median gross income. See who qualifies and what’s covered.
• Eligible expenses: Qualified elementary and secondary education expenses as defined in §530(b)(3)(A), such as tuition, fees, books, supplies, tutoring and special-needs services. Treasury has said it will issue separate §530 guidance on qualified expenses and on what counts as a school “as soon as possible.” It has not been released yet, so questions such as homeschool coverage remain open.

How the federal credit became law

ECCA was introduced in earlier sessions of Congress as standalone legislation by Republican lawmakers, including Senator Bill Cassidy (R-LA) and Representative Adrian Smith (R-NE), with support from school-choice advocacy groups. After earlier standalone proposals, Congress enacted the federal scholarship credit through §70411 of P.L.119-21 on July 4, 2025, adding IRC §25F. ECCA is legislative background, not a separate enacted law here.

Because the enacted §25F credit was adopted through reconciliation, it was structured as a tax-code change rather than as a new spending program, a constraint that shaped its non-refundable, capped-credit design.

Frequently asked questions

Sources and guidance

Sources checked October 19, 2026. Proposed rules and projections are identified in the article. Consult the latest official guidance before acting.

• Proposed
• Temporary regulations
• IRC §25F
• Form 8525
• §530
• The source analysis of the income rules
• Calendar of the new deadlines
• Rev. Proc. 2026-6
• Form 15714
• Proposed regulations, released October 1, 2026
• Supporting source