Michigan Attorney General Dana Nessel recently published an opinion piece in the Detroit Free Press targeting the Federal Education Freedom Tax Credit Program, arguing that the federal initiative violates state constitutional limits and redirects funds away from public schools. However, a close examination of the framework established in 2025 reveals that her legal interpretations and claims regarding funding mechanics are fundamentally inaccurate.
Donation-Based Funding Sustains Private Scholarships
- Donation-Based Funding: Scholarship monies originate entirely from private donors rather than congressional appropriations or earmarked public budgets.
- Cross-State Contributions: Opting out of the program fails to block state residents from contributing to external scholarship organizations or claiming federal credits.
- Administrative Scope: Maintaining a state list of qualifying entities aligns with standard private school registration requirements without constituting unconstitutional entanglement.
Families Access Tax Credits for Educational Necessities
The Federal Education Freedom Tax Credit Program allows parents to apply to scholarship granting organizations (SGOs) within participating states, provided family income remains below three times the local median income. There are no caps on individual student funding amounts, and scholarship scope is restricted strictly to educational necessities like books, tutoring, and transportation. SGOs draw their capital entirely from private donations rather than public treasuries. When individuals file federal taxes, they can claim a credit of up to $1,700 for individuals or $3,400 for joint filers in exchange for supporting these non-profit organizations.
Federal rules require SGOs to direct at least 90% of their income directly toward student scholarships. States must submit qualifying SGO lists to the IRS to participate. Yet, if a state government refuses to opt in, federal guidelines still permit local taxpayers to route their contributions to SGOs operating in other jurisdictions. Refusing participation merely blocks local families from accessing those financial benefits while allowing donations and resulting educational expenditures to cross state lines.
| Program Parameter | Federal Guideline | Attorney General Claim |
|---|---|---|
| Source of Funds | Private donor contributions | Redirected congressional appropriations |
| Tax Credit Limits | $1,700 (Individual) / $3,400 (Joint) | Drawn from earmarked public school funds |
| State Opt-Out Effect | Permits cross-state donations | Prevents all local financial participation |
| Administrative Burden | Basic IRS list maintenance | Unconstitutional policing of private entities |
Private Donations Fund Tax Credits Instead of Public Appropriations
In her published commentary, Nessel asserts that the federal dollars utilized in the program are redirected directly from funds Congress previously appropriated for economically challenged public schools. Mackinac Center for Public Policy analyses show this claim is structurally false. The capital originates from private pockets, and the associated tax credits do not draw from earmarked or apportioned public revenue streams.
Nessel also argues that compiling and maintaining required lists of scholarship organizations for the IRS requires substantial state resources, which could run afoul of the state constitution regarding public support for private schools. This interpretation remains difficult to support under existing legal standards. State agencies already maintain registries of private schools and associated operational details without constitutional violations. Maintaining an IRS roster of qualifying non-profit SGOs imposes no greater constitutional conflict.
Federal Tax Credits Operate Across State Lines
Nessel claims the tax credit is designed to favor multi-state educational entities over local programs. While technically true in a tautological sense, the argument applies equally to all federal fiscal programs, including Social Security, Medicare, and SNAP, which operate across state lines by design.
The Mackinac Center for Public Policy notes that states cannot add restrictions to federal program criteria. Nessel contends that federal limits constrain the state’s capacity to police scholarship organizations. Because the initiative is fundamentally a federal tax credit mechanism, state governments lack the mandate to expand routine IRS list maintenance into active local policing of private non-profit operations.
Disclaimer: The information provided in this article is for educational and informational purposes only and does not constitute financial advice.
