Pennsylvania Senators Move Toward the Federal Scholarship Tax Credit
A bipartisan group of Pennsylvania senators is preparing legislation intended to help ensure that Pennsylvania can participate in the new federal scholarship tax credit program.
On August 5, 2026, a group of Pennsylvania senators circulated a co-sponsorship memorandum to all Senate members titled “Ensuring Pennsylvania’s Participation in the Federal Scholarship Tax Credit Program.” The memo is Senate Co-Sponsorship Memo 49085 of the 2025–2026 Regular Session.
The announcement represented an important step in Pennsylvania’s debate over whether to participate in the new federal program, but it was not yet introduced legislation and did not itself opt Pennsylvania into Section 25F.
October 2026 Update: Treasury and the IRS have now issued proposed and temporary regulations implementing Section 25F. Pennsylvania does not currently appear on the IRS list of 30 states that have made advance elections to participate for 2027.
What Just Happened in Harrisburg
The memorandum was circulated by Senate President Pro Tempore Kim Ward (R-39) and joined by several other senators from both parties.
The senators said they planned to introduce legislation intended to ensure Pennsylvania families and parents can benefit from the new federal educational resources made available through the Federal Scholarship Tax Credit.
Three points from the memorandum are particularly important.
Every State Is Eligible
The memorandum emphasizes that Pennsylvania is eligible to participate in the new federal program.
Participation Is Not Automatic
States must affirmatively make the election required under Section 25F in order to participate.
Pennsylvania Has Not Yet Opted In
The memorandum stated that Gov. Josh Shapiro had not committed to participation and argued that Pennsylvania families could miss access to new federal scholarship funding if the Commonwealth does not participate.
How the Federal Scholarship Tax Credit Works
Section 25F created a new federal tax credit for eligible individual taxpayers who make qualified cash contributions to eligible Scholarship Granting Organizations, or SGOs, beginning in 2027.
Maximum Federal Credit Per Individual Taxpayer
Eligible individual taxpayers may claim a federal income tax credit of up to $1,700 for qualified contributions, subject to the applicable Section 25F requirements and federal tax limitations.
The federal SGO structure is similar in concept to scholarship organizations that already participate in Pennsylvania’s Educational Improvement Tax Credit program, but qualification under a Pennsylvania program does not automatically make an organization eligible under Section 25F.
For Pennsylvania students and families to benefit from Pennsylvania-based Section 25F scholarship funding, the Commonwealth must participate and eligible organizations must satisfy the federal and applicable state requirements for inclusion on Pennsylvania’s SGO list.
This Is a Co-Sponsorship Memo — Not Yet a Bill
It is important to distinguish the August 5 announcement from introduced legislation.
A co-sponsorship memorandum is circulated among members of the General Assembly before legislation is formally introduced. It allows lawmakers to explain a proposal and gather additional co-sponsors.
At the time of the memorandum, no bill number had been assigned. The next step would be introduction of actual legislation containing the statutory language proposed by the senators.
Federal Section 25F Guidance Has Now Been Issued
Since this article was originally published, Treasury and the IRS have issued proposed Section 25F regulations together with companion temporary regulations. The new guidance addresses State participation, SGO certification and registration, qualified contributions, donor acknowledgments and reporting, student eligibility, SGO operations and other implementation requirements.
Pennsylvania does not currently appear on the IRS’s list of 30 states that have made advance elections to participate under Section 25F for 2027.
The federal regulations that Pennsylvania officials had been waiting to review are therefore now available, although Pennsylvania’s participation decision and related state-level implementation remain issues to watch.
What to Watch Next
Two developments are now especially important:
Pennsylvania’s Participation Decision
Pennsylvania would need to make the election required under Section 25F through the Governor or another individual, agency or entity authorized under Pennsylvania law.
Pennsylvania’s SGO Certification Process
If Pennsylvania participates, the Commonwealth will need to identify and certify organizations that satisfy the federal requirements and submit its applicable State SGO list to the IRS.
Where Friends of Education Stands
Friends of Education is an approved scholarship organization under Pennsylvania’s Educational Improvement Tax Credit program.
If Pennsylvania elects to participate in the Federal Scholarship Tax Credit, Friends of Education intends to seek inclusion on the Commonwealth’s list of qualifying Scholarship Granting Organizations.
Participation in Pennsylvania’s existing EITC program does not by itself establish federal SGO status. Friends of Education would need to satisfy the applicable Section 25F requirements and Pennsylvania’s certification process if the Commonwealth participates.
Friends of Education will continue to monitor Pennsylvania legislation, the Commonwealth’s Section 25F participation decision, implementation of the October 2026 federal regulations and any additional Treasury or IRS guidance.
Stay Updated on Pennsylvania’s Section 25F Decision
Want to be notified when Pennsylvania makes a participation decision or when important new Section 25F guidance is issued?
Note: This article is provided for general informational purposes only and should not be treated as tax, legal or financial advice. Federal Section 25F rules and Pennsylvania implementation may continue to develop. Donors, families, schools and scholarship organizations should review current Treasury, IRS and Pennsylvania guidance and consult qualified advisers regarding their specific circumstances.
