Major Endangered Species Act and Waters of the United States Rollback + Federal School Choice Tax Credit
By Jennifer Butler, November 26, 2025
As we head into Thanksgiving, federal agencies are moving quickly to catch up. After a record-breaking 43-day shutdown, the federal government officially reopened on November 13, and while Congress returned briefly last week before leaving town again, executive agencies immediately began clearing their regulatory backlog.
This burst of activity matters for state and local governments, which are almost always the first to feel the effects of federal policy changes; whether in the form of new guidance, shifting regulatory expectations, or changes in federal funding. Even when a rule does not create direct mandates for states, it can redefine the environment in which states operate, shaping everything from state agencies administer programs and their planning timelines to how local communities navigate federal requirements.
This edition features major deregulation efforts in two areas that would scale back federal authority in policy areas that have long affected how states and local communities use their land, manage water, and support economic development. The first is a package of four Endangered Species Act (ESA) proposals that roll back several of the Biden Administration expansions. The second is a new definition of Waters of the United States (WOTUS), issued in response to the Supreme Court’s Sackett v. EPA decision, which limited federal jurisdiction to waters and wetlands with a clearer, more direct connection to traditional navigable waters.
In addition to major ESA and WOTUS rollbacks, the IRS also released a significant Notice tied to the new K-12 federal tax credit scholarship program in the One Big Beautiful Bill (OBBB) which opens up public comments on contributions to Scholarship Granting Organizations. This will matter for governors, state revenue departments, and any state considering whether to opt in.
Let’s dig in!
Endangered Species Act: A Four-Part Deregulatory Push
The U.S. Fish and Wildlife Service (FWS), working with National Oceanic and Atmospheric Administration (NOAA) Fisheries on two of the proposals, has released a coordinated package of four proposed rules rolling back the Biden Administration’s 2024 ESA expansions. The goal is to reduce unnecessary regulatory reach, bring ESA implementation back in line with the statute and decades of practical experience, and restore predictability for states, landowners, and businesses - especially those affected by federal reviews that can slow or complicate projects. Below is an overview of each proposed rule:
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The ESA’s listing rules determine when a species is classified as endangered or threatened and where “critical habitat” is drawn on the map. These decisions affect what land uses face restrictions, when federal projects must undergo extra review, and how far agencies can responsibly look into the future when assessing a species’ risk of decline. Under the last administration, ESA rules expanded in ways that made listings more precautionary, maps larger, and long-term predictions more speculative. But after the Supreme Court’s Loper Bright decision, agencies must return to the best reading of the statute and avoid broad interpretations that go beyond what the law allows.
This proposal would scale ESA implementation back to its core requirements - namely, that listing decisions must rely solely on the best scientific and commercial data available. It also tightens how agencies apply the “foreseeable future” standard by making clear that a species is only “threatened” when both future threats and the species’ response to those threats are likely (not merely possible) within a timeframe supported by actual data. For delisting, the proposal confirms that species should come off the list when they no longer meet the definition of endangered or threatened.
On critical habitat, meaning the specific geographic areas where federal project reviews must avoid destroying or degrading essential habitat, the proposal restores a clearer, two-step approach. FWS would first focus on areas the species currently occupies before considering unoccupied areas, which could only be designated when occupied habitat is insufficient and the unoccupied areas are truly essential for conservation.
View the proposed rule at https://www.federalregister.gov/documents/2025/11/21/2025-20549/endangered-and-threatened-wildlife-and-plants-listing-endangered-and-threatened-species-and
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When federal agencies issue permits, fund major projects, or approve infrastructure work, they must check whether their actions could harm a listed species or its habitat. These “Section 7 consultations” affect everything from bridge replacements and highway expansions to water projects, hydropower operations, and development that needs a federal permit.
In recent years, shifting rules have made federal species reviews unpredictable and time-consuming for states and local governments that depend on federal permits. Biden-era rules expanded what agencies had to analyze, including “offsets” and mitigation measures not authorized in the ESA, but the Supreme Court’s Loper Bright decision requires agencies to stick to the best reading of the statute. The new proposal would return to a clearer, narrower framework by removing those provisions and focusing consultations on direct, reasonably certain impacts. For states and local communities, this means fewer speculative analyses, more predictable timelines, and less risk of federal agencies requiring mitigation beyond what the law allows.
View the proposed rule at https://www.federalregister.gov/documents/2025/11/21/2025-20551/endangered-and-threatened-wildlife-and-plants-interagency-cooperation-regulations
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Right now, when a species is listed as threatened, it automatically receives the same protections as an endangered species. That means species that are not currently in danger of extinction, but could become endangered in the future, must still be managed under the strictest federal restrictions. For landowners and communities, this has often meant limits on routine land uses, additional steps or delays for permits, and tighter constraints on development near potential habitat, even when the species’ status does not warrant endangered-level protections.
The proposal would end this automatic, one-size-fits-all approach. Instead of treating all threatened species like endangered species, FWS would determine what each species actually needs, tailor protections based on what is “necessary and advisable,” and identify activities that can continue without harming the species’ recovery.
View the proposed rule at https://www.federalregister.gov/documents/2025/11/21/2025-20552/endangered-and-threatened-wildlife-and-plants-regulations-pertaining-to-endangered-and-threatened.
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When FWS proposes critical habitat, it must also consider how that designation would affect surrounding communities - including economic impacts, local land-use plans, infrastructure projects, and national security interests. In the past, shifting rules made this step unpredictable, leaving states and landowners uncertain about how their information factored into the decision.
The proposal would return to a clearer, more structured process by explaining when and how FWS conducts an exclusion analysis, the step where the agency compares the conservation benefits of designating an area with the real-world impacts of doing so. If the benefits of excluding an area outweigh the benefits of including it, and exclusion will not cause the species to go extinct, FWS may leave that area out.
In practical terms, this gives states, counties, and landowners a more defined opportunity to submit information on how a potential designation would affect local development, water management, agriculture, or community plans. The proposal does not change the ESA’s underlying conservation standards, but it does make the decision-making process more transparent and predictable for the public.
View the proposed rule at https://www.federalregister.gov/documents/2025/11/21/2025-20550/endangered-and-threatened-wildlife-and-plants-regulations-for-designating-critical-habitat.
📣 Call to Action: How You Can Shape the Final ESA Rules
Federal agencies need to hear from state and local leaders on ESA rules that have impacted their communities. Feedback submitted in comments will directly shape how workable the final ESA rules are and help support these changes if challenged in court.
How to submit comments: Agencies do not decide rules by counting comments. One detailed, well-supported comment from an impacted stakeholder or policy expert carries far more weight than thousands of identical form letters. Best practices for an effective comment include:
Share a real example (e.g., a project delayed because habitat boundaries were unclear; routine maintenance stalled over speculative species impacts).
Be specific about the sections of the proposal you support or have concerns with.
Explain administrative impacts - staff time, duplicative reviews, unclear standards, or inconsistent federal guidance.
Include data when available (project timelines, acreage affected, cost impacts, number of permits delayed, etc.).
Describe state or local capabilities, especially where state programs already manage land, water, or species more effectively.
Offer alternatives or fixes, even brief ones - agencies must respond to workable suggestions.
Key questions to address in comments:
How have ESA rules affected projects, permitting, or land-use decisions in your state or community?
How should federal agencies weigh information from states, counties, and local governments?
Are there examples where local impacts were overlooked in past ESA decisions?
Would these reforms improve predictability or reduce delays—and if so, how?
Are these proposed changes easier to understand and apply than current rules?
Which terms, thresholds, or steps still need clarification or guardrails?
Are there additional ways to streamline ESA reviews or reduce administrative burden?
Do the proposals better reflect the ESA as written and recent Supreme Court direction?
Comment deadline & links: Comments for all four ESA proposals must be submitted by December 22, 2025. Links to proposed rules and where to comment:
Waters of the United States: Redefining Federal Water Jurisdiction
The Environmental Protection Agency (EPA) and the Army Corps have released a major proposal to narrow the scope of “waters of the United States” (WOTUS) under the Clean Water Act, aligning the definition with the Supreme Court’s Sackett v. EPA decision and scaling back federal authority that has long shaped state and local land use, drainage, agriculture, and development.
The proposal would reduce the number of wetlands and water features that require federal permits, especially features that are intermittent, isolated, groundwater-driven, or separated from larger waters by human-made barriers. While this would ease federal permitting for many projects, it also expands the role states play in regulating waters within their borders, since fewer features would fall under federal oversight. Changes include:
Limiting federal regulation of wetlands to those that physically touch a major water and maintain a surface-water connection during the wet season. Wetlands separated by roads, berms, culverts, or ditches would generally no longer fall under federal jurisdiction.
Removing interstate waters as an automatic category of federal jurisdiction, so a waterbody that crosses a state line would only be regulated if it meets another qualifying test (such as being a traditional navigable water).
Narrowing the definition of a tributary so that flow through culverts, pipes, debris fields, or similar features does not automatically create a federally regulated water.
Reaffirming and clarifying key exclusions, including groundwater, most ditches built on dry land, prior-converted cropland, and waste-treatment systems.
Applying the Sackett standard nationwide to replace the current patchwork of state-by-state enforcement and ensure a single, consistent national standard.
📣 Call to Action: How You Can Shape the Final ESA Rules
Comments on the proposed WOTUS rule are due January 5, 2026 and can be submitted here. EPA and the Army Corps specifically ask for feedback on the definitions in the proposed rule and whether the agencies correctly implement the Supreme Court’s Sackett decision. But even if you are not weighing in on the technical aspects of the proposed rule, real-world examples still matter. State and local commenters can strengthen the record by providing:
Examples of wetlands, water features or man-made natural breaks (such as culverts, ditches, or roads) that require federal review under the current rule.
Projected cost savings and other benefits states and other impacted parties will receive from narrower federal jurisdiction.
Any other impacts on state and local permitting programs.
OBBB Spotlight: IRS Requests Input on New K-12 Scholarship Federal Tax Credit
The IRS has released Notice 2025-70, launching the rulemaking process for the new One Big Beautiful Bill Act federal tax credit for individual contributions to Scholarship Granting Organizations (SGOs). Beginning January 1, 2027, individuals may claim up to $1,700 per year in nonrefundable federal tax credits for cash donations to qualifying SGOs that provide K–12 scholarships for low- and middle-income families.
However, states must actively choose to participate, and they must certify which SGOs meet federal requirements. Here are some of the key provisions of the program:
The Governor, or another state official authorized by state law to make decisions related to federal tax policy, must make the election to participate and certify they have the authority to do so.
States must submit an annual list of SGOs operating in the state that meet federal statutory requirements.
States must independently verify SGO eligibility. They may not rely solely on SGO self-attestations; they must have policies and procedures to confirm compliance.
State certifications must affirm that approved SGOs:
are 501(c)(3) public charities (not private foundations),
maintain separate accounts for the scholarship funds,
meet federal income-eligibility and scholarship-distribution rules,
avoid earmarked or donor-directed scholarships, and
meet minimum scholarship and spending thresholds.
Multistate SGOs have extra requirements, including tracking contributions by state and using donations only for scholarships in the state where the contribution was made.
States must notify the IRS if an SGO loses eligibility so the IRS can update its list for taxpayers.
The IRS is asking states, SGOs, and education stakeholders to weigh in on how this new program should work in practice — from how states certify eligible SGOs to how income limits are verified, how multi-state organizations allocate funds, and what reporting standards should apply. These decisions will shape how smoothly the credit functions once launched in 2027.
Comments are due December 26, 2025. Details on how to submit comments are available at the link here.
As a reminder, before engaging in any federal education and outreach activities, please ensure the opportunity aligns with your current strategy and seek legal counsel before weighing in on a specific piece of legislation. The IRS does not consider 501(c)(3) participation in the federal regulatory notice and comment process as lobbying.