Arizona Gov. Katie Hobbs vetoes FSTC / ECCA opt-in bill (SB 1106)

Arizona Governor Katie Hobbs vetoed SB 1106 on January 16, 2026, the state legislature's bill to opt Arizona in to the Federal Scholarship Tax Credit (FSTC) — the program known to Congress as the Educational Choice for Children Act (ECCA) and codified at IRC §25F. Hobbs cited the absence of final IRS implementing regulations as part of her rationale for waiting.

Arizona's veto is notable because the state already operates one of the country's largest existing state-level scholarship tax credit programs and has well-developed Scholarship Granting Organization (SGO) infrastructure. The veto means Arizona families will not be eligible for FSTC scholarships when the federal program goes live on January 1, 2027, unless the legislature overrides the veto or the governor reverses course in a subsequent year.

FSTC opt-in is an annual decision — states submit a list of qualifying SGOs to the U.S. Treasury by January 1 each year. Arizona could revisit the decision once IRS guidance becomes clearer, particularly after the agency finalizes the proposed regulations announced in IRS Notice 2025-70.