Ed. Note: Below is a press release from New Jersey Policy Institute urging Gov. Mikie Sherrill to opt into the Federal Education Tax Credit. While 30 states had already filled out the paperwork and listed their scholarship-granting organizations (SGOs, which have to be charitable nonprofits), some blue state governors, including Sherrill, were waiting to see the regulations, released just last week.

The regs are more narrow than some had hoped — you can’t exclude private schools that discriminate against LGBTQ students, for instance– but the money definitely can be used for high-dosage tutoring in public schools., curriculum and instructional materials, academic testing, dual-enrollment costs, and services for kids with disabilities. You just need to approve an SGO that works on that. For example, New Jersey could make the state-funded nonprofit New Jersey Tutoring Corps an SGO. Also, states can try it for a year and then opt out without penalty. All US taxpayers can use the tax credit ($1,700 for single, $3,400 for a couple) regardless of whether their state opts in. If NJ opts out, the money from residents using the tax credit will just go to other states.

Teacher unions are fiercely opposed to Gov. Sherrill opting in (although NJEA’s campaign for one of her opponents, former NJEA president Sean Spiller, funded by $45 million in teacher dues, may have diluted her obeisance to its agenda.) NJEA says, “the harm will affect all students, as schools are forced to divert resources to compensate for the loss of federal funds.” But that’s simply not true: As Chad Aldeman explains, ” if local civic organizations take advantage of the program, they could potentially drive millions of dollars in new spending [to public schools].”

For more info, here is a primer from EdChoice.

The U.S. Treasury Department and the IRS released the long-awaited rules for the Federal Education Tax Credit. In response, the New Jersey Policy Institute (NJPI) called on Governor Mikie Sherrill to opt New Jersey into the program before the January 1, 2027 deadline.

For months, the Governor’s office has said it would evaluate the program once federal rules were published. With today’s release, that wait is over.

“New Jersey’s leaders said they needed to see the rules before taking a position. Today they have them,” said Wells Winegar, Executive Director of NJPI. “The questions have answers, the guardrails are written, and it costs our state nothing. Governor Sherrill has the opportunity to unlock hundreds of millions of dollars in scholarships for New Jersey students right away, and potentially billions as participation grows. Every day New Jersey waits is a day our families fall further behind states that have already said yes.”

The cost of staying out

New Jersey residents can claim the credit whether or not the state participates, but without an opt-in their donations will fund scholarships in other states. According to Treasury, 30 states have already opted in, and New York Governor Kathy Hochul has announced her state intends to participate. NJPI’s Cost of Not Opting In tool estimates what New Jersey stands to lose statewide and in every town, school district and legislative district.

Based on IRS data showing nearly 1.8 million New Jersey filers earning $75,000 or more, NJPI estimates New Jersey would lose roughly $911 million if it fails to opt-in–  $243 million in 2027, $304 million in 2028 and $364 million in 2029 if 8, 10 and 12 percent of those filers give each year. That figure is conservative, since it counts just one $1,700 credit per tax return.

“New Jersey taxpayers are going to give either way,” said Winegar. “The only question is whether those scholarships help kids in Camden, Paterson and Newark, or kids across the Hudson.”

NJPI to partner on high-impact tutoring scholarships for public school students

NJPI intends to partner with an established national SGO to offer high-impact tutoring scholarships to eligible New Jersey public school students. The effort would directly support Governor Sherrill’s focus on high-impact tutoring, including her proposal to double state funding for it to $15 million, by adding private, federally credited dollars on top of state investment. It would also help improve academic outcomes in reading and math, and create new paid opportunities for New Jersey teachers who provide tutoring services.

“The Governor has made high-impact tutoring a priority, and this program can put real resources behind it at no cost to the state,” said Winegar. “We want to help New Jersey students catch up and get ahead, and give our teachers a chance to earn more doing work they already know makes a difference.  The questions have answers, the guardrails are written, and it costs our state nothing. Everyday New Jersey waits is a day our families fall further behind states that have already said yes.”

What the new rules provide

• A $1,700 dollar-for-dollar federal tax credit for donations to approved Scholarship Granting Organizations (SGOs), or up to$3,400 for married couples filing jointly.
• Broad eligibility. Students in households earning up to 300 percent of the area median income qualify, which Treasury estimates covers about 96 percent of children in participating states.
• Help for public school students. Scholarships can pay for tutoring, special-needs services, books, supplies and computers, as well as private school tuition.
• Strong accountability. SGOs must keep donations in segregated accounts, spend at least 90 percent of their income on scholarships, pay schools directly, and undergo annual independent audits reviewed by the state.
• A one-year commitment. A state’s election covers a single calendar year, so New Jersey can opt in for 2027 and reassess.

Alongside the proposed rules, Treasury issued companion temporary regulations that spell out how states opt in and certify SGOs now. States, SGOs and taxpayers may rely on the proposed rules for contributions starting January 1, 2027.

Key dates

• January 1, 2027: Deadline for New Jersey to opt in.
• February 15, 2027: Deadline for states to submit their list of approved SGOs.
• December 15, 2026: Treasury public hearing on the proposed rules. Public comments are being accepted now.