Federal tax credit: Public school students will benefit, too

Despite being pigeonholed as a “voucher” or a “diversion” of funds from public schools, the recently passed federal tax-credit scholarship provision created under the Educational Choice for Children Act (ECCA) operates completely different than a voucher program and not only costs North Dakota zero education dollars but will benefit public school students, too.

Funded by charitable donations to qualified non-profits called scholarship granting organizations (SGOs), the scholarships can be used by eligible students toward a variety of eligible expenses under the existing federal Coverdell Education Savings Accounts.

Notably, public school students can use the scholarships toward supplemental learning expenses — tutoring, test preparation fees, AP, SAT, ACT exam fees, and services for students with disabilities, to name a few.

North Dakota’s public school budgets will continue to be funded at the levels set by the state’s legislature, as there is no “diversion” of state, local, or federal dollars from public school funding to cover the donations, scholarships, or administration of the federal tax credit scholarship provision.

“[Scholarship] money will start flowing in 2027. Whether school districts move quickly enough to get in on the deal is an open question,” according to Marguerite Roza with Edunomics Lab at Georgetown University. “But this bill is now law.” The provision takes effect January 1, 2027.

It’s an opportunity that will likely change the education landscape over time and, “depending on how the law gets implemented” in each participating state could “re-shape fee-based services for students,” Roza continues. “Need tutoring? Want to do science camp in the summer? These options used to be available only to parents with means. That may change.”

Opting in

But states do have to opt in for eligible students to benefit.

After vetoing a school choice bill from the legislature earlier this year, Gov. Kelly Armstrong has an opportunity to say yes to this federal law and help North Dakota students in both public and private school settings.

If North Dakota does not opt in, the state’s students will pay the price, as they will be ineligible to receive the scholarships, but North Dakota taxpayers will still be able to take advantage of the federal tax credit. Their donations will leave the state to fund scholarships for students in states whose leaders choose to participate.