Last year, Congress created a federal tax credit for donations to scholarship-granting organizations (SGOs) that help families choose the best educational options for their children. This tax credit goes beyond the role of the federal government and should not have been created. But, because it’s coming, it is crucial that it be executed well.
In November, the Department of the Treasury, which is tasked with implementing the tax credit, requested comments on multiple issues as it prepares to draft regulations for the program. I submitted comments that emphasized maintaining the highest degree of freedom and flexibility when drafting rules.
Importantly, the department’s rules should not allow the federal government to set parameters around what kinds of schools scholarship-granting organizations can let parents choose based on factors such as their enrollment policies or teachings. It is also essential that all SGOs that meet the § 25F(c)(5) statutory requirements be allowed to participate, rather than participating states imposing further restrictions.
Regarding specific areas where Treasury requested comments, I urged a light-touch administrative model that relies on self-certification and IRS audit authority rather than mandating burdensome verification requirements. I also recommended that organizations operating in multiple states be allowed to determine the most effective way to allocate contributions among those states.
My concerns about the federal government enacting a scholarship program go beyond the lack of constitutional authority. I worry it will eventually result in restrictions on private schools that could harm the innovative educational landscape that has been developing throughout the country. While future administrations may change the initial regulations Treasury adopts, this is a chance to lay a foundation that is rooted in freedom.
