What You Need to Know About the ECCA: A New Federal Opportunity for School Choice

As school choice expands at the state level, new momentum is building at the federal level through the Educational Choice for Children Act (ECCA). This proposed tax credit program could unlock up to $5 billion annually in private donations to fund K-12 scholarships. 

The ECCA has gained significant traction and was recently included in the U.S. House’s budget reconciliation process, though it is not yet a law. The most recent version of the bill restores important protections for religious liberty, an issue closely watched by private schools and scholarship organizations.

The ECCA is designed to make private education more accessible to families by providing federal tax credits to individuals and businesses that donate to Scholarship Granting Organizations (SGOs). These SGOs then provide scholarships to eligible students for tuition and other educational expenses at participating private schools. As federal lawmakers debate the future of school choice, the ECCA could represent the most significant national expansion to date. 

The ECCA is a federal initiative that would create up to $5 billion annually in tax credits for donations to SGOs. In turn, these organizations fund scholarships for K–12 students to attend private schools across the country, including faith-based schools. The program aims to complement existing state-based school choice programs and address the rising demand for educational alternatives. 

Here are the core elements of the program: 

• Annual Volume Cap: $5 billion in federal tax credits, available from 2026 through 2029.
• Donor Eligibility:  Only individual income taxpayers may participate. Corporate donors are not eligible.
• Donation Limit: Up to 10% of adjusted gross income (AGI) or $5,000, whichever is greater. 
• Student Eligibility:  Must be eligible to attend public school and have a household income at or below 300% of Area Median Income (AMI).
• Qualified Expenses:  Tuition, fees, educational materials, therapies, dual enrollment, tutoring, and more.
• State Set-Aside: 10% of the annual volume cap is allocated evenly across all 50 states and reserved for residents of those states.
• First-Come, First-Serve Allocation: Credits are awarded in the order contributions are received, with no allocations after December 31 of each year. 
• Sunset Clause:  The program is authorized through 2029 and would require reauthorization to continue beyond that.

The most recent draft of the ECCA restores specific language that protects the religious liberty of participating schools. This ensures that faith-based schools can continue to operate according to their religious mission and beliefs while participating in the program. The addition of this language addresses concerns from religious organizations and school leaders who advocated for clear protections. Additional adjustments include: 

• Reduced funding cap from $10B to $5B annually
• Program is now time-limited: 2026–2029 
• Corporate donors removed
• Scholarships are currently treated as taxable income (expected to be fixed)
• New admission mandate for special education students was added (also expected to be challenged)

This legislation presents a new funding stream that could significantly expand access to private education. However, it also brings operational expectations:

• SGOs must verify income, distribute funds on a timeline, and manage audits.
• Schools may need to review admission policies to ensure eligibility.
• Donors may ask new questions about tax credits, including state versus federal programs and their impact.

For SGOs and private schools, the restoration of religious liberty protections is significant. It means faith-based organizations can confidently participate in the ECCA without compromising their values or operational autonomy. At the same time, the enhanced federal tax credit could dramatically increase the pool of available scholarship funds, expanding access for more families.

Being ready early means being positioned to grow.

SGOs need to know they’re working with a trusted leader in school choice and scholarship management. FACTS is actively monitoring developments in the ECCA legislation and preparing solutions to support schools and SGOs. We’re actively monitoring the ECCA’s progress and working to:

• Ensure our platforms are ready for federal compliance
• Educate clients with summaries, webinars, and FAQs
• Provide guidance on eligibility, documentation, and distribution requirements

Our eligibility verification and program management tools are designed to help organizations navigate new compliance requirements, ensure accurate reporting, and maximize scholarship impact.

Whether you’re a long-time SGO partner or just getting started, our goal is to make your transition into any new federal program seamless.

Want to learn more about the ECCA and what it means for your organization? Register for our webinar where we’ll break down the latest developments, answer your questions, and discuss how FACTS can help you navigate these changes. If you’d like to discuss how your organization can prepare for the ECCA, reach out to your FACTS representative or contact us directly.

As federal and state scholarship landscapes evolve, FACTS is here to help you adapt and thrive every step of the way.

Q: Can donors claim both state and federal tax credits?
A: Yes. If donations are made to separate programs, donors may be eligible for both.

Q: Are scholarships really taxable?
A: The current draft says yes, but it is widely expected this will be corrected in a future revision.

Q: Will schools be required to change their admissions policies?
A: Possibly, depending on how the special education requirement survives reconciliation.

Q: Who qualifies as a donor?
A: Only individual taxpayers, not businesses or corporations.

Q: What if my SGO already participates in a state tax-credit program?
A: You may qualify under a “grandfathering” clause or meet the new federal criteria. More guidance will come as the bill progresses.

This information is for general guidance only and should not be considered legal or tax advice. For specific compliance questions, please consult with your legal or tax advisor.