DAVENPORT, Iowa (OSV News) — A new statewide Iowa Catholic scholarship- granting organization, or SGO, has been formed by Iowa’s four dioceses to offer K-12 scholarships with funds raised through an upcoming federal Education Freedom Tax Credit program.
Trish Wilger, executive director of Iowa Alliance for Choice in Education and Iowa Advocates for Choice in Education, said this federal legislation has been in the works for years. The program is opt-in for states, and Iowa has already opted to do so. It launches in January 2027.
The tax credit was created by the Working Families Tax Cuts Act, signed into law by President Donald Trump July 4, 2025.
The Iowa Catholic SGO “will operate alongside Iowa’s existing STOs — not replace them,” said Angela Olson, head of schools for Regina Catholic Schools in Iowa City and representative for the Diocese of Davenport Iowa Catholic SGO, or school tuition organization. It provides additional funding for costs not covered by those programs.
12 existing Iowa STOs will be part of federal SGO
“The 12 existing Iowa STOs will be part of the federal SGO. The Catholic bishops in Iowa opted to form an SGO for Catholic schools throughout the state,” Wilger said. An STO is a school tuition organization.
Other private, charter, independent schools and homeschools formed the other option — Iowa SGO. Wilger noted some states have made a multistate scholarship-granting organization.
Beginning in 2027, donors can receive a federal tax credit up to $1,700 for contributions made to SGOs. It is not a tax deduction, Wilger said. A tax credit reduces the amount of federal income tax owed dollar-for-dollar.
Scholarship- granting organizations then use these funds to provide scholarships to children to attend a school of choice or to access other education-related services and products.
As of Aug. 13, 31 states have opted in or signaled their intent to participate in the federal Education Freedom Tax Credit ahead of its Jan. 1 launch, according to the American Federation for Children.
Tuition, fees, academic tutoring, classroom supplies
According to a release from the Iowa Catholic Conference, under the law, students from a household with an income not greater than 300% of the area’s median gross income could qualify for a scholarship from the new Iowa Catholic or Iowa SGOs. Uses of the scholarships could include tuition, fees, academic tutoring, classroom supplies, and before and after school programming.
“We are pleased by the upcoming opportunity to provide additional assistance for students who all have diverse and specialized needs,” said Steve Kane, director of Our Faith STO and a member of the Iowa Catholic SGO board.
“The Iowa Catholic SGO will be an efficient way to get dollars to students who need it,” he told The Catholic Messenger, newspaper of the Diocese of Davenport.
The state Catholic conference is the public policy agency of the Catholic Church in Iowa. Its board of directors includes the four Catholic bishops of Iowa as well as laypeople, priests, deacons and religious sisters. The conference said the Iowa Catholic SGO will also help donors provide additional support for students at their local Catholic school, as Education Savings Accounts do not always cover the full cost of education.
“The number of lower-income students and students with special needs in Catholic schools has also grown during the past few years,” the conference said in its statement.
STOs used only for tuition, SGOs have more options
There are 12 STOs in the state of Iowa, two of which serve the Diocese of Davenport’s schools, Wilger said. Iowa STO funds can only be used for tuition. The SGO has more options.
Those who contribute to an STO can qualify for a 75% Iowa income tax credit on their state taxes, Olson said. Again, it is not a tax deduction.
Iowa’s Legislature passed the Students First Act in January 2023, which established Education Savings Accounts, or ESAs. Those funds are available to all students, regardless of family income. For the 2026-27 school year the accounts top out at $8,148 per school year, per student in K-12, according to the Iowa Department of Education.
These funds do not fully cover tuition at Catholic and other schools, Wilger noted. Parish subsidies continue to keep tuition rates lower at Catholic schools.
Olson said the cost of education is much more than the ESA funding. This is why the “STO assistance remains important.”
Federal government to issue final rules
Both Wilger and Olson said details on the SGOs in Iowa are still being worked out. “The federal government has not yet issued its final rules,” Olson said. “More guidance will be available after the federal rules are finalized.”
The Department of the Treasury in a June news release said the final rules are expected to be released by the end of September. It said the “forthcoming guidance is expected to provide states, scholarship-granting organizations, taxpayers, and other stakeholders with a clear path to prepare for the launch of the Education Freedom Tax Credit in January.”
“The Iowa Catholic SGO will provide scholarship assistance alongside Iowa’s ESAs and existing STOs. This is especially important for Catholic schools near the Illinois and Missouri borders because students who live outside Iowa cannot receive Iowa ESA or STO assistance, even if they attend an Iowa Catholic school,” Olson said.
“Pending eligibility details,” she added, “we anticipate federal SGO assistance will be available to these families. Within Iowa, nearly all schools in the Diocese of Davenport use all available STO funding and still have additional demonstrated need.”
Anne Marie Amacher is assistant editor of The Catholic Messenger, newspaper of the Diocese of Davenport. This story was originally published by The Catholic Messenger and distributed through a partnership with OSV News.
