Treasury takes first step in rule-making process on Federal Educational Tax Scholarship Program – afterschool field is encouraged to weigh in

On November 25, the Treasury and Internal Revenue Service issued a public notice to request comments ahead of the public rulemaking process on the Federal Tax Credit established in the H.R. 1 legislation passed this July as part of the reconciliation process. Comments are due on December 26, 2025.

The new law¹ explicitly allows scholarships to cover “extended day” programs provided or required by schools as well as tutoring. Families with up to 300% of the area median income are eligible (estimated to be about 90% of all families) to apply for scholarships. These scholarships could help expand and create afterschool programs to serve the 23 million young people across the United States waiting for access to afterschool programs.

Recent estimates show if even 15% of taxpayers opt in to the new tax credit, donations would reach $12 billion nationwide (almost 10 times the investment in 21st Century Community Learning Center programs).   

Whether, and how much of, those funds support afterschool and summer programs depends on swift, thoughtful, and organized action. The Treasury Department has enormous latitude to define terms and create regulations to implement the scholarships. The Treasury/IRS comment period open now is the first step in the process.

The Afterschool Alliance weighed in with comments on five important topic areas for our field (see the full comments here):

1. Clarifying a definition of extended day as learning opportunities outside of the traditional school day that are provided by schools or community-based partners, faith-based and/or for-profit partners that are partnering closely with schools. Extended day opportunities can occur at school sites or in the school community, at locations like community organizations and stand-alone youth centers
2. Including summer learning programs that provide enrichment and academic support operated by schools, community-based partners, and faith-based partners at school sites or in the community as eligible uses of scholarship funds.
3. Ensure that scholarship-granting organizations can narrow their focus given their particular expertise and their role as a trusted resource among parents.
4. Clarifying that the 90% of income requirement is constrained to the federal tax credit scholarship funds, and that the 90% is calculated on a 3-year rolling average
5. Enabling states the necessary autonomy to establish policies that allow scholarships to meet state educational goals

The request for comments also asks for additional opinions from the field, including

• The potential ways multi-state Scholarship Granting Organizations (SGOs) might participate
• How state governors will choose their lists of SGOs and certify compliance with the federal requirements
• How Treasury/IRS should interpret “disqualified persons” under the law
• The types of recordkeeping and reporting required of SGOs

Participation in the comment process can be formal or informal. We encourage afterschool advocates to weigh in on the importance of defining “extended day” to include afterschool and summer enrichment on and off school property. Include examples run by community and/or faith-based partners as well as evidence-based programs that coordinate with schools and are provided in locations such as libraries, tech centers, and college campuses. Entities considering participating in the credit as scholarship-granting organizations may have additional areas to weigh in to ensure the process to become an SGO is manageable for them so that they can best serve the needs of families and children.

It is beneficial to speak up early in the process and voice thoughts now as the proposed regulations are being constructed. After this round of comments, the Treasury and IRS will be expected to put forth a formal notice of public rulemaking sometime early in the new year.