Kentucky lawmakers have enacted House Bill 1, a measure designed to expand access to educational opportunities by allowing the state to participate in a new federal tax credit program tied to scholarship funding.
HB 1 enables Kentucky to opt into a federal initiative that offers a dollar-for-dollar federal tax credit — up to $1,700 annually — for individuals who donate to approved scholarship-granting organizations, according to information provided by House Majority Leadership.
Supporters said the move positions Kentucky to benefit from a program already available in other states while directing scholarship resources to students within the Commonwealth.
“We are committed to helping every child in Kentucky reach their full potential, and that means expanding access to educational opportunities that fit their unique needs,” said Rep. Suzanne Miles. “HB 1 allows us to responsibly leverage a federal tax credit to bring new scholarship resources into our state — without increasing the burden on taxpayers. This is a smart, forward-looking approach that puts students first and ensures more Kentucky families can access the tools they need to succeed.”
Scholarship-granting organizations, often referred to as SGOs, are nonprofit entities that collect donations and distribute scholarships based on a defined mission. These organizations could include public school foundations, nonprofits supporting students with disabilities, or groups focused on assisting lower-income families with education-related expenses.
Under the program, donors — including individuals from any state — can receive the tax credit by contributing to an approved SGO. If the full credit cannot be used in a single year, it may be carried forward for up to five years.
Scholarships funded through SGOs can be used for a range of qualified education expenses, including private school tuition, out-of-district public school tuition, tutoring, support services for students with disabilities, and online course fees.
Eligibility for students is limited to those from households earning at or below 300% of the area’s median income. Additionally, the legislation prohibits parents from donating to SGOs with the intent of directly benefiting their own children.
“HB 1 is about making sure Kentucky families are not left behind while other states seize an opportunity to expand educational access,” said Rep. DJ Johnson. “By opting into the federal Education Freedom Tax Credit, we can unlock scholarship funding through certified SGOs to help students pursue the learning environment that best meets their specific needs — without adding a burden to Kentucky taxpayers.”
The program is scheduled to take effect for the 2027 tax year. In the meantime, the Kentucky Secretary of State’s Office will be responsible for establishing regulations, registering scholarship organizations, and submitting a list of approved SGOs to the federal government.
Lawmakers included an emergency clause in the bill, allowing implementation work to begin immediately.
The legislation also clarifies that existing rules from the Kentucky High School Athletic Association will remain in place, meaning student-athletes receiving scholarships through SGOs will still be subject to current eligibility guidelines.
Kentucky High School Athletic Association Commissioner Julian Tackett said the organization is aware of the legislation and will evaluate any potential impacts as the regulatory process unfolds.
“We are aware of the provisions of HB1, which was only signed into law this week and has an effective date well in the future. As we continue with our own regulatory approval process and the necessary regulations are developed through the Secretary of State’s office, as directed in this legislation, we will make every effort to ensure that all questions are asked and answered,” Tackett said in a statement to the Owensboro Times. “We know our membership-approved Financial Aid restrictions for those who choose to participate in the privilege of interscholastic athletics have withstood legal scrutiny and are a necessary part of our governing regulations. Any necessary changes, if they exist, will be considered throughout the normal regulatory process.”
House Bill 1 moved quickly through the General Assembly after being introduced on Feb. 19. It passed the House 79-17 on Feb. 24 and cleared the Senate 33-5 on Feb. 27.
Gov. Andy Beshear vetoed the bill on March 13, but lawmakers overrode the veto in both chambers — with the House voting 77-14-1 and the Senate 31-5, finalizing the measure as law.
Supporters said the legislation intends to provide families with additional tools to support their children’s education rather than to impact athletics or other extracurricular activities.
The program is expected to roll out over the coming months ahead of its 2027 launch.
