Iowa dioceses create SGO for federal tax credit program

By Anne Marie Amacher
The Catholic Messenger

DAVENPORT — A new statewide Iowa Catholic Scholar­ship Granting Organi­zation (Iowa Catholic SGO) was formed by the four Iowa dioceses to offer K-12 scholarships with funds raised through an upcoming federal Education Freedom Tax Credit program.

Trish Wilger, executive director of Iowa Alliance for Choice in Education and Iowa Advocates for Choice in Education, said this federal legislation has been in the works for years. The program is opt-in for states, in which Iowa has already opted to do so. It launches in January 2027.

The Iowa Catholic SGO “will operate alongside Iowa’s existing STOs — not replace them,” said Angela Olson, head of schools for Regina Catholic Schools in Iowa City and

representative for the Diocese of Davenport Iowa Catholic SGO. It provides additional funding for costs not covered by those programs.

“The 12 existing Iowa STOs will be part of the federal SGO. The Catholic bishops in Iowa opted to form an SGO for Catholic schools throughout the state,” Wilger said. Other private, charter, independent schools and homeschools formed the other option — Iowa SGO. She noted some states have made a multi-state SGO.

SGO details

Beginning in 2027, donors can receive a federal tax credit up to $1,700 for contributions made to SGOs. It is not a tax deduction, Wilger said. A tax credit reduces the amount of federal income tax owed dollar-for-dollar.

According to a release from the Iowa Catholic Conference (ICC), under the law, students from a household with an income not greater than 300% of the area’s median gross income could qualify for a scholarship from the new Iowa Catholic or Iowa SGOs. Uses of the scholarships could include tuition, fees, academic tutoring, classroom supplies, and before and after school programming.

“We are pleased by the upcoming opportunity to provide additional assistance for students who all have diverse and specialized needs,” says Steve Kane, director of Our Faith STO and a member of the Iowa Catholic SGO board. “The Iowa Catholic SGO will be an efficient way to get dollars to students who need it.”

The ICC is the public policy agency of the Catholic Church in Iowa. Its board of directors includes the four Catholic bishops of Iowa as well as lay people, priests, deacons and religious sisters. The ICC said the Iowa Catholic SGO will also help donors provide additional support for students at their local Catholic school, as Education Savings Accounts do not always cover the full cost of education. “The number of lower-income students and students with special needs in Catholic schools has also grown during the past few years,” the ICC said in its statement.

Iowa STO details

There are 12 STOs in the state of Iowa, two of which serve the Diocese of Davenport’s schools, Wilger said. Iowa STO funds can only be used for tuition. The SGO has more options.

Those who contribute to an STO can qualify for a 75% Iowa income tax credit on their state taxes, Olson said. Again, it is not a tax deduction.

The two STOs in the Diocese of Davenport are STO of Southeast Iowa and Mississippi Valley STO. The STO of Southeast Iowa covers Notre Dame Catholic Schools-Burl­ing­ton; Prince of Peace Catholic School-Clinton; St. Joseph Catholic School-DeWitt; Holy Trinity Catholic schools in Fort Madison and West Point; Regina Catholic Schools-Iowa City; St. Vincent Catholic School-Keokuk; Saints Mary and Mathias Catholic School-Muscatine; Seton Catholic School-Ottumwa and St. James Catholic School in Washington. The Mississippi Valley STO covers St. Joan of Arc Catholic School-Bettendorf; All Saints, Assumption High, John F. Kennedy and St. Paul the Apostle Catholic schools-Davenport.

ESA details

Iowa’s legislature passed the Students First Act in January 2023, which established Education Savings Accounts (ESAs). Those funds are available to all students, regardless of family income. For the 2026-27 school year the accounts top out at $8,148 per school year, per student in K-12, according to the Iowa Department of Education.

These funds do not fully cover tuition at Catholic and other schools, Wilger noted. Parish subsidies continue to keep tuition rates lower at Catholic schools.

Olson said the cost of education is much more than the ESA funding. This is why the “STO assistance remains important.”

Both Wilger and Olson said details on the SGOs in Iowa are still being worked out. “The federal government has not yet issued its final rules,” Olson said. “More guidance will be available after the federal rules are finalized.”

“The Iowa Catholic SGO will provide scholarship assistance alongside Iowa’s ESAs and existing STOs. This is especially important for Catholic schools near the Illinois and Missouri borders because students who live outside Iowa cannot receive Iowa ESA or STO assistance, even if they attend an Iowa Catholic school,” Olson said. “Pending eligibility details, we anticipate federal SGO assistance will be available to these families. Within Iowa, nearly all schools in the Diocese of Davenport use all available STO funding and still have additional demonstrated need.”