A Colorado scholarship charity plans to go national before the new tax credit

ACE Scholarships, a Colorado-based nonprofit that uses private donations to help low-income students attend private schools, announced on Thursday, October 8, that it will expand to all 50 states and will also serve students in public schools, charter schools and home school programs, The Colorado Sun reported.

Founded in 2000, ACE has operated in 13 states from its base in Greenwood Village and this year distributed nearly 17,000 scholarships, according to the Sun. Its scholarships average $3,500 and often cover a third or half of a student's private school tuition.

Built for the federal credit

The expansion is aimed at the federal Education Freedom Tax Credit, which launches on January 1, 2027. Under proposed regulations from the Treasury Department and the IRS, taxpayers who give cash to eligible scholarship granting organizations can claim a credit of up to $1,700 a year, and married couples filing jointly up to $3,400. The organizations use the money for scholarships covering K-12 expenses, and the Sun reported that the scholarships can go to students at public and private schools. ACE plans to help families with tuition and with add-ons such as tutoring, after-school programs, books, supplies, transportation, technology and support for students with disabilities.

"And so it really opens up the door for families to have more choices for their child," ACE president Jason DiFraia told the Sun.

To prepare, ACE ran a pilot that partnered with at least two schools in every state and supported at least 10 students in each, following the new program's federal requirements, the Sun reported. It operated with 90% of dollars going directly to students and 10% covering administration and overhead, which the Sun said are also federal rules under the program.

In May, ACE launched EmpowerEd, a scholarship management platform that handles applications, eligibility, awards, donor tracking and reporting. ACE said partners pay no annual platform fees, product markups or transaction fees. The group says it has delivered more than 121,000 scholarships worth more than $395 million. DiFraia told the Sun that by the end of 2027 ACE will have more than 120 staff members helping families, donors and schools.

The debate in Colorado

Gov. Jared Polis signed Colorado up for the program earlier this year. Colorado Attorney General Phil Weiser, the Democratic candidate for governor, has opposed the state's participation and called it a "de facto voucher program," the Sun reported.

"I have real concerns about what could happen, the risk of this essentially hollowing out funding for education," Weiser told the Sun. DiFraia said he understands the pushback but disagrees, because the money comes from donations to scholarship organizations rather than from the government.

Groups planning scholarships for Colorado public school students have also formed, including the Colorado Public Schools Foundation, the Denver Public Schools Foundation Opportunity Fund and the Learn Everywhere Fund, according to the Sun.

What donors should check

In our view, donors weighing the credit next year should ask any scholarship organization three things: whether it is approved in their state, what share of each gift reaches students, and which kinds of schools and expenses it funds. Our explainer on the scholarship credit covers how the gift and the credit fit together.