SC joins federal tax credit scholarship program, widening families’ private school choices

That unsurprising decision means some families here will have access to taxpayer-backed scholarships awarded by private charities starting in 2027 which they will be able to use for private school tuition and other educational expenses.

“School choice works in South Carolina,” McMaster wrote on social media last June as federal lawmakers negotiated the measure. “A federal school choice tax credit, backed by President Trump, would help provide even more Palmetto State parents with an opportunity to choose a learning environment that best suits their child’s needs.”

It’s separate from the state’s private school scholarship program, which is in its second year after lawmakers reinstated it last spring.

Families whose income is less than 300 percent of their area’s gross median income — a mark that varies across the state but is as high as $300,000 in parts of Charleston — will be eligible for the scholarships in the new federal system.

But it is not yet clear how many of those scholarships will be available, or how much they’ll be worth.

That’s because of its funding system. Unlike the state’s program, the federal government will not set aside a specific amount of money to fund the scholarships, or even award the scholarships itself.

Instead, the IRS will give a dollar-for-dollar tax credit, up to $1,700, for donations that people make to certain private charities. Those charities will then use the donations to give students the scholarships.

Every will have to send a list each year to the federal government of which charities meet the requirements. Participating charities have to use 90 percent of their income on the scholarships, and provide at least 10 to students attending at least two different schools.

It’s too early for the governor’s office to know which organizations will be included on South Carolina’s list, the spokesman said. They are due Jan. 1, 2027, which is when taxpayers can start claiming the credit for donations.

The charities, which the law calls “Scholarship Granting Organizations,” could range from large — maybe even nationwide — groups to small local ones, said Ryan Dellinger, director of education policy for the Palmetto Promise Institute, a conservative-leaning think tank.

There is interest in creating new organizations and adapting existing ones, he said, but much will depend on yet-to-come guidelines from state and federal officials.

“Personally, if I owed the federal government $1,700, I would much rather it go to something that is going to make a difference, and I’m hoping South Carolinians will agree,” Dellinger said.

Besides private school tuition, families could also use the scholarships for costs including tutoring, books, room and board, uniforms, transportation and computers, including at public schools.

But lingering questions about exactly how the charities would work, and what exactly would count as a school that could receive the scholarships, has drawn concern from some public school advocates.

“You have to have guardrails in place to make sure there’s not waste, fraud and abuse in the funds that are donated to these entities, and it’s just unclear how that’s going to occur,” said Patrick Kelly, a lobbyist for the Palmetto State Teachers Association.

Even then, he said it would have been “foolhardy” for South Carolina not to opt in to the program, since it won’t cost the state any money and opens up new resources for students. Twenty-two other states had also joined as of Jan. 27, the U.S. Department of Education said.

Others have criticized the program as a boon for private schools at the expense of the public system.

“I think it’s unfortunate that there is the push for the expansion of public money being used for private institutions that don’t have the same accountability as our public institutions,” said Dena Crews, president of the S.C. Education Association.

The SCEA led the successful 2023 lawsuit against the state’s voucher program, which resulted in the state Supreme Court striking down the part of the law allowing families to use the scholarships for private school tuition. It violated the state constitution’s prohibition on public money going to the “direct benefit” of private schools, the court ruled in a 3-2 decision.

But lawmakers passed a new version of the law last year that resumed the payments to private schools for the current school year, tweaking its structure and funding streams in an effort to appease the court. That program is set to expand to 15,000 slots next year, but McMaster and State Superintendent of Education Ellen Weaver have asked the Legislature to add another 5,000.

The revamped law has not yet drawn a legal challenge, but Crews said her organization is still planning to file a lawsuit, arguing that it remains unconstitutional. They are waiting to gather additional information about its impact, she said.

The state Education Oversight Committee is also waiting on information from the S.C. Department of Education about how students in that program performed academically, which is required by law, officials said during a meeting earlier in January.

Even once that data becomes available, which is uncertain, it could be of limited use, since private school students don’t have to take state standardized tests like those enrolled in public schools. There are ways to statistically “link” results from different assessments, but it will be “a little bit of a challenge,” said Jenny May, the committee’s research director.