Education Freedom Tax Credit in Montana

Montana appears on the IRS’s September 14, 2026 roster of advance elections for 2027. An advance election starts the participation process; the annual list of qualifying scholarship organizations is a separate requirement. Here are the practical next steps for families, donors, schools and scholarship organizations.

By Rich Sedmak · Clarity

Sources checked October 19, 2026 · Editorial policy review pending · IRS roster dated September 14, 2026

Scholarship access for Montana families

Montana’s advance election creates a path for eligible students to apply through qualifying organizations. Scholarship availability depends on the SGO’s resources, eligibility rules and application process. An election does not guarantee an award. Scholarships generally serve eligible students residing in the state whose list includes the SGO. The October proposal provides narrow residence exceptions for qualifying Armed Forces dependents and specified Indian Lands situations; these are not a general right to use another state’s election. The student must be eligible to enroll in a public elementary or secondary school and satisfy the household-income limit of 300% of area median gross income or an applicable proposed income safe harbor.

The program begins January 1, 2027. The October temporary rules set January 1, 2027 for a 2027 advance election and February 15, 2027 to complete that election with an SGO list. T.D. 10057 is effective December 1, 2026; specified applicability provisions reach September 1, 2026. An election, state approval and IRS listing should be checked separately.

Beginning January 1, 2027, an eligible individual may claim up to $1,700 for qualifying cash contributions to an eligible SGO. The credit is nonrefundable: current-year use is limited by applicable federal income tax liability, with unused credit generally carried forward up to five years. Under the proposed calculation, the applicable state credit is subtracted from qualified contributions before the $1,700 cap is applied. A $2,500 qualified gift with a $500 state credit can still support a $1,700 federal credit, subject to available federal income tax liability. The credited amount, including eligible carryforwards, cannot also be deducted as a charitable gift. Donor residence does not require giving to an SGO in the donor’s own state.

Montana’s governor announced on September 1, 2026 that organizations seeking federal SGO status should contact the Department of Revenue for verification. The announcement directs interested organizations to Jennifer.hicks@mt.gov or 406-444-1991. This federal process is separate from Montana’s state scholarship tax credit; confirm current instructions and the IRS contribution-year list before relying on eligibility.

Preparing a scholarship organization in Montana

Start with federal eligibility, accounting and scholarship requirements. State certification and the annual contribution-year list remain separate steps. The overview below identifies enacted requirements and labels proposed details so organizations can prepare without treating unfinished rules as final.

Federal requirements to review

• Public charity status — Qualify as a 501(c)(3) public charity, not a private foundation. The temporary rules permit a state to include qualifying pending-exemption applicants if it applies that option to all applicants meeting the pending-application requirements, makes the required certifications and identifies their pending status. Recognition must be effective on or before January 1 of the listing year. IRS public listing follows recognition and the organization’s disclosure consent. (statute / temporary regulations)
• State authorization — Meet the applicable authorization and generally applicable charity-law requirements. Being “located” in a state does not require headquarters there; multistate listing still requires meeting each applicable state’s standards. (temporary regulations)
• Separate program account — Keep qualified contributions and related earnings in a segregated account and use the account consistently with the federal requirements. (statute)
• Scholarship spending — Meet the statutory 90% scholarship-spending test. The proposal addresses use by the following taxable year and an account-focused safe harbor tied to an 85% activities test; those proposed details are not final. (statute / proposed regulations)
• Student and school reach — Provide scholarships to at least 10 students who do not all attend the same school. (statute)
• Eligible students — Verify public-school enrollment eligibility and household income no greater than 300% of area median gross income. Apply the proposed student-residence rules and their narrow military-dependent and Indian Lands exceptions, along with the proposed income-verification methods and safe harbors. (statute / proposed regulations)
• Verification and qualified expenses — Verify family size and income, retain supporting records, and restrict payments to qualified elementary and secondary expenses under §530. Homeschool and other schooling arrangements require the applicable school and expense tests. (statute / proposed regulations)
• Scholarship priority — Prioritize renewal recipients and then their siblings under the statute. The proposal allows priority based on need for individual academic tutoring or special-needs services when prior awards or sibling status are not relevant. (statute / proposed regulations)
• No named-student earmarking — Do not earmark a donor’s gift for a named student. A school preference is a different question; the October proposal does not expressly approve every designation arrangement. (statute)
• Disqualified recipients — The statute prohibits scholarships to disqualified persons. The proposal defines the relevant substantial contributors, officers, trustees, directors, award-selection participants and family members, including the applicable thresholds, account-level tests, timing and exceptions. (statute / proposed regulations)
• Registration and donor reporting — Prepare for federal registration and donor reporting under the temporary rules, including January 31 donor acknowledgments and February 28 IRS reporting for the preceding year. Confirm released forms, procedures and the applicable first filing dates. (temporary regulations)
• Audit and annual certification — Under the proposal, SGOs required to file an annual information return under §6033(a) attach the prescribed certification and information form. Organizations not required to file that return submit the form separately by the 15th day of the fifth month after the reporting period. Each listing state receives a copy. Every SGO undergoes an annual financial and programmatic audit. Above $500,000 in total annual receipts, an external independent professional or accredited body must conduct it; at or below that threshold, an independent committee unrelated to management may do so and must sign its report under penalties of perjury. (proposed regulations)
• Annual state listing — Obtain the applicable annual state listing. The temporary framework requires states to include each qualifying organization seeking inclusion, with procedural protections for removal; general charity laws and reasonable verification remain relevant. (statute / temporary regulations)

§25F was enacted through P.L. 119-21 §70411; ECCA is legislative background, not a separate enacted program here. T.D. 10057 has a December 1, 2026 effective date and specified September 1 applicability provisions. The October proposal is not final; 2027 reliance requires satisfying its stated conditions. State applications may verify federal compliance and generally applicable charity laws, but cannot add conflicting program restrictions.

Montana’s application process

Montana’s governor announced on September 1, 2026 that organizations seeking federal SGO status should contact the Department of Revenue for verification. The announcement directs interested organizations to Jennifer.hicks@mt.gov or 406-444-1991. This federal process is separate from Montana’s state scholarship tax credit; confirm current instructions and the IRS contribution-year list before relying on eligibility.

Prepare written procedures for income verification, student selection, segregation of funds, acknowledgments, expense review, records and reporting. Confirm the current forms with the responsible office; a general planning guide does not complete state certification.

Explore jurisdictions with a similar status

Compare dated participation evidence and implementation steps. Reported positions may change.

Each guide distinguishes the election from the annual SGO list.

For scholarship organizations

Prepare applications, compliance and donor records

Building a scholarship program takes more than a participation announcement. Map the application, compliance and donor-record processes your organization will need, then identify the right support for each step.

Find official Montana updates

Use the governor’s office and the responsible agency to find current participation information, application requirements and organization lists. Ask factual questions about the process and verify the contribution year before relying on a listing.