We asked five school choice proponents to offer their advice on what the forthcoming regulations from the Department of the Treasury on the new federal scholarship tax credit should be. Our five-part series continues today with an essay by Peter Murphy.

In July 2025, President Trump signed into law the first federal school choice provisions that could benefit children in all 50 states. These provisions are contained in the Educational Choice for Children Act, which became part of the One Big Beautiful Bill Act. They create a federal tax credit to privately fund scholarships for use in K–12 education.

This new law requires governors to opt in to the program annually if they want their states to participate in this choice-expanding initiative. If a governor does decide to opt in, not later than January 1 of each year, they must submit to the U.S. Treasury Department a list of scholarship-granting organizations (SGOs) in the state that are qualified to participate.

In short, the law provides that governors decide whether to opt in and, if so, whether an SGO can be included, based on its compliance with this federal law. That’s it. The governor’s role is a ministerial function, not an arbitrary or open-ended determination.

The nation’s governors have a moral obligation to sign their states up for this program. In 1963, Alabama Governor George Wallace stood in a doorway at the University of Alabama to symbolically oppose the enrollment of two Black students. If school choice is the civil rights issue of the 21st century, as many leaders and activists have averred, governors who refuse to opt in to the scholarship tax-credit program would be metaphorically “standing in the schoolhouse door,” becoming this century’s version of Dixiecrat governors like Wallace. No need to sugarcoat it.

A governor who opts in must determine “the scholarship-granting organizations that meet the requirements” of this law. The process for making such determinations on the compliance of these organizations is not defined in the statute, and likely will be detailed in forthcoming Treasury regulations.

On this issue, note that there is no other basis under this school choice law by which a governor determines which organizations can participate, meaning that imposing additional conditions would exceed the scope of the governor’s authority. A governor cannot tailor the list to their preferences to reflect a policy or political agenda. Either the organization qualifies under the federal law, or it does not, regardless of the entity’s choice of schools, eligible services, or underlying philosophy.

If, however, a state law imposed additional requirements on SGOs, and such requirements were consistent with the federal statute, those actions would likely be acceptable. But if a state law imposed conditions that conflicted with federal law, the outcome is far less certain, and litigation would likely occur.

Governors of every state should be encouraged to opt in to the federal scholarship tax-credit program so their state’s children can benefit from resulting scholarships for use in both public and private schools. Doing so would financially empower parents to access school or service options that best meet the education needs of their children and respect the family’s values.

Expanding school choice in a state via these new federal provisions would increase private funding for education and be cost-free to the state’s taxpayers. Since charitable donations would fund the scholarships for children attending public, charter, private, and religious schools, the resulting tax revenue loss would be incurred by the federal government, not individual state coffers. States that do not opt in will lose charitable contributions from donors who instead will fund children’s scholarships in states that do opt in.

For governors who put the needs of children and families first, opting in to the new school choice program is a no-brainer. Every other consideration is secondary in importance or smacks of political bias.

Peter Murphy is senior adviser to the Invest in Education Coalition.

Suggested citation format:

Blew, J., Elorza, J., Enlow, R., Luebke, R. and Murphy, P. (2025). “How Should the New Federal Scholarship Tax Credit Be Regulated? Treasury Department rulemaking could make or break the OBBBA’s school choice provision”. Education Next, 25(4), 19 September 2025.