Catholic education leaders applaud proposed rules on tax credit

(OSV News) — Catholic education leaders are applauding proposed regulations for the Federal Scholarship Tax Credit, which incentivizes private contributions to K-12 scholarships benefiting students in public, charter or private schools, including religious.

On Oct. 1, the U.S. Treasury Department and the IRS jointly announced the proposed regulations for the program (also known as the Education Freedom Tax Credit), which was enacted in 2025 and is set to launch Jan. 1.

According to the two federal agencies, some 96% of children in participating states would be eligible to receive funds.

The “transformative” tax credit “will create opportunities for families to access much-needed resources to expand their options for choosing the best tools and learning environment for their children,” said Bishop David M. O’Connell of Trenton, New Jersey, chairman of the U.S. Conference of Catholic Bishops’ Committee on Catholic Education, in an Oct. 2 statement.

The Oct. 1 announcement “provides additional clarity for states, donors, and scholarship-granting organizations,” according to the National Catholic Educational Association.

In an Oct. 1 statement, Steven F. Cheeseman, NCEA president and CEO, highlighted the announcement’s confirmation that married couples filing jointly will be able to claim up to $3,400 in tax credit for eligible contributions, “rather than the previously understood $1,700 household limit.”

“That increases the potential funding available to support educational opportunities for America’s children,” he said.

Individuals can claim up to $1,700 for qualifying contributions, according to the Treasury Department and the IRS.

Under the program, participating states identify qualifying scholarship-granting organizations (SGOs) to which donors from any state can contribute to receive the tax credit.

The recipient organizations must be qualifying public charities that award K-12 scholarships to students in their respective states, and must spend 90% of their income doing so. SGOs must also provide funds to at least 10 students “who do not all attend the same school,” according to a Department of Education fact sheet.

Under the proposed regulations, states cannot impose restrictions on SGOs beyond those required by the federal agencies or “exclude otherwise qualifying SGOs.”

Scholarships can be used for “a broad set of expenses incurred in connection with or required” by their schools, according to the Department of Education’s fact sheet.

Among the examples listed by the department are tuition for a school of choice, tutoring for public school students, special education services, books, supplies and “qualifying extended day programs.”

Scholarship eligibility is extended to students whose prior-year household income is “no more than 300% of the area’s median gross income, adjusted for family size,” said the department.

As of Sept. 14, 30 states are set to participate in the program, according to the IRS.

Cheeseman said the clock is ticking for state governors to sign up.

“With just three months until the program begins, governors who have not yet opted in face an important decision with real consequences for families in their states,” he said.

Cheeseman noted that “the tax credit doesn’t stop at state lines, but the scholarships do.”

He added, “As states make their participation decisions, families, schools, and scholarship organizations need certainty and time to prepare.” He said the NCEA remains focused “on expanding educational opportunities and helping children in public, private, and religious schools receive the support they need to succeed.”

Bishop O’Connell stressed that “the Catholic Church teaches that parents are the first and primary educators of our children, and that parents have the obligation of educating their children in the manner best suited for their development and needs.”

He added, “I applaud all the hard work of the advocates for this law, the legislators themselves, and officials of the Department of Treasury who worked diligently on the proposed regulations for implementing the FSTC so it can be a transformative opportunity for children across the country in both public and non-public school settings.”

Read more world news

African bishops express solidarity with Zambia’s arrested Archbishop Banda, local Catholics amid unrest

Greenland Catholics eye new security agreement with relief, concern and commitment to the Gospel, says priest

‘Too much at stake’: Church leaders plead for dialogue amid renewed unrest in Northern Ireland

Hegseth announces ‘Office of Religious Affairs’ in speech on Pentagon policy

Tennessee halts executions after death row inmate survives lethal injection attempt

Hundreds of children join Pope Leo XIV in praying the rosary for peace in Vatican Gardens

 Print