IRS Notice 2025-70, Request for Comments on §25F Implementation

Where the October 2026 rules landed

Our notes, topic by topic, on where the rules followed or departed from what the Notice anticipated. “Prop.” sections are proposed regulations (not final; taxpayers may rely on them for contributions made on or after January 1, 2027). “T” sections are temporary regulations.

• State certification of SGOs. Followed. The Notice read §25F(g) as requiring each state to verify that every listed organization meets the requirements. The rules keep that: the state certifies each organization and certifies that its own procedures let it make that determination (§ 1.25F-5T(d)(3) and (d)(6)). A self-attestation approach some commenters favored was not adopted. For a new organization, a state may rely on governing documents and policies that expressly require the operating rules (§ 1.25F-5T(d)(4)).
• “Located in the State.” Now defined: authorized to do business in the state and in compliance with its generally applicable charity laws (§ 1.25F-1T(a)(10)). A state may not require SGOs to operate more restrictively than §25F (§ 1.25F-5T(e)(2)).
• State tax credit information. A state describes any state tax credit for SGO contributions as part of its election (§ 1.25F-5T(c)(5)(vii)). On the donor side, a state credit for the same gift is subtracted before the $1,700 cap (prop. § 1.25F-2(c)).
• Single-state and multistate SGOs; the 90% test. The Notice’s single-state versus multistate distinction was kept. The 90% test applies state by state for a multistate SGO: it keeps a separate §25F account for each state, meets the operating rules separately for each, and must be at least 85% scholarship granting (prop. § 1.25F-3(c)(3)).
• Donors who do not designate a state. Not addressed. A multistate SGO must let donors designate how a gift is allocated among its states (prop. § 1.25F-3(c)(3)), but the rules do not say what happens to a gift that names no state.
• Eligibility across multiple states. A student counts for a state only if the student resides there, wherever the school is, with added rules for military families and families residing on Indian Lands (prop. § 1.25F-3(c)(7)).
• Reporting, recordkeeping, and donor notification. SGOs register in an IRS SGO portal, send each donor a written acknowledgment by January 31 with a unique donor number, and report to the IRS by February 28 (§ 1.25F-4T(b) and (c)). Donors do not give the SGO a Social Security number. SGOs also file an annual certification and report (prop. § 1.25F-4(d)).
• Income verification. Four methods: direct documents; a recent award letter for SNAP, TANF, WIC, Section 8 housing, or SSI; a safe harbor for tutoring and special-needs awards at schools in low-income areas; and automatic eligibility for foster children (prop. § 1.25F-3(c)(6)).
• Fund segregation. A §25F segregated account that holds only qualified contributions and their earnings, with every designated gift deposited into it (prop. § 1.25F-3(b)(2)).
• Disqualified persons. Departed. The Notice asked whether to drop the $5,000 threshold and test substantial contributors on 2% alone; the proposal keeps both tests (more than $5,000 and more than 2%), consistent with §4946 (prop. § 1.25F-3(d)(2)).
• State list deadline. Departed. The Notice anticipated 2027 lists due by a date before January 1, 2027. For 2027, a state files its advance election on Form 15714 by January 1, 2027 and its SGO list by February 15, 2027 (§ 1.25F-5T(c)(3)).
• Electronic submission. Followed. States file elections, lists, and certifications through an IRS State section 25F portal (§ 1.25F-5T(b)).