Updated: 14 Jul 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. Students from families with household incomes at or below 300% of the area median income are statutorily eligible to receive scholarships. This includes over 86% of households in Illinois. According to the Department of Treasury, the regulations will be released no later than September 2026 and will hopefully clarify how SGOs will operate and what role states may have in determining key elements of the program, such as prioritizing students with greatest need. A preview of the regulations was released on June 9th, 2026, though final regulations have not been shared. Illinois must decide if it is opting into the tax credit prior to its effective January 1st, 2027 date. Importantly, 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 Illinois from using federal tax credit dollars to support students in private and public schools. That said, if Illinois chooses to opt into the program, it is unlikely the state will 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. Additionally, there are little to no accountability measures in the law, meaning that scholarship-receiving entities may not be required to report student outcomes or demographics.
The lack of a spending cap for the tax credits at the federal level raises concerns about the program utilizing billions in federal revenue that could be used for public education more generally.
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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