EFTC in New York

Becoming an SGO in New York

To operate as a Scholarship Granting Organization (SGO) in New York under the federal Education Freedom Tax Credit, an organization must meet the §25F requirements that apply in every participating state, plus New York’s own application, documentation, and reporting requirements. Treasury’s temporary regulations (October 2026) limit that state layer: a state must require compliance with its general charity laws and must require application, documentation, and financial reporting tailored to the federal tests and to fraud prevention, but it may not make SGOs operate under rules stricter than §25F, such as limits on the types of schools or expenses scholarships can cover. Here is the current picture.

Federal requirements (apply in every state)

• Be a 501(c)(3) public charity: tax-exempt and not a private foundation. If your exemption application is still pending, the temporary regulations let a state list you only if the exemption, once granted, takes effect by January 1 of the list year.
• Be located in the state: authorized to do business there and in compliance with its general charity laws. No in-state headquarters is required (temporary regulations).
• Keep a separate §25F account that holds only qualified contributions and their earnings, and deposit every gift a donor designates for the credit into it.
• Spend at least 90% of the organization's income on scholarships for eligible students. Under the proposed regulations, each year's income must be spent by the end of the taxable year after the year it comes in, and income means total gross receipts from all sources, but an SGO whose activities are at least 85% scholarship granting can apply the test to its §25F account (qualified contributions plus earnings) instead.
• Award scholarships to 10 or more students who do not all attend the same school.
• Fund only eligible students: household income at or below 300% of area median gross income and eligible to enroll in a public school. Under the proposed regulations, the student must also live in the state whose list the SGO is on, with exceptions for military and tribal families.
• Verify each applicant's household income and family size, and pay only for qualified elementary or secondary education expenses.
• Give priority to students who received a scholarship the previous school year, then to their siblings.
• Do not earmark or set aside contributions for a particular student.
• Pay no scholarships to disqualified persons: substantial contributors, officers, directors, anyone who helps select recipients or set awards, and their family members (proposed regulations).
• Register in the IRS SGO portal (not yet open), give each donor a written acknowledgment by January 31 of the following year, and report designated gifts to the IRS by February 28 (temporary regulations).
• Get an annual financial and programmatic audit, from an independent professional if total receipts exceed $500,000, and file an annual compliance certification with your Form 990 (proposed regulations).
• Appear on your state's SGO list, which the state submits to the IRS each year. The state must include every organization located there that asks to be listed and meets these requirements, and may remove one only through a procedure that affords due process (temporary regulations).

Sources: the §25F statute; Treasury’s temporary regulations (T.D. 10057), which take effect without a comment period and apply from September 1, 2026; and its proposed regulations (October 2026), which taxpayers, SGOs, and states may rely on for contributions made on or after January 1, 2027 but which are not final.

New York-specific requirements

New York has not published SGO requirements beyond the federal rules yet. Treasury’s temporary §25F regulations, released October 1, 2026, give participating states until February 15, 2027 to submit their 2027 SGO lists, and each list must include every organization located in the state that asks to be on it and meets the federal requirements, so watch for New York’s application window before then.

Full walkthrough: how to start an SGO. The intake, income verification, receipting, and disbursement a compliant program needs can run on software built specifically for the §25F workflow.

Starting an SGO in New York? Work the free SGO builder, a 21-step checklist that saves your progress, or retrofit an existing nonprofit.

Scholarship Granting Organizations in New York

Our directory tracks the Scholarship Granting Organizations running today’s state tax-credit scholarship programs, the organizations most likely to administer the federal EFTC once official §25F lists are certified.

Learn more about EFTC

In-depth guides on how the program works, who qualifies, and how to participate.

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