Iowa Gov. Kim Reynolds has announced she will opt the state in to the new federal education tax-credit program, set to take effect January 2027.
Iowa joins seven other states — South Dakota (R), Colorado (D), Nebraska (R), Texas (R), Louisiana (R), Tennessee (R), and North Carolina (D) — whose leaders have stated they intend to give eligible families and taxpayers the opportunity to participate in the Educational Choice for Children Act (ECCA), a tax-credit scholarship program that incentivizes giving through the tax code to expand educational opportunity.
Unlike traditional programs that rely on direct federal spending, this federal program functions entirely through private donations — not federal appropriations. Individuals and businesses donate to federally certified Scholarship Granting Organizations (SGOs) and receive a 100 percent dollar-for-dollar federal tax credit up to $1,700. These SGOs, in turn, award scholarships to eligible K-12 students in public schools and non-public schools for use toward tutoring, special education services, educational software, tuition, and other qualified expenses established under the existing federal Coverdell Education Savings Account program.
In practical terms, the ECCA simply encourages private giving to student scholarships by offering a tax incentive.
States must “opt in”
Even though the ECCA is now federal law, states still play a gatekeeping role. Students in each state can only participate if their governor (or another state-designated authority) formally opts in.
And the potential financial impact is not insignificant. If a governor declines to participate, taxpayers can still donate to SGOs in other states, benefitting children elsewhere while that state’s local students lose out. This gives governors significant influence. (Hence the updates as more state leaders decide what they will do.)
With Gov. Tim Walz no longer running for re-election, Minnesota’s upcoming decision on whether to opt in to the federal tax-credit scholarship program could take on added political significance. Walz has been under pressure lately to decide whether Minnesota would participate, and that pressure does not have to let up, as he could still signal support for the next governor to opt Minnesota in. It will be interesting to see whether gubernatorial candidates stake out clearer positions on the program, potentially turning the opt-in question into a campaign issue.
