What Is a Scholarship Granting Organization (SGO)?

How an SGO works, step by step

1. A program authorizes it. A state credit program (such as Ohio's) or the federal program certifies or lists the organization. For the federal credit, the SGO must be on a participating state's Section 25F list for the year.[source]
2. Donors give. Individuals give cash to the SGO. For the federal credit, the donor designates the gift as a qualified contribution when giving.[source]
3. The SGO keeps the money separate. A federal SGO must hold qualified contributions in one or more accounts used only for them.[source]
4. Families apply, and the SGO awards scholarships. The SGO verifies eligibility, such as household income, and awards scholarships under its written policies. It may not earmark donations for a particular student.[source]
5. Donors claim the credit. The SGO sends the documentation the program requires, and the donor claims the credit on their return.[source][source]

What federal law requires of an SGO

Under Section 25F, a scholarship granting organization must:

• Be a 501(c)(3) public charity, not a private foundation.
• Keep qualified contributions in separate accounts used only for them.
• Provide scholarships to 10 or more students who don't all attend the same school.
• Spend at least 90 percent of its income on scholarships for eligible students.
• Pay only for qualified elementary and secondary education expenses.
• Give priority to students who received a scholarship the previous year, then to their siblings.
• Not earmark or set aside contributions for any particular student.
• Verify household income and family size, and award only to eligible students.
• Not award scholarships to disqualified persons (rules similar to IRC 4946).
• Be on a participating state's list for the year.

All of these come from the statute.[source] The regulations add registration, donor acknowledgment, IRS reporting, and an annual audit.[source][source] For the full list, see the SGO compliance checklist.

SGOs under Ohio's credit

Ohio uses a separate certification. The Ohio Attorney General certifies an organization if it is a 501(c)(3) organization that primarily awards academic scholarships for primary and secondary school students and prioritizes low-income students.[source] The Attorney General publishes the list of certified organizations.[source]

How to check whether an SGO qualifies

• Ohio credit: look for the organization on the Ohio Attorney General's certified SGO list for the year of your gift.[source]
• Federal credit: look for the organization on the IRS SGO list once the IRS publishes it. Under the proposed regulations, donors generally may rely on that list.[source]
• Tax-exempt status: the IRS Tax Exempt Organization Search shows whether an organization is a recognized 501(c)(3) charity, but that alone doesn't make it an SGO.

What donors can and can't do

• Donors can't direct a gift to a particular student or family.[source]
• Donors may tell an SGO about a school or community they care about, but the SGO keeps control of awards. ASN records school preferences this way.
• For the federal credit, a donor may give to a listed SGO in any participating state.[source]

Where ASN fits

American Scholarship Network is a 501(c)(3) public charity certified by the Ohio Attorney General for Ohio's credit.[source] It is also approved for Ohio's Section 25F list for the federal credit.