Exactly what to do
- 1. Public charity, not a private foundation. Private foundations cannot be SGOs; your 1023 requested public-charity classification (stage 1, step 6). Verify anytime in the IRS Tax Exempt Organization Search.
2. Documents that EXPRESSLY REQUIRE §25F compliance. The bylaws template’s Article VIII (step 4) turns every rule in this stage into a governing-document requirement, which is exactly what a state must find before listing a new SGO on its documents (temporary § 1.25F-5T(d)(4)).
3. A segregated §25F account. Opened in step 7, holding only qualified contributions and their earnings, with every designated gift deposited and its own books. (Going multistate later? The proposed regulations require a separate §25F account for each state whose list you’re on.)
All three true? Check this off and move on.
Questions people actually ask
We wrote our own bylaws. What must they require?
They must expressly require, not merely describe, each rule in this stage: the 90% spending test, 10+ students across more than one school, qualified expenses paid the permitted ways, income verification by a permitted method, students who live in the state, the award priority order, no earmarking, no scholarships to disqualified persons, and the segregated §25F account, plus the reporting and audit duties. Until you file your first annual certification and audit, a state may rely on your governing documents and written policies only after determining they expressly require the operational rules (beyond a general duty to comply with law) and show your ability and intent to meet them (temporary § 1.25F-5T(d)(4)). That’s why generic borrowed bylaws fail; the full checklist is in step 4’s questions.
What keeps us a public charity over time?
Genuinely broad support: many donors rather than one funder. §25F pushes you the right way, since the credit recruits many donors at the $1,700-per-person credit level ($3,400 for a married couple when each spouse gives). Watch it if a single family or foundation would otherwise dominate your revenue, and know the §25F twist: a donor who gives more than $5,000 in a year, if that is more than 2% of that year’s contributions, becomes a substantial contributor whose family can’t receive your scholarships that year or the next.
Primary sources: Treasury temporary regulations, T.D. 10057 (our summary) · Treasury proposed regulations, October 2026 (our summary)
