There are seemingly few matters that get people more invested in politics than laws concerning their children. Frequently, though, there is disagreement among legislators, parents, political groups, and educators about what is best for children, especially in the realm of decisions related to schooling. The federal government’s opt-in tax credit law that offers incentives for those who donate to state-recognized scholarship granting organizations (SGOs)[1] is an example of one of those laws that has prompted stark disagreement.
On July 4, 2025, Congress enacted the Education Freedom Tax Credit as part of the One Big Beautiful Bill Act in order to “support[] national education choice.”[2] The law will provide a tax credit of up to $1,700 for those who donate money to organizations that meet the SGO requirements of the statute.[3] In order to qualify as an SGO, an organization must be classified by the Internal Revenue Service as a Section 501(c)(3) tax-exempt organization and fulfill certain functions.[4] Those requirements include: providing scholarships to a minimum of ten students attending different schools, spending at least 90% of the organization’s income on scholarships, prioritizing scholarships based on siblings and previous recipients, refraining from setting aside contributions for particular students, verifying that the families of recipients meet the household income requirement, and ensuring that scholarships cover only qualified education expenses.[5] The category of qualified education expenses includes more than just tuition payments; it encompasses other expenses such as books, transportation, tutoring, and computer technology.[6] The law requires that the family income of students who receive scholarships must be below 300% of their area’s median gross income, making it more localized than laws that cite to federal poverty guidelines.[7]
The tax credit offers only 1:1 compensation for donations made to SGOs, which effectively offsets the cost of donating without leaving contributing taxpayers in a more financially advantageous position.[8] However, because the law requires that SGOs spend 90% of their income on school scholarships, it is likely that qualifying SGOs will have to be newly created unless they are already operating in states with existing tax credit scholarship programs.[9] The law does not stipulate that schools be accredited or mandate background checks.[10] Still, states have the power to impose requirements on SGOs beyond those enumerated in the federal statute.[11] Crucially, the tax credit is only available for states that opt in to the program.[12] States, generally through their governors, elect to participate by providing lists of the SGOs in that state, and students in states who choose not to participate are ineligible for scholarships.[13] States can also condition an SGO’s admissibility into the program on their ability to adhere to certain accountability measures, such as providing program reports or conducting yearly audits.[14] Virginia, Tennessee, Georgia, South Carolina, and other states have already chosen to opt in to the program.[15]
North Carolina, on the other hand, has yet to opt in.[16] In July 2025, the North Carolina General Assembly became the first state legislature to pass a bill opting into the tax credit program when it passed House Bill 87, the Educational Choice for Children Act.[17] The bill did not become law, though, because Governor Josh Stein vetoed it the next month.[18] In vetoing the bill, Governor Stein stated that while he supports school choice, he believed the federal government had not yet issued “sound guidance” about the implementation of the program.[19] This divide between the legislature and the governor speaks to the differences in opinion within the state itself. Some people and organizations feel strongly that the program will help families across the state send their children to better schools,[20] whereas others are concerned that it will divert resources from public schools that are already low on funds.[21]
In the months since Governor Stein’s veto of House Bill 87, nine votes have been scheduled to try to override his decision.[22] On March 9, 2026, U.S. Secretary of Education Linda McMahon, a North Carolina native,[23] paid a visit to High Point in order to encourage Governor Stein to opt in to the tax credit program.[24] According to McMahon, twenty-seven governors so far have expressed interest in adopting the program.[25] Governor Stein, though, has yet to backtrack on his decision to veto the bill and in fact declared his support for public education in a separate news conference that same day.[26] As the legislature struggles to override his veto, the Trump administration has increased charter school funding, giving $53 million in grants to the North Carolina Association for Public Charter Schools.[27] It remains to be seen whether North Carolina will adopt the tax credit program, but the battle over funding for schools is unlikely to subside soon.
[1] Pub. L. No. 119-21, § 70411, 139 Stat. 72, 215–18 (2025).
[2] U.S. Dep’t of Educ., Fact Sheet: President Trump Delivers Affordable School Choice Options Through Education Freedom Tax Credit (2026), https://www.ed.gov/media/document/education-freedom-tax-credit-fact-sheet-113147.pdf (last visited Mar. 21, 2026); see § 70411, 139 Stat. at 215–18.
[3] Brendan McDermott & Rebecca R. Skinner, Library of Congress, Federal Tax Credit Scholarship Included in P.L. 119-21, the FY2025 Reconciliation Law (2025), https://www.congress.gov/crs-product/R48724 (last visited Mar. 21, 2026).
[4] § 70411, 139 Stat. at 216.
[5] Id.
[6] McDermott & Skinner, supra note 3.
[7] Id.
[8] Id.
[9] Id.
[10] Id.
[11] Id.
[12] Id.
[13] Id.; § 70411, 139 Stat. at 217.
[14] Id.
[15] Press Release, U.S. Dep’t of Educ., U.S. Departments of Education and Treasury Release Joint Fact Sheet on Historic Education Freedom Tax Credit, (Jan. 27, 2026), https://www.ed.gov/about/news/press-release/us-departments-of-education-and-treasury-release-joint-fact-sheet-historic-education-freedom-tax-credit (last visited Mar. 21, 2026).
[16] Anneliese Reinwald, North Carolina Governor Vetoes Bill Opting Into Federal Private School Choice Program, Ballotpedia News (Aug. 8, 2025), https://news.ballotpedia.org/2025/08/08/north-carolina-governor-vetoes-bill-opting-into-federal-private-school-choice-program/ (last visited Mar. 21, 2026).
[17] Id.
[18] Id.
[19] North Carolina Office of Governor Josh Stein, Governor Stein Takes Action on Three Bills (Aug. 6, 2025), https://governor.nc.gov/news/press-releases/2025/08/06/governor-stein-takes-action-three-bills (last visited Mar. 21, 2026).
[20] See Parents for Educational Freedom in North Carolina, The Philosophy Behind School Choice: Freedom, Fairness, and Family (June 27, 2025), https://www.pefnc.org/blog_june_30_2025 (last visited Mar. 21, 2026) (encouraging readers to push for the federal Educational Choice for Children Act so that families can be free to seek out quality educational opportunities for their children).
[21] See North Carolina Budget & Tax Center, Public Comment: Individual Tax Credit for Qualified Contributions to Scholarship Granting Institutions (Dec. 23, 2025), https://ncbudget.org/public-comment-individual-tax-credit-for-qualified-contributions-to-scholarship-granting-organizations/ (last visited Mar. 21, 2026) (explaining that the program will increase inequity by diverting public funds to unaccountable private entities without improving educational outcomes).
[22] North Carolina General Assembly, H.B. 87, 2025-2026 Session, https://www.ncleg.gov/BillLookup/2025/H87 (last visited Mar. 21, 2026).
[23] U.S. Dep’t of Educ., Linda McMahon, https://www.ed.gov/about/ed-organization/meet-secretary-of-education/linda-e-mcmahon (last visited Mar. 21, 2026).
[24] Rebecca Noel, Trump Admin Travels to NC to Urge Gov. Stein to OK School Choice Tax Credit, The Charlotte Observer (March 10, 2026), https://www.charlotteobserver.com/news/local/education/article314982778.html (last visited Mar. 21, 2026).
[25] Id.
[26] Zach Tucker, Lawmakers Push for New Education Freedom Tax Credit, But Stein Waiting for Guidance on Related Legislation, Spectrum News (March 9, 2026), https://spectrumlocalnews.com/nc/charlotte/news/2026/03/09/education-freedom-federal-tax-credit (“The time is now to demonstrate not only to our current teachers, but to people who are thinking about being teachers, that we actually value public education.”) (last visited Mar. 21, 2026).
[27] T. Keung Hui, US Gives $53M to Expand NC Charter Schools. Why It’s Not Going to the State, Raleigh News & Observer (Sep. 25, 2025), https://www.newsobserver.com/news/local/education/article314986367.html (last visited Mar. 21, 2026).
