Scholarship-granting organizations (SGOs) seeking to participate in a new federal tax credit program should begin preparing their compliance procedures ahead of its 2027 implementation, according to a report from Reuters. 

The Treasury Department and IRS released temporary and proposed regulations on Oct. 1 outlining requirements for the credit, established under the One Big Beautiful Bill Act. Beginning Jan. 1, 2027, eligible taxpayers can claim a nonrefundable credit of up to $1,700 for cash contributions to SGOs approved by participating states.

Richard L. Lieberman, senior counsel at Dykema, said organizations should establish compliance systems now rather than wait for states to issue additional guidance.

“Treasury delivered the operating manual on time,” Lieberman said. “Now everyone has about 90 days to build the machine.”

Among the requirements, SGOs must spend at least 90% of their gross receipts on scholarships, leaving limited resources for administrative expenses. The proposed regulations also expand restrictions on scholarship recipients to include certain family members, including siblings, of individuals involved in the organization.

Lieberman said some organizations are establishing separate entities to comply with the spending requirements, while others are updating conflict-of-interest policies and preparing financial records.

Although states will determine which organizations qualify for participation, the first lists are due Feb. 15, 2027. Lieberman emphasized that organizations should prepare their applications and internal procedures before state participation decisions are finalized.