Comment from Tennessee SGO

I write on behalf of Tennessee SGO (“TN SGO”), a newly formed entity established to administer the EFTC in Tennessee. The purpose of founding TN SGO is to create a local SGO, attentive to the needs of our area students and schools. An important clarification for TN SGO, and all other start-up SGOs, is the definition of “income” as it is used in Section 25F. As such, TN SGO is thankful for and affirms Treasury Secretary Bessent’s recent remarks providing a safe harbor under which “income of the organization” is measured by the amount held in a “Section 25F segregated account, including qualified contributions and earnings.” This interpretation is consistent with our reading of the Statute and gives meaning to the requirement to maintain qualified contributions in a segregated fund that are not co-mingled with non-qualified contributions. Another point of clarification important to TN SGO is the ability to afford scholarships to any student who attends a Tennessee school. As Tennessee has elected to participate in the program, any student attending a school physically located within Tennessee should be eligible to receive a scholarship, regardless of the student’s state of residence. Tennessee has many schools near state borders that serve students from neighboring states. As James McNeany from Indiana noted in his public comment: “residency-based restrictions led to confusion and disappointment for families. Tying eligibility to the location of the school, rather than student residency, would provide clarity, consistency, and equitable access.” Additionally, Frank O’Linn noted: “Treasury should adopt student-centered guidance for families whose educational circumstances cross state boundaries. In many border regions—such as Cincinnati and Northern Kentucky—students often reside in one state while attending school in another. Limiting eligibility solely based on residence would exclude families fully participating in schools located in participating states. Regulations should therefore clarify that scholarships may be awarded based on the location of the school, not solely the student’s state of residence.” TN SGO’s understanding of 25F is that a plain reading of the statute does not place a state residency requirement on scholarship recipients. Rather, the statue requires that the student be “eligible to enroll in a public school.” This restriction ties scholarship award eligibility to United States citizenship – rather than residency within a specific state. Further, scholarship eligibility considers a family’s “area median gross income.” Importantly, this standard is based upon “area.” For Chattanooga, (the birthplace of TN SGO), “area” for the purposes of AMGI as established by HUD is defined as: “Chattanooga, TN-GA Metropolitan Statistical Area.” This “area” is made up of 6 counties: three Tennessee counties (Hamilton, Marion and Sequatchie) and three Georgia counties (Catoosa, Dade and Walker). According to the plain meaning of the statute and based upon the inclusion of both Tennessee and Georgia counties in what constitutes AMGI for our region, TN SGO is confident in our understanding that all students who: attend Tennessee schools, are eligible to enroll in any public school in the US, and whose family’s income is not greater than 300% of AMGI are eligible to be considered for a scholarship award regardless of the student’s state of residence. As such, TN SGO recommends that the safe harbor as outlined by Secretary Bessent be implemented in final regulations and to the extent clarification is necessary, regulations should state that scholarships may be awarded based upon the location of the school rather than the student’s state of residence.