With the enactment of the "One, Big, Beautiful Bill Act" (Public Law 119-21) in July 2025, Congress introduced a new nonrefundable income tax credit under Internal Revenue Code Section 25F. This credit, effective for calendar years beginning in 2027, incentivizes qualified contributions to Scholarship Granting Organizations (SGOs). To facilitate the implementation of this credit, the Internal Revenue Service released Revenue Procedure 2026-6. This article examines the procedural framework established by the IRS, detailing the statutory background, the mechanism for State elections, and the specific requirements for the "Advance Election" process.

Statutory Background and Legislative Context

Section 25F provides a federal income tax credit for cash contributions made by individual citizens or residents to SGOs. For a contribution to qualify, the SGO must fund scholarships for eligible students solely within a specific State. A critical component of this statutory scheme is State sovereignty; the credit is only available if a State voluntarily elects to participate and be designated as a "covered state".

Under Section 25F(g)(1), a State electing to participate must submit a list of compliant SGOs to the Secretary of the Treasury. Generally, this list must be submitted by January 1 of the calendar year for which the election is made, or as early as practicable for the inaugural 2027 year. The statute defines a "covered state" as one that both elects to participate and identifies its SGOs in accordance with Section 25F(g).

The Necessity of Advance Elections

While the statute requires the submission of an SGO list to finalize participation, practical administration requires an earlier indication of intent. The IRS released Revenue Procedure 2026-6 to establish an "Advance Election" mechanism. This procedure addresses a timing issue inherent in the statutory rollout: States need to inform potential SGOs of the State’s participation under Section 25F prior to the finalization and submission of the SGO list.

The primary rationale for this guidance is to provide SGOs with adequate lead time to prepare for the commencement of the new credit in 2027. By making an Advance Election, a State can signal its participation status early, allowing organizations within its jurisdiction to organize and ensure compliance with Section 25F requirements before the credit goes live.

IRS Analysis of the Election Procedure

The IRS has determined that while an Advance Election facilitates early notification, it does not replace the statutory requirement to submit an SGO list. The Revenue Procedure establishes that an Advance Election is a preliminary step that must be "perfected". The IRS analysis emphasizes that the statutory definition of a "covered state" relies on the identification of SGOs. Consequently, the Service concludes that a State making an Advance Election must subsequently submit its State SGO list, accompanied by all required certifications, to validly complete the election.

The Service explicitly warns that failure to perfect the election carries significant consequences. Because Section 25F(g) mandates the provision of the SGO list as part of the election, a failure to submit this list by the forthcoming deadline would result in a failure to meet statutory requirements. The IRS concludes that in such a scenario, no organization within that State would qualify as an SGO for calendar year 2027, effectively nullifying the credit for taxpayers in that jurisdiction.

Procedural Conclusions and Implementation

Revenue Procedure 2026-6 sets forth the exclusive methodology for States to make an Advance Election for calendar year 2027. The IRS has mandated the use of Form 15714, Advance Election to Participate Under Section 25F for 2027. The procedural conclusions outlined in the guidance are as follows:

Submission Window: States may submit Form 15714 starting January 1, 2026. The window closes on the day before the final date permitted for submitting the State SGO list, a date which will be specified in future guidance.
Exclusivity of Form: No alternative methods or alterations to Form 15714 are permitted. The IRS will acknowledge receipt of validly submitted forms.
Prohibition on Attachments: The IRS advises that the Advance Election is solely for the election itself. States must not attach the SGO list or other information to Form 15714. Any such attachments will not be processed and must be resubmitted later under separate procedures.
One-Time Submission: Once an Advance Election is made for 2027, the IRS will not process subsequent Advance Election submissions; the next step is strictly the submission of the SGO list.

Tax professionals advising SGOs or potential donors should monitor whether their specific State files Form 15714. However, practitioners must remain aware that the Advance Election is merely the first step, and the credit’s availability is contingent upon the State strictly adhering to the subsequent "perfection" requirements regarding the SGO list.

Prepared with assistance from NotebookLM.