Treasury and IRS exclude digital-asset donations from scholarship-credit cash contributions

What changed

Treasury and IRS published binding temporary regulations implementing aspects of the section 25F scholarship tax credit for contributions in 2027 and later taxable years. Section 1.25F-1T(a)(12) defines qualifying cash payments in U.S. dollars and expressly excludes any digital asset. A direct cryptocurrency contribution therefore does not satisfy this cash definition. The regulations become effective December 1, 2026; the definition section specifies applicability beginning September 1, 2026 and expiration on or before October 1, 2029.

Who it affects

• Digital-asset holders considering contributions to scholarship granting organizations
• Advisers coordinating charitable and tax planning for clients with cryptocurrency holdings
• Scholarship granting organizations receiving client contributions

What is still open

• Whether a particular contribution meets all other section 25F requirements, including recipient and state eligibility
• The donor's separate tax consequences if digital assets are sold before a U.S.-dollar contribution
• Whether subsequent regulations modify the temporary definition

What it means for an advisor

• Flag direct digital-asset contributions as excluded from the regulation's qualifying cash definition
• Coordinate any proposed sale and subsequent cash donation with the client's tax adviser
• Check recipient eligibility, contribution designation, and substantiation before incorporating the credit into a client plan