Updated: 4 Nov 2026
Illinois must decide whether to opt in to the federal scholarship tax credit.
The 2025 Budget Reconciliation Act (OBBBA) created a tax credit for donations made to scholarship granting organizations (SGOs) of up to $1,700 per donor ($3,400 if filing jointly). Students from families with household incomes at or below 300% of their area’s median income are statutorily eligible to receive scholarships. Estimates predict over 86% of households in Illinois will qualify. In October 2026, the Department of Treasury released both proposed and temporary regulations for the program. Governor Pritzker must decide if Illinois is opting into the tax credit by January 1, 2027, and provide a subsequent list of approved SGOs to the IRS by February 15, 2027. Illinois may opt in for future years of the program if it does not opt in during this first year of implementation.
Impact
Not opting in would prevent SGOs from supporting eligible Illinois students; a decision that means foregoing potentially significant financial impact. That said, a decision to opt into the program presents several challenges. First, the state will not be able to control the type of SGOs that are eligible to receive donations, which types of students they serve, and how dollars are prioritized and spent. Given the high-income eligibility set in statute, research on large-scale scholarship programs suggests SGO recipients will likely skew to middle- and high-income households – not serving as the lifeline to low-income students many might wish for or imagine. In addition, while scholarships can be used in public school settings, the fact that public schools generally do not charge for programs or services makes it unclear how feasible it will be to direct “scholarship” dollars to public schools. Finally, there are little to no accountability and anti-discrimination measures in the law or regulations, meaning that scholarship-receiving entities may not be required to report student outcomes or demographics and may be able to discriminate in their distribution of scholarships.
The lack of a spending cap for the tax credits at the federal level means the program could utilize billions in federal revenue, raising concerns about potential cuts to federal education spending in future years and/or in the nearer term.
Possible Federal Action:
- Members of Congress might send a letter to Secretary Scott Bessent that encourages the Department of Treasury to include accountability regulations for SGOs and the entities that accept scholarships.
- As states begin implementing the tax credit, Congress could work to ensure that tax dollars are being spent on high-quality and evidence-based programming that will report data and boost student learning.
Possible State Action:
- When considering whether Illinois should participate in this program, it is crucial that the Governor’s Office have a clear understanding of what will be allowable under the regulations and then carefully weigh the benefits and drawbacks of opting in to the program in a way that balances diverse stakeholder interests. We caution state leaders not to rush to judgment with incomplete information.
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