SGO 90/10 rule compliance calculator
Check whether your Scholarship Granting Organization meets the §25F 90/10 rule under Treasury's proposed regulations. Enter a year's income and the scholarships paid from it to see your scholarship ratio, the 10% left for other uses, and how much more you must pay out by the end of the following year.
Treasury's proposed rules measure the 90% against all of the organization's gross receipts, unless a single-state SGO's activities are at least 85% scholarship granting. Multistate SGOs test each state's §25F account.
Total gross receipts from every source during the year, cash basis, before any expenses.
Scholarships for eligible students actually paid from this income, this year and next. Amounts count when paid, not when awarded, and payments apply to the oldest unspent income first.
Based on Treasury’s proposed regulations (October 2026), which SGOs may rely on for 2027 but which are not final. Only scholarships for eligible students count toward the 90%. Refunds from schools or vendors count as new income in the year returned. The 85% activity test that unlocks the account-only basis is separate from the 90% test, and Treasury has asked for comments on how to measure it. Estimate only; confirm with your auditor.
How this works
- §25F requires an SGO to spend at least 90% of its income on scholarships for eligible students, so at most 10% of that income can go to anything else.
- Under Treasury's proposed regulations, income means all of the organization's gross receipts (cash method). A single-state SGO whose activities are at least 85% scholarship granting can measure it on its §25F segregated account instead (qualified contributions plus earnings); a multistate SGO tests each state's account separately.
- Each year's 90% must be paid by the last day of the following taxable year. Amounts count when paid, not when awarded, and payments apply to the oldest income first.
- Enter a year's income and the scholarships paid from it so far, and we compute your ratio and what's still due. A real platform tracks this continuously, per state account.
Questions, answered
Is the 90% measured against revenue or profit?
Against income, not net profit. Treasury's proposed regulations measure the test against the organization's total gross receipts from all sources, on the cash method and unreduced by expenses, with a safe harbor letting a single-state SGO whose activities are at least 85% scholarship granting measure 'income' as the qualified contributions and earnings in its §25F segregated account. Either way, at least 90% must go to scholarships.
What can the 10% be spent on?
The rule requires at least 90% of income to go to scholarships, so administration, fundraising, and compliance come out of what's left: at most 10% of all receipts under the whole-organization test. Under the 85% safe harbor the test applies to the §25F account, and the organization can fund overhead with separate, non-§25F gifts; Treasury gave that as a reason for the safe harbor.
Does the test apply per state for multistate SGOs?
Yes. Under Treasury's proposed regulations, a multistate SGO must be at least 85% scholarship granting, keeps a separate §25F account for each covered state, and must meet the operational requirements, including the 90% test, separately for each state account. Track the ratio per state, not just in aggregate.
When does the 90% have to be spent?
By the last day of the taxable year after the year the income came in, so a first-year SGO has until the end of its second year. Amounts count when paid (cash method): a multi-year award counts in each year a payment goes out, and refunds from schools or vendors are new income in the year returned, with another full year to spend.
Learn more
- The 90/10 rule & SGO complianceA deep dive into the federal §25F rules every Scholarship Granting Organization must meet, updated for Treasury's October 2026 proposed regulations: the 90/10 rule (90% of income to scholarships, measured on total gross receipts or, under the 85% safe harbor, on the §25F account), the deadline to spend each year's income, the 10-student rule, renewal and sibling priority, anti-earmarking, disqualified persons, separate accounts, donor substantiation, and income verification.
- How to start an SGOThe complete, start-from-nothing guide to launching a Scholarship Granting Organization (SGO) for the federal Education Freedom Tax Credit (EFTC / ECCA / §25F): incorporating a nonprofit, getting an EIN, filing for 501(c)(3) (Form 1023 vs 1023-EZ, real fees and timelines), opening the required separate bank accounts, registering to fundraise, meeting every §25F operating rule, getting on your state's list, and a step-by-step checklist, written for founders with zero nonprofit experience.
- The proposed regulations, walked throughA practical walkthrough of the §25F (EFTC / FSTC) proposed regulations and temporary regulations Treasury and the IRS released October 1, 2026, organized for donors, families, SGO operators, and states: what is binding, what is proposed and can be relied on for 2027, and what is still open. Covers the $3,400 joint-return reading, state-credit ordering, the 90% test and 85% safe harbor, income verification, payments and audits, donor numbers and Form 8525, state election deadlines, key dates, and what changed from Treasury's June preview.
- Scholarship Granting OrganizationsWhat an SGO is, how organizations get designated by their state, the 90/10 rule, what compliance looks like, and how donors and families choose between SGOs.
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