Separate accounts, no commingling
The statute requires qualified contributions to sit in one or more dedicated accounts, never mixed with other money. The platform tracks segregated balances so the line never blurs.
§25F compliance
It's a compliance regime, not a tax form.
The Education Freedom Tax Credit comes with federal rules that aren't optional, and they apply whether you're forming an SGO or you've run scholarships for years. SGO Software is built around them, so compliance is the default, not a scramble before an audit.
What §25F actually requires
The rules aren't optional. The first one surprises people.
§25F doesn’t just let you collect tax-credit donations, it tells you how. The statute bars commingling: qualified contributions must sit in separate accounts, never mixed with your other funds. That one rule alone breaks most existing setups. Here’s the full set , and how the platform handles each.
The 90/10 rule
At least 90% of the organization's income must go to scholarships. We track every dollar against the cap continuously, not reconstruct it the night before an audit.
Eligibility, document-backed
Awards go to income-eligible students, verified against documents. AMI lookup and the 300%-of-poverty calculation are built in.
Priority order, no earmarking
Prior-year recipients first, then siblings, and no donor can earmark a gift for a named student. The award workflow holds the line.
Distribution requirements
Scholarships must reach ten or more students who don't all attend the same school. Dashboards show your distribution at a glance.
Per-donor §25F receipts
Each donor gets the exact document they need to claim the federal credit, generated as the gift settles, never reconstructed.
State + federal reporting
States must independently verify each SGO, self-certification isn't enough. We generate the state and federal reports from one ledger.
Audit-ready records
A complete, reconstructable trail of every donation, award, and disbursement, so an independent financial audit is answer-and-done, not a rebuild.
Based on §25F as enacted (OBBBA §70411) and IRS Notice 2025-70. Treasury’s final regulations are still being written; the platform tracks the rules as they’re finalized.
New or established
Same mandate, whoever you are.
§25F compliance isn’t lighter because you’re big. The separate-account rule, the 90/10 income test, the eligibility priority order, the federal audit, they apply the same to a first-year community fund and a national foundation.
And the tools most established orgs already run on, a donor CRM here, a scholarship database there, spreadsheets for the rest, were never built to keep §25F funds segregated or to produce a federal report. Bolting §25F onto old infrastructure is exactly where the audit risk lives. SGO Software is the compliance layer, whether it’s your first scholarship or your hundred-thousandth.
Compliance is a feature of every surface, not a separate module.
The separate accounts and receipts live on the donor surface, eligibility on the family surface, reconciliation on the school surface, and the 90/10 tracking and reporting in the admin console. That’s what “by construction” means.
What §25F is
The federal credit you're building to administer.
The Education Freedom Tax Credit is a federal tax credit for donations to Scholarship Granting Organizations, enacted as 26 U.S.C. §25F (OBBBA §70411) and effective January 1, 2027. For a plain-English explanation of the program, who it helps, and where each state stands, see eftccredit.com.
Four surfaces · one platform
Explore the rest of the platform
Preparing your SGO for January 2027?
See the platform that runs donor collection, family applications, school disbursement, and §25F reporting end to end. Talk to us early.