What is a scholarship granting organization?

An SGO sits between donors and schools. It takes donations, holds them in separate accounts, checks which students qualify, awards scholarships and pays each school. Then it reports to the IRS and to each state that lists it. States use different names for the same kind of group: SGO, STO, SSO or SFO. The federal law says scholarship granting organization. (Source: §25F(c)(5); §25F(d))

For a donor, the SGO is what turns a donation into a federal tax credit. For a family, it's who they apply to. For a school, it's the partner that carries the compliance work so staff can keep teaching.

• Not a school. It doesn't enroll students, set tuition or shape what a school teaches. The school accepts scholarship payments and confirms enrollment.
• Not a voucher. A voucher is state money paid toward a student's tuition. An SGO scholarship is funded by private donations. The donor gets a tax credit, but no government money passes through the SGO.
• Not an ESA. An education savings account puts state money in an account a parent spends on approved costs. An SGO pays the school, and the family never holds the money.
• Not a private foundation. A foundation can make grants on its own terms, but donations to it don't earn this credit. The law requires an SGO to be a public charity. (Source: §25F(c)(5)(A))
• Not the donor's agent. A donor can choose a school. The SGO, not the donor, decides which student receives each scholarship. (Source: §25F(d)(1)(E))

The law sets the rules in two places. Section 25F(c)(5) says what kind of organization qualifies. Section 25F(d) says how it has to run. Here they are in plain English.

The 90/10 rule

At least 90% of an SGO's income has to go to scholarships. The base is income, not just donations, so investment earnings count too. The other 10% at most covers everything else: staff, audits, software and fundraising. Treasury's June 2026 preview described how the test will be measured, including a safe harbor, but the rules aren't final. (Source: §25F(d)(1)(B); Treasury guidance preview, June 2026)

Example. An SGO takes in $1,000,000 in donations and earns $20,000 in interest. Its income is $1,020,000. At least $918,000 goes to scholarships, and no more than $102,000 goes to running the program.

No earmarking

A donor can pick a school, but not a student. The SGO can't reserve a donation for any particular child, including the donor's own. Every award is the SGO's decision. (Source: §25F(d)(1)(E))

Priority order

When there's more need than money, students who received a scholarship from the SGO the year before come first. Next come eligible students whose brother or sister received one. After that, the law leaves the order to the SGO. (Source: §25F(d)(1)(D))

Disqualified persons

An SGO can't award a scholarship to a disqualified person. The law borrows the idea from the private foundation rules in §4946, which cover people such as an organization's managers, its largest donors and their families. Treasury will set out exactly how it applies. (Source: §25F(d)(2))

The credit only works in a state that opts in. The governor, or whoever state law names, makes the election and gives the IRS a list of SGOs located in the state that meet the federal rules. The list is due by January 1 of each year, and for 2027 as early as practicable. (Source: §25F(g)(1))

States could make an early election for 2027 on IRS Form 15714. It only counts if the state follows up with its SGO list by the deadline Treasury sets. If it doesn't, no organization in that state qualifies for 2027. (Source: Rev. Proc. 2026-6)

Treasury expects each state to check every SGO on its list itself. An SGO's own word won't be enough. The state would certify, under penalties of perjury, each SGO's tax status, its separate accounts and the rules above. An SGO that works in more than one state would also have donors choose a state, and would match each state's donations to scholarships there. (Source: Notice 2025-70)

Being on the list matters to donors. Treasury expects to treat a donation as going to an SGO if the organization was on the list when the donor gave. See where your state stands (Source: Notice 2025-70)

Money raised through a state's list funds students in that state only. A donation to an Ohio school stays with Ohio students. (Source: §25F(c)(3))

• Donors get a dollar-for-dollar federal credit of up to $1,700 a year, an acknowledgment with a donor number, and the choice of which school their donation supports. Unused credit carries forward up to five years. (Source: §25F(b)(1); §25F(f))
• Families get a scholarship paid straight to their school. It isn't taxable income. (Source: §139K)
• Schools get a new source of scholarship money from their own community, without running the compliance themselves.

1. 1Check the state list. The SGO should be on the list your state gave the IRS for this year. The IRS program page shows which states take part, and the state tracker follows each one. (Source: IRS FSTC page)
2. 2Check its 501(c)(3) status. Look it up in the IRS's records of tax-exempt organizations and make sure it's a public charity, not a private foundation. (Source: §25F(c)(5)(A))
3. 3Ask for documents. A real SGO will share its IRS determination letter, its Form 990 and its audited financials.
4. 4Listen to how it talks about awards. An SGO that promises a donor's money will reach a named child is breaking the earmarking rule. (Source: §25F(d)(1)(E))
5. 5Look for a record. Ask how many students it has served, at how many schools, and for how long.

CEN SGO is the scholarship granting organization of the Christian Education Network, founded by the Center for Christian Virtue in Columbus, Ohio. It's a 501(c)(3) public charity built only for Christian K-12 schools, Evangelical and Catholic. Every member school agrees to CEN's statement of faith.

The model comes from Ohio, where CEN has run scholarships under the state's tax credit since 2021. The network now has 211 member schools, more than 8,700 scholarship recipients and $15 million in scholarship money raised.

At least 90% of what CEN SGO receives goes to scholarships. The rest pays for running the SGO, supporting local schools and advocating for school choice and religious freedom. An independent board with staggered terms governs CEN SGO. Its financials are audited every fiscal year and its Form 990 is public. Schools pay nothing to take part. How CEN SGO is run to the statute

• Thinking the SGO is a government program. It's a charity funded by private donations.
• Thinking a donor can fund one named student. The law forbids it.
• Thinking any 501(c)(3) earns the credit. Only an SGO on the state's list for that year does.
• Thinking a school can be its own SGO for its own students. The law requires students at more than one school.