EITC Guide

Contents:
The Opportunity
The Legislation
Contribution Limits
Qualifying Taxes
Turning Tax Credits to Scholarships

The Opportunity

The choice is yours--pay taxes to the state or provide scholarships for deserving children. Qualified businesses can send their tax dollars to the government or they can donate them to a scholarship fund, bringing long-range effects in the lives of students and their communities. You can choose through Pennsylvania’s Educational Improvement Tax Credit (EITC) to play a significant role in improving educational opportunities for children.

The Legislation

Act 4 of 2001 authorizes tax credits for businesses that make contributions to scholarship organizations. The program is administered by the Department of Community and Economic Development (DCED) in order to encourage corporations to donate money to scholarship organizations for primary and secondary education.

A total of $40 million in tax credits is authorized for scholarships for students attending public and nonpublic schools and for innovative education programs in public schools. $26,666,667 million is earmarked for tax credits for contributions to scholarship organizations and $13,333,333 million for tax credits for contributions to educational improvement organizations.

Contribution Limits

Tax credits are awarded to businesses on a first-come, first-served basis. The guidelines provide the process and forms for businesses to apply for tax credits. They are posted on the DCED website: www.inventpa.com.

Only contributions to organizations set forth on a list maintained by the department may be recognized for awarding tax credits. The guidelines provide the process and forms for organizations to register with DCED.

Tax credits are limited to 75% of the business’s contribution, with a maximum of $200,000 annually (meaning the business would have to contribute $266,667 in order to obtain the maximum tax credit amount).

If a business agrees to make the same contribution to an organization for two consecutive tax years, it may receive a tax credit equal to 90% of its contribution, again up to a maximum of $200,000 annually (meaning the business would have to contribute $222,222 each year for two years in order to obtain the maximum tax credit amount).
 

Qualifying Taxes

Entities eligible to apply for Educational Improvement Tax Credits are businesses authorized to do business in the Commonwealth of Pennsylvania that are subject to the following taxes:

• Corporate Net Income Tax
• Capital Stock Franchise Tax
• Bank and Trust Company Shares Tax
• Title Insurance Companies Shares Tax
• Insurance Premiums Tax
• Mutual Thrift Institutions Tax

Turning Tax Credits to Scholarships

To receive tax credits, businesses must make contributions to scholarship organizations or educational improvement organizations that are on the list of such organizations published by the Department. A variety of organizations, religious and secular, throughout the state have formed scholarship organizations. Upon approval of the tax credits, a business gives those tax dollars to an approved scholarship organization for allocation to families needing assistance via scholarships for students. In other words, the flow of tax credit dollars is from qualified businesses to registered scholarship organizations to recipient schools to qualified families.  

Community Partnership School is a designated recipient of tax credit dollars through this fund.

Please discuss the Educational Improvement Tax Credit Program with your tax advisor then contact the Community Partnership School, 215-235-0461 or through the Contact Us page.