Minnesota Gov. Walz declines to opt Minnesota into the Federal Scholarship Tax Credit

Minnesota Governor Tim Walz said on March 24, 2026 that opting Minnesota into the federal Scholarship Tax Credit (FSTC) is “never going to happen.” FSTC is the program known to Congress as the Educational Choice for Children Act (ECCA) and codified at IRC §25F. Without an opt-in, Minnesota will not designate Scholarship Granting Organizations (SGOs), and Minnesota families will not be eligible for FSTC scholarships when the program goes live on January 1, 2027.

Walz's stance has been controversial in part because of how he framed it in earlier budget work. His supplemental budget proposal earlier in the 2026 session would have ended Minnesota's longstanding state nonpublic pupil aid and pupil transportation aid programs if Minnesota opted into the federal credit — an unusual structure given that the federal opt-in itself imposes no fiscal cost on the state. Critics pointed out that the federal credit redirects federal income tax that would otherwise go to the U.S. Treasury, rather than drawing down state revenue.

For Minnesota donors and families, the practical effect is the same as in other declined or vetoed states: Minnesota residents can still claim the federal §25F credit (up to $1,700 per filer, $3,400 per joint return) by donating to SGOs in opted-in states, but those scholarships will fund K-12 students in other states rather than in Minnesota. Eligible students under §25F are those in households at or below 300% of the relevant Area Median Gross Income.

The FSTC opt-in is annual. Each participating state's governor must submit a list of qualifying SGOs to the U.S. Treasury by January 1 of each participating year, so Minnesota's status could change in a future year under the same governor or a successor. As of May 2026, with New York's announcement, roughly 30 states have moved toward participation, leaving Minnesota as one of a small group of states that have explicitly declined.