Virginia will sit out the federal scholarship tax credit in 2027

Virginia will not take part in the first year of the federal scholarship tax credit program, Gov. Abigail Spanberger has decided, leaving the state out of a program that begins Jan. 1, 2027 — even though her predecessor signed Virginia up first.

The Washington Post reported Friday evening that Spanberger will not finish the enrollment former Gov. Glenn Youngkin began in January, after a recent letter from the Internal Revenue Service said the state still had to complete the process. The Post, which reviewed the documents, said she cited doubts about the program’s benefits for public school students. Her office had not posted a public statement on the decision as of early Saturday.

How Virginia got here

Youngkin filed Virginia’s advance election days before leaving office, making Virginia the first state in the country to opt in. His Jan. 9 letter to the Treasury Department named eight scholarship organizations, and on Jan. 16 he announced five more — 12 in all, because one name appeared on both lists.

But under the Treasury Department’s temporary regulations, which took effect Sept. 1, an advance election is only the first step. The state “must perfect its election by providing its State SGO list,” and for 2027 that list is due between Oct. 1, 2026, and Feb. 15, 2027. If the list never arrives, no organization in Virginia qualifies as a scholarship granting organization for 2027.

What the program would have offered

The Education Freedom Tax Credit, enacted as Section 25F of the tax code in the One Big Beautiful Bill Act, gives donors a dollar-for-dollar federal tax credit of up to $1,700 a year — $3,400 for a married couple filing jointly — for contributions to scholarship granting organizations, known as SGOs.

A scholarship can go to any K-12 student who is eligible to enroll in a public school and lives in a household at or below 300 percent of area median gross income, whether the student attends a public, charter, private or religious school. The Treasury Department has put the eligible share at about 96 percent of children in participating states. Virginia’s public schools enrolled 1,258,852 students in 2023–24, according to the National Center for Education Statistics.

What it means for families here

No Virginia student can receive one of these scholarships in 2027, because no Virginia organization will be on the federal list. Virginians can still donate to an SGO on another participating state’s list and claim the credit — but those scholarships go to students in that state, not Virginia.

One exception matters in a region with a large military presence: a student who is the dependent of a service member can still receive a scholarship from the list of the state where the family legally lives. Virginia’s own Education Improvement Scholarships Tax Credit is a separate, pre-existing state program and is not affected by the federal decision.

The debate

The Virginia Education Association urged Spanberger on Oct. 2 not to complete the enrollment, warning that even a 4 percent reduction in public school support would mean roughly $940 million less a year statewide. On Oct. 9, Spanberger said Virginia’s status “remains in question.”

Supporters of the program have pressed the other way. The Chesapeake School Board voted 7–2 on Oct. 12 to back participation, and board chair Kim Scott put the trade-off plainly: “Virginians can still participate,” she said, but their donations “would go to students in other states. I want Virginia dollars in Virginia.”

It can still change

The window to send the SGO list stays open until Feb. 15, 2027, and each year is a separate election, so 2028 is a new decision. A bill that would have put state testing and other rules on private schools taking tax-credit scholarships, HB 359, was carried over to the 2027 General Assembly session.

Virginia is the first state whose election is on file with the IRS and will not be completed; the other governors who said no did so before filing anything.