26 U.S.C. § 25F • Public Law 119-21 § 70411 • TD 10057
Enacted under Public Law 119-21 § 70411 (26 U.S.C. § 25F), individual U.S. taxpayers receive a 100% dollar-for-dollar nonrefundable federal income tax credit for qualified cash contributions to a certified Scholarship Granting Organization (SGO) beginning tax year 2027, up to $1,700 per individual taxpayer ($3,400 for married couples filing jointly when each spouse contributes $1,700).
Unused credit amounts carry forward for up to 5 subsequent tax years under § 25F(b)(3). Under § 25F(f), the federal credit is reduced dollar-for-dollar by any state tax credit claimed on the same contribution, and taxpayers cannot claim both a § 170 charitable deduction and a § 25F tax credit on the same dollar contributed.
Federal law mandates that a certified SGO maintain separate, segregated accounts exclusively for qualified § 25F contributions and allocate at least 90% of all contribution revenue directly to qualified elementary and secondary education scholarships, with an absolute statutory ceiling of 10% for administration and operations.
Account ••9166 — Restricted Scholarship Trust (≥ 90%)
Dedicated exclusively to direct K-12 tuition disbursements and MCC-restricted student scholarship wallets. Zero commingling with operating funds.
Account ••0918 — Statutory Administrative Reserve (≤ 10%)
Covers independent CPA audit verification, income vetting, IRS Form 8525 cryptographic issuance, and bank rail infrastructure. Partner schools pay $0.
To qualify as an SGO under § 25F(d)(1)(A), an organization must award scholarships to 10 or more eligible students who do not all attend the same school. A single private school cannot legally operate a single-school § 25F fund on its own.
SparkScholar solves this structural compliance requirement by pooling multiple partner schools under the P. Davis Jones Scholarship Initiative umbrella while maintaining dedicated, transparent school-designated sub-ledgers for each partner campus.
Under § 25F(d)(1)(E), donors cannot earmark, designate, or restrict a contribution for the benefit of any specific, named student or dependent. Contributions may support a general school partner sub-ledger or the general K-12 scholarship pool, and all student award selections are made independently by the SGO Scholarship Committee based on statutory eligibility and financial need.
Pursuant to § 25F(e), scholarships may never be awarded to dependents of SGO officers, directors, or substantial contributors ("disqualified persons").
Eligible scholarship recipients must be members of a household with an annual income not exceeding 300% of the Area Median Gross Income (AMGI) as published by HUD, and must be eligible to enroll in a public elementary or secondary school.
Under Treasury Regulation TD 10057 / REG-117199-25, household eligibility is determined strictly by prior-year Adjusted Gross Income (Form 1040) against HUD AMGI tables — non-income household assets (home equity, 529 balances, retirement accounts) are disregarded.
SparkScholar and the P. Davis Jones Scholarship Initiative never collect or store donor Social Security Numbers (SSNs). Under IRS Treasury regulations (TD 10057), every qualified contribution is substantiated via a cryptographic 25-character alphanumeric Unique Donation Number (UDN) issued on an official IRS § 25F acknowledgment certificate.
Donors or their CPAs enter the 25-character UDN directly onto IRS Form 8525 when filing Form 1040, matching against the SGO's annual information return (Form 1099-SGO).
For direct private school awards, funds are settled via direct ACH to the school's bursar office. For homeschool and micro-grant families, funds are provisioned in a virtual Visa/Mastercard scholarship wallet restricted at the card-network level to qualified elementary and secondary education expenses (MCC 8211 Elementary/Secondary Schools, MCC 8299 Educational Services & Tutoring, MCC 5942 Bookstores & Curriculum). Non-qualified retail merchants are declined automatically in real time prior to settlement.
