One Entity, Many State Accounts: How Multistate SGOs Actually Work Under Section 25F

The most commonly misunderstood part of the Section 25F program is what happens when an SGO wants to operate in more than one state. The phrase "national SGO" gets used as if there were a single national scholarship pool an organization could raise into and award from. There is not — and the actual structure, confirmed in Treasury's June 2026 guidance preview, has sharp consequences for fundraising, committee design, and which states are worth operating in at all.

Yes, One Charity Can Be Listed in Thirty States

Start with what is permitted. A single 501(c)(3) can appear on the certified list of more than one participating state. Per the June preview, the conditions are that the organization is "located in" each state and maintains a separate Section 25F account for each state.

"Located in" is more accommodating than it sounds. It means the organization is authorized to do business in the state and complies with the state's generally applicable charitable-organization rules — registration, solicitation requirements, the rules that apply to every charity. No office, no staff, no physical presence required. And states may not impose SGO-specific requirements more restrictive than Section 25F itself, which prevents participating states from building bespoke obstacle courses.

So the entity picture is simple: one charity, one board, one audit, many state listings. What is not simple is the money.

But There Is No National Pool

Section 25F(c)(3) requires that a qualified contribution be used to fund scholarships for eligible students solely within the state in which the organization is listed. IRS Notice 2025-70 spells out what a multistate organization must certify to each of its states:

• It funds scholarships to eligible students in that certifying state.
• It requires donors to designate the state in which their contribution will be used.
• It tracks and matches designated contributions to scholarships for students within that state.
• It satisfies all of the single-state requirements within that state — including that scholarship recipients reside there.

Put plainly: the donor picks a state at the moment of giving, and that dollar is locked to that state's segregated account for its entire life. It funds a student who resides in that state, or it funds nothing.

This is why "national SGO" is a misleading label. What the statute permits is one legal entity operating a portfolio of state-locked programs. A "regional SGO" is the same thing — the Notice acknowledges organizations that raise funds and award scholarships across a multistate region, but every requirement still applies state by state. There is no such thing as a pooled regional fund where a dollar raised for the region can find a student in whichever state needs it.

The 90/10 Test Runs Per Account

The consequences compound when you add the 90/10 rule. Under the safe harbor Treasury previewed in June, income for the 90% test is measured by the amount held in the Section 25F segregated account — and for a multistate organization, the safe harbor must be satisfied separately for each state-specific account.

Each state account must independently send at least 90% of its contents out as scholarships to that state's students. Each account can release at most 10% for everything else. A large account in one state cannot carry a small account in another — there is no cross-subsidy, because the test never aggregates.

That no-cross-subsidy rule is the binding constraint on footprint. A state account holding $80,000 can release at most $8,000 toward administration — which will not cover that state's share of anything. Opening an account in a state where an organization has only a handful of schools or families is not merely inefficient; the arithmetic does not work. Multistate SGOs should concentrate where they have real density and add thin states only when the account can plausibly sustain itself.

What Stays Entity-Level

Not everything fragments by state. The June preview makes the annual audit — financial and programmatic, by a qualified independent third party — an entity-level obligation: one audit, furnished to each covered state on whose list the organization appears. The board is entity-level. Donor records and the forthcoming unique donor number acknowledgments are entity-level. The organization's expense-allocation methodology — how shared costs are apportioned across state accounts, a question on which the guidance is entirely silent so far — is necessarily designed once and applied consistently.

This split is exactly why one multistate entity beats a constellation of single-state organizations. Separate entities would each need their own board, filings, conflict-of-interest process, and audit — multiplying precisely the fixed costs that the 10% allowance struggles to cover — while gaining nothing, because account-level separateness is already mandatory inside a single entity.

The Donor Lives Wherever the Donor Lives

One genuinely national feature survives all of this: the donor. Nothing in Section 25F requires a donor to live in a participating state. The credit is available to any U.S. citizen or resident; eligibility turns on where the SGO is listed and where the student resides — not where the donor pays state taxes.

A donor in a state that has not opted in can contribute to an SGO listed in a participating state, claim the full federal credit, and fund that state's students. For SGOs with supporters concentrated in non-participating states, this is the honest bridge: organize the donor base now, direct gifts to states where students can actually receive them, and be ready the moment the home state opts in. State-conditional pledge campaigns — commitments that only process if and when a state opts in — are the organized version of that readiness, and they pair naturally with the state opt-in tracker.

The per-state account structure, for all its rigidity, has a donor-facing virtue worth naming: in a program where earmarking a gift to a particular school or student is prohibited, the state designation is the legitimate form of donor intent. Donors who want their giving to stay close to home can honestly be told: your state, guaranteed; your school, never.

What Remains Open

Treasury has previewed that most operational requirements apply separately to each state account while certain organization-wide rules apply to the SGO as a whole — without fully enumerating which are which. Notice 2025-70 explicitly asked whether the ten-students/multiple-schools test, the earmarking prohibition, the priority rules, and the self-dealing analysis should run in aggregate or state by state. The September proposed regulations should settle these. Until they do, the conservative design assumes per-state application of the operational tests — and flexible systems that can flip when the answers land.

The committee question — whether one selection committee can serve every state, and what it costs in disqualified families — is consequential enough that we gave it its own analysis.