PA Businesses Get Tax Breaks for Contributing to Scholarships

Posted on Mon, May 19, 2014 ©2021 Drucker & Scaccetti

Funding for education is one of the key topics in Pennsylvania's hotly contested gubernatorial race. Ideas abound on how to fund the Commonwealth's schools without putting too much of the burden on taxpayers. There are, however, a few state programs already in place that provide tax incentives for contributions to public school scholarships. In this blog, The Tax Warriors® will discuss two such programs and how and when you can take advantage of them.

 

The Educational Improvement Tax Credit (EITC) program provides credits to eligible businesses that make contributions to a Scholarship Organization, an Educational Improvement Organization, and/or a Pre-K Scholarship Organization.

 

The Opportunity Scholarship Tax Credit (OSTC) program provides tax credits to eligible businesses contributing to an Opportunity Scholarship Organization. Business contributions are then used by Opportunity Scholarship Organizations to provide tuition assistance in the form of scholarships to eligible students residing within the boundaries of a low-achieving school to attend a public school in another district.

 

Amount of Credit:

For both credits, the tax credit equals 75% of the contribution made up to a maximum of $750,000 per year, per entity.  However if the business agrees to provide the same amount of contributions for two consecutive years, the credit equals 90% of the contribution.  Taxpayers in the second year of their commitment must adhere to the maximum credit that was in place during their original commitment.  For contributions to Pre-K Scholarship Organizations, a business may receive a tax credit equal to 100% of the first $10,000 contributed and up to 90% of the remaining amount contributed up to a maximum credit of $200,000 annually.

 

Tax credits may be used against the Pennsylvania tax liability of a business for the tax year in which the contribution was made.  A pass-through entity, an S corporation or a partnership, that has approved credits that it cannot use, may transfer all or a portion of them to its shareholders, partners or members who can then claim the credit on their personal tax return.

 

Opening Dates for Applications:

  • Returning donors who wish to renew their commitment, or are in year two of their commitment - May 15, 2014
  • New donors or those who did not participate in the prior year -  July 1, 2014

 

How to Apply:

Paper applications are no longer being accepted.  You may begin the application process now by registering and creating a username and password and applying at: https://www.esa.dced.state.pa.us/Login.aspx

 

The application will be reviewed by the Pennsylvania Department of Community & Economic Development (DCED).  Once your application is approved, you will receive a notification regarding the tax credits by mail and will then have 60 days to make a contribution to your selected organization. The organization will then send you a donation receipt that you will need to submit to the DCED within 30 days.

 

Please note that these tax credits are available on a first-come, first-served basis, until the amount of available tax credits are exhausted.   Therefore, do not hesitate if you are planning to participate in either of these programs.

 

The Tax Warriors® at Drucker & Scaccetti have experience helping clients with this process. If you need assistance with the application process, or have any questions related to these credits, please contact us via the "Ask A Tax Warrior" button below.

Topics: Credit, EITC, Tax Credit, OSTC, Education tax credit, opportunity scholarships, applications, tax credits, credits, PA, Pennsylvania

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