Federal School Choice Tax Credit Rules Released – Shapiro Must Decide

(The Center Square) – Guidelines for the federal school choice tax credit program dropped Thursday, leaving Pennsylvania’s participation an unanswered question.

Gov. Josh Shapiro has yet to opt the commonwealth into the Education Freedom Tax Credit, saying he wanted to wait for the new rules before deciding. The Center Square was unable to reach the governor’s office for comment on Thursday.

The proposed regulations from the Department of the Treasury and the Internal Revenue Service allow eligible taxpayers to claim an annual credit of up to $1,700 for qualifying contributions to scholarship granting organizations or up to $3,400 for married couples filing jointly.

The program will take effect Jan. 1, and in many ways, mirrors Pennsylvania’s own educational choice tax credit programs, which have provided tuition assistance to more than 100,000 students. If Shapiro opted in at the federal level, 1.8 million students would become eligible.

Eligibility for students is up to 300% of area median gross income, based on Housing and Urban Development guidelines. In Pennsylvania, this ranges from approximately $200,000 in Forest County – the lowest income bracket – to $358,000 in the highest bracket in the southeastern part of the state. Within that ceiling, each SGO can set more defined rules.

SGOs must be listed by the state, reported to the IRS, and serve at least 10 students attending more than one school. They must spend 90% of the funds on scholarships, with a maximum of 10% allowed for other expenses.

School choice tax credits have long drawn scrutiny along partisan lines: Democrats argue the money is better spent on public schools, while Republicans maintain that the increased support districts have received over the years has done nothing to improve students’ math and reading proficiency.

The Center Square was unsuccessful in its attempts to reach the Pennsylvania State Education Association, the commonwealth’s largest teachers union, for comment. Historically, the organization has opposed school choice tax credit expansion and prefer instead to see the money – $680 million in Pennsylvania, alone – invested into public education.

Princess Moss, president of the National Education Association, said Thursday the Trump administration is more focused on “putting its thumb on the scale” for private schools, rather than help families afford groceries and gas.

“At a time when educators, students, and families are calling for more resources to strengthen neighborhood public schools, this administration is advancing a plan to divert taxpayer dollars to subsidize private education for a select few,” she said.

The Commonwealth Foundation, long vocal about support for school choice, told The Center Square on Thursday it, too, was awaiting Shapiro’s reaction.

“The guidelines are here. The details are final. No more excuses,” said CEO and President Andrew Lewis. “It cannot be overstated – this program is a no brainer. Governor Shapiro must opt Pennsylvania in. Our students are counting on it.”

Thirty-one states have opted into the federal program, including Ohio and West Virginia. New York Gov. Kathy Hochul has also expressed interest in participating.