# Prop. Treas. Reg. § 1.25F-5: State election, State SGO list, and certification of SGOs. Proposed regulation, not in force. REG-117199-25, 91 FR 62818, published 2026-10-02 . Interprets 26 U.S.C. § 25F. Par. 2. Sections 1.25F-0 through 1.25F-5 are added to read as follows: (a) Overview. This section provides rules under section 25F(g) of the Internal Revenue Code (Code) for a State election and participation under section 25F. Paragraph (b) of this section describes the IRS State section 25F portal used for the submission of State elections and State scholarship granting organization (SGO) lists and the reporting of any changes to State SGO lists and other required information. Paragraph (c) of this section provides rules for the State election, including an advance election, and the provision of the State SGO list. Paragraph (d) of this section provides rules regarding State SGO lists. Paragraph (e) of this section provides general guidance regarding Federal review of the policies and procedures States adopt for SGOs. (b) IRS State section 25F portal— (1) In general. A State that chooses to participate under section 25F must register in the IRS State section 25F portal in accordance with the instructions therein. Registration requires obtaining or being assigned a special-purpose employer identification number (EIN) in accordance with paragraph (b)(3) of this section and then providing the information required by paragraph (b)(4) of this section. At the conclusion of the registration process, a State will be able to electronically transmit through the IRS State section 25F portal its State election (including an advance election), State SGO list, any changes to the State SGO list, annual certifications, and any other information required by future guidance. (2) Delegation— (i) In general. The Governor of the State or such other individual, agency, or entity as is designated under State law to make elections with respect to Federal tax benefits on behalf of the State may authorize up to two designated officials, as described in paragraph (b)(2)(ii) of this section, to register for and use the IRS State section 25F portal. The State must provide any information and documentation necessary, in accordance with future guidance, to establish an individual's authority to use the IRS State section 25F portal on behalf of the State. (ii) Designated officials. A designated official for purposes of the delegation described in paragraph (b)(2)(i) of this section must be one of the following individuals: (A) An elected official; (B) The Director of Taxation; or (C) An appointed official. (3) Special-purpose EIN. Before a State may begin the registration process for the IRS State section 25F portal, the State must obtain or be assigned a special-purpose EIN, to be used only for purposes of section 25F, in accordance with applicable IRS guidance. The State may not obtain its own special-purpose EIN using the general guidance for obtaining an EIN set forth in § 301.6109-1(d)(2)(i) of this chapter. The special purpose EIN cannot be used for any other purpose under the Code. (4) Information required to complete registration. A State must provide the following information to complete the registration process for the IRS State section 25F portal: (i) The State's special-purpose EIN obtained or assigned in accordance with paragraph (b)(3) of this section; (ii) Contact information, including the name, official title, telephone number, and email address of each of the State's designated officials (if any) authorized as provided in paragraph (b)(2) of this section; and (iii) Any other information the IRS deems necessary for purposes of administering the requirements of section 25F as may be described in future guidance. (c) State election— (1) In general. Except as provided in paragraph (c)(3)(i)(B) of this section (providing a special rule for the first year a State makes an election), a State election may be made either as an advance election that is perfected, as described in paragraph (c)(3) of this section, or as an election made as part of the submission of the State SGO list, as described in paragraph (c)(4) of this section. The State election is made only for a single calendar year, and all the requirements in this paragraph (c) must be satisfied for each year for which an election is made. (2) Authority to make a State's election. A State election, including an advance election, must be made either by the Governor of the State (or the Mayor of the District of Columbia) or by such other individual, agency, or entity as is designated under State law to make such elections with respect to Federal tax benefits on behalf of the State. (3) Advance election— (i) Submission of advance election —(A) In general. Except as provided in the transition rule in paragraph (c)(3)(i)(B) of this section (or as otherwise provided in guidance), a State may submit an advance election through the IRS State section 25F portal on or after January 2 and on or before September 30 of the calendar year immediately preceding the calendar year for which the election is being made. The IRS will acknowledge or otherwise confirm receipt of a State's advance election. (B) Transition rule for the first calendar year for which the State makes an election —( 1 ) Calendar year 2027. For calendar year 2027 only, a State must submit an advance election on Form 15714, Advance Election to Participate Under Section 25F for 2027, on or before January 1, 2027. The IRS will acknowledge or otherwise confirm receipt of a State's advance election. ( 2 ) Future years. For calendar years after 2027, a State making its first election to participate under section 25F must submit an advance election as provided in future guidance. (ii) Perfection of advance election —(A) In general. Except as provided in paragraph (c)(3)(ii)(B) of this section, if a State has submitted an advance election in accordance with paragraph (c)(3)(i) of this section, the State must perfect its election by providing its State SGO list for a calendar year, with the information and certifications required in paragraph (c)(5) of this section, on or before January 1 of that year, but not earlier than October 1 of the immediately preceding calendar year. (B) Transition rule for the first calendar year for which section 25F applies. For calendar year 2027 only, a State may provide its State SGO list on or before February 15, 2027. (C) Failure to perfect. Because a State that makes an advance election is required by section 25F(g) to provide its State SGO list as part of its State election, a failure to perfect its advance election within the time period set forth in this paragraph (c)(3)(ii) would result in a failure to meet the requirements of section 25F(g). Accordingly, no organization in that State would qualify as an SGO for the calendar year for which the advance election was not perfected. (iii) IRS advance election list. The IRS will maintain and publish on https://www.irs.gov a list of States that have made an advance election. (4) Election with submission of the State SGO list. Except for the first year for which the State makes its election (see paragraph (c)(3)(i)(B) of this section), a State may make its State election for a calendar year when the State submits its State SGO list for that year by providing its State election and State SGO list for that calendar year, with the information and certifications required in paragraph (c)(5) of this section, on or before January 1 of that year, but not earlier than October 1 of the immediately preceding calendar year. (5) Certifications and other required information. As part of providing a State election and the State SGO list under this paragraph (c), the person with authority to make the State election, as described in paragraph (c)(2) of this section, or a designated official as described in paragraph (b)(2) of this section, must, in accordance with future guidance: (i) Certify that the individual, agency, or entity making the State election has the authority to make the State election on behalf of the State; (ii) Certify that the person authorizing any individuals as designated officials under paragraph (b)(2) of this section has the authority to do so; (iii) Provide the enacted statutory or regulatory provisions that are binding on the State and establish the authority of an individual to make the election on behalf of the State, if the individual making the election is not the Governor of the State (or the Mayor of the District of Columbia); (iv) Provide the information and certifications required by paragraphs (d)(2) and (3) of this section for each SGO on the State SGO list; (v) Certify that the State SGO list includes every organization located in the State that is described in section 25F(c)(5)(A) and (B) and § 1.25F-3(b)(1) through (4) and (6), is seeking inclusion on the State SGO list, and is operating in a manner that satisfies the operational requirements in section 25F(d) and § 1.25F-3(c) and the applicable State requirements described in paragraph (e)(1) of this section; (vi) Provide the certification of State procedures as required by paragraph (d)(6) of this section; (vii) Describe any tax credit (including relevant State statutes, regulations, and other authoritative guidance) available under State law for contributions made to SGOs during the calendar year for which the State is electing to participate under section 25F; and (viii) Provide any other information and certifications described in future guidance. (d) State SGO lists —(1) In general. Except to the extent otherwise provided in future guidance, a State must provide its State SGO list and include the information and certifications required under paragraphs (d)(2) and (3) of this section as part of its State election. Paragraph (d)(4) of this section provides a transition rule for an organization that has not yet been required to provide information and certifications to the IRS. Paragraph (d)(5) of this section provides a procedure that applies when an organization's application for recognition of tax-exempt status is pending with the IRS. Paragraph (d)(6) of this section requires a State to provide a certification regarding its policies and procedures for determining whether an organization is included on the State SGO list. Paragraph (d)(7) of this section provides rules for changes to a State SGO list, and paragraph (d)(8) of this section provides rules for the removal of an SGO from the IRS SGO list. Paragraph (d)(9) of this section provides for the publication of the names of covered States and their State SGO lists on https://www.irs.gov. (2) Required SGO information. For each organization named on the State SGO list, a State must provide: (i) The name, EIN, address, and telephone number of the organization; (ii) The Federal tax-exempt status of the organization, meaning that it either is currently described in section 501(c)(3), exempt from tax under section 501(a), and not a private foundation as defined in section 509(a), or, if paragraph (d)(5) of this section applies, that its application for recognition of tax-exempt status is pending with the IRS; and (iii) Any other information the IRS deems necessary for purposes of administering the requirements of section 25F as may be described in future guidance. (3) Required SGO certifications. Except as provided for the transition rule in paragraph (d)(4) of this section, for each organization named on the State SGO list, the State must certify that: (i) The organization is located in the State; (ii) The organization prevents the co-mingling of qualified contributions with other amounts by maintaining a section 25F segregated account, which must contain only qualified contributions and the earnings therefrom, depositing all qualified contributions into its section 25F segregated account and maintaining a complete set of books and records for its section 25F segregated account; (iii) The organization meets all the operational requirements described in section 25F(d) and § 1.25F-3(c); (iv) As part of the State's determination that an organization is or will be an SGO, the State has: (A) Determined whether the organization is or will be a single-State SGO or a multistate SGO; (B) Reviewed the annual financial and programmatic audit report the organization is required to provide to the State in accordance with § 1.25F-4(e); (C) Reviewed the annual certifications and other information the organization is required to provide to the IRS in accordance with § 1.25F-4(d); and (D) Investigated any failure by the SGO to provide the required certifications and other information in accordance with § 1.25F-4, and, with respect to any such failure, has become reasonably satisfied that the SGO has corrected the failure, if possible, or has put in place procedures to prevent future failures in a manner that satisfies the State that the SGO will satisfy the requirements to be an SGO located in the State; and (v) The organization satisfies any other requirements the IRS deems necessary for purposes of administering section 25F as may be described in future guidance. (4) Transition rule for an organization that has not yet been required to provide information and certifications to the IRS. Until an organization first provides the information described in § 1.25F-4(d) and (e), a State may rely, in determining whether the organization may be treated as an SGO, on the organization's governing documents or bylaws, written policies and procedures, and other documentation the organization provides to the State as part of its submission requesting inclusion on the State SGO list. However, for each year during this transition period for which the organization is listed as an SGO on the State SGO list, the State must: (i) Determine that the SGO satisfies all requirements of section 25F(c)(5)(A) and (B); (ii) Determine that the SGO's provisions, policies, and procedures expressly require (beyond a general requirement to comply with applicable law) the SGO to satisfy the operational requirements for an SGO in section 25F(d) and § 1.25F-3(c); (iii) Determine that the documentation and information available to the State evidences the SGO's ability and intent to satisfy the operational requirements in section 25F(d) and § 1.25F-3(c); and (iv) Require the SGO to concurrently provide the State with a copy of any information and certifications required to be provided to the IRS before the end of the transition period in accordance with § 1.25F-4(d). (5) Procedure that applies when an organization's application for recognition of tax-exempt status is pending with the IRS. A State SGO list may include organizations whose applications for recognition of tax-exempt status are pending with the IRS as of the date of submission of the State SGO list if the State includes on its State SGO list all organizations seeking inclusion on the State SGO list whose application for recognition of tax-exempt status is then pending with the IRS, provides the information and certifications required under paragraphs (d)(2) and (3) of this section for each such organization, and certifies, for each such organization, that: (i) The organization has applied for, but has not yet received, IRS recognition of its status as an organization described in section 501(c)(3); (ii) The organization's tax-exempt status, if granted, will be effective retroactively to a date that is on or before January 1 of the year for which the State SGO list applies; (iii) The State SGO list indicates that such organization's tax-exempt status is pending IRS recognition; and (iv) The State has complied with the requirements of paragraph (d)(4) of this section for each such organization. (6) Certification of State policies and procedures. A State must certify that its policies and procedures, including its procedures for assessing and responding to audit results: (i) Enable the State to make its own determination that each organization on the State SGO list is located in the State, is in compliance with the requirements of section 25F(c)(5)(A) and (B) and § 1.25F-3(b)(1) through (4) and (6), and is operating in a manner that satisfies the operational requirements in section 25F(d) and § 1.25F-3(c) and the applicable State requirements described in paragraph (e)(1) of this section; (ii) Provide for the prompt removal of an organization from the State SGO list, and notification to the IRS through the IRS State section 25F portal, upon a determination that the organization does not satisfy each of the required criteria referenced in paragraph (d)(6)(i) of this section; (iii) Require that any publicly available list of SGOs maintained by the State is identical to the most recently submitted State SGO list, includes the IRS SGO list's URL (Uniform Resource Locator), and states that a taxpayer may rely on an organization's inclusion on the IRS SGO list in accordance with § 1.25F-2(b); and (iv) Ensure that the State's procedures before and after the removal of an organization from the State SGO list are fairly administered and afford due process in accordance with applicable Federal and State laws. (7) Changes to State SGO list —(i) Changes before the deadline for the elected calendar year. A State may replace or supplement its State SGO list for a calendar year at any time before the deadline for perfecting or completing an election for that year by submitting the change in the IRS State section 25F portal in accordance with future guidance. (ii) Additions to State SGO list after the deadline for the elected calendar year. Except to the extent provided otherwise in guidance, a State may not make any additions to the State SGO list for a calendar year after the deadline provided in paragraph (c)(3)(ii) or (c)(4) of this section, as applicable. Any additions a State seeks to make after that deadline may be included as part of the State's submission of its State SGO list for the following calendar year. (iii) Removal from State SGO list —(A) Removal request from SGO. If an SGO requests to be removed from a State SGO list, a State must comply, indicate the removal and its effective date on that list, and promptly notify the IRS of that removal through the IRS State section 25F portal so the IRS can remove the SGO from the IRS SGO list for the current year. (B) State removal procedures. A State may remove an SGO from its State SGO list if the State determines, through a procedure providing due process to the organization, that the SGO is not located in the State, or that the SGO does not satisfy the requirements for an SGO in section 25F(c)(5) or (d), § 1.25F-3(b) or (c), or the applicable State requirements described in paragraph (e)(1) of this section. The State must promptly notify the IRS of the removal and its effective date through the IRS State section 25F portal. (8) Removal of a non-compliant organization from the IRS SGO list. An organization may be removed from the IRS SGO list, and will be shown on that list as having been removed as of the date the IRS removes the organization from that list, in the following circumstances: (i) Removal following change in tax-exempt status. The IRS will remove an organization from the IRS SGO list if: (A) The organization is not described in section 501(c)(3) and exempt from tax under section 501(a); or (B) The organization is a private foundation. (ii) IRS determination of non-compliance with applicable requirements. The IRS may remove an organization from the IRS SGO list following a determination that the organization has failed to comply with a requirement of section 25F or § 1.25F-3 (other than the tax-exempt status requirement in section 25F(c)(5)(A) and § 1.25F-3(b)(1)) or has failed to comply with the requirements in § 1.25F-4, including a failure to report qualified contributions in accordance with § 1.25F-4(c). Such an IRS determination is a Federal tax controversy under section 7803(e)(3), which gives the SGO an opportunity to seek review of the determination by the IRS Independent Office of Appeals in the time and manner prescribed in applicable forms, instructions, or other administrative guidance. (iii) Removal following State SGO status determination.—(A) In general. If a State removes an SGO from its State SGO list in accordance with paragraph (d)(7)(iii) of this section, the IRS will remove an SGO from the relevant part of the IRS SGO list. (B) Multistate SGO. If a State removes a multistate SGO from its State SGO list under paragraph (d)(7)(iii) of this section, but the SGO continues to satisfy all applicable requirements for an SGO in a different covered State on whose State SGO list it appears, as well as the applicable requirements as described in paragraph (e)(1) of this section in such other State(s), the SGO will remain on the IRS SGO list with respect to such other covered State(s), subject to any further discretionary examination of the SGO by such other covered States or the IRS. (9) Publication of covered States and State SGO lists —(i) In general. The IRS will maintain and publish the IRS SGO list on https://www.irs.gov. For those SGOs that have authorized the disclosure of their information on the IRS SGO list, the IRS SGO list will contain each SGO included on a State SGO list for each of the covered States for the calendar year and reflect each removal from a State SGO list and the date of the removal. For donor reliance on the IRS SGO list, see § 1.25F-2(b). (ii) Addition of organizations with pending tax-exempt status to IRS SGO list. Upon determining that an organization described in paragraph (d)(5) of this section qualifies for tax-exempt status and that the effective date of such tax-exempt status is on or before January 1 of the calendar year for which the State SGO list applies, the IRS will add the organization to the IRS SGO list for that year if and as soon as the organization authorizes publication of its information to be included on that list. (e) State administrative requirements —(1) In general. Except as provided in paragraph (e)(2) of this section, a State must: (i) Require that organizations meet all generally applicable State requirements for charitable organizations, including any State requirements that any organization must satisfy to be authorized to do business in the State and to solicit charitable contributions in the State; and (ii) Require SGOs to comply with application, documentation, and financial reporting requirements that are reasonably tailored to: (A) Support the State's certifications under paragraph (d)(3) of this section; and (B) Facilitate the prevention and detection of fraud or abuse, including the misuse of scholarship funds, such as through the duplication of scholarship awards to the same student for the same qualified elementary or secondary education expense. (2) Prohibition on additional State requirements or discretionary exclusions. A State may not require SGOs to operate in a manner that is more restrictive than the requirements set forth in section 25F(c)(5) and § 1.25F-3(b) and (c), such as by limiting the type of school that scholarship recipients may attend or the types of qualified elementary or secondary education expenses for which scholarship funds may be used. Accordingly, the State requirements provided in paragraph (e)(1)(ii) of this section must be reasonably related to determining whether an organization is located in the State, meets the requirements of section 25F(c)(5) and § 1.25F-3(b) and the operational requirements in section 25F(d) and § 1.25F-3(c), and satisfies the generally applicable State requirements for charitable organizations. (3) Federal review. The procedures a State implements in accordance with this paragraph (e) are subject to Federal review. Upon discovering a pattern of irregularities or noncompliance, the IRS, in its discretion, may require a State to modify its procedures to ensure that its determinations regarding an organization's satisfaction of the requirements in section 25F(c)(5) and (d) and § 1.25F-3(b) and (c) are being administered in accordance with the applicable statutory, regulatory, and appropriate State requirements. (f) Applicability date. This section applies to taxable years ending on or after [date of publication of the final regulations in the Federal Register ].