Educational Improvement Tax Credit
Changes to PA
Legislation Enacted July 8, 2008 – Highlighted in Red
by an overwhelming bi-partisan majority, Pennsylvania made history by
becoming the first state to pass an education tax credit aimed at businesses
HB 996, the
Educational Improvement Tax Credit (EITC), provides companies with a 75 percent
tax credit for donations to a non-profit scholarship program. The tax credit
increases to 90 percent if the company commits to making the same donations for
two consecutive years. A business paying taxes in Pennsylvania can receive up to $300,000 in tax credits annually. Now, effective retroactively to July 1, 2008, the definition of “business entity” has been
expanded to include S Corporations and Partnerships which can receive up to
$200,000 in tax credits annually.
importantly, the EITC provides children and families with a choice in their
education and a chance in life.
Mount Saint Joseph Academy is a scholarship
recipient organization whose funding is directed through the Henkels
Foundation. This particular scholarship program assists all students who have
applied for financial aid whose adjusted family income is no greater than
$50,000 plus $10,000 for each dependent up to a total of $100,000 adjusted
family income. Here is how the EITC works.
- Eligible businesses must submit to the Department of Community and
Economic Development a completed application form found in Appendix I of
the EITC business guidelines, signed by the chief executive officer or
other officer capable of making commitments for the business. The PDF
format is recommended when printing the application from the website. An
eligible business that submits an application to the Department and that
agrees to make a contribution to an organization whose name is set forth
on the current list of scholarship organizations maintained by the
Department shall be awarded Educational Improvement Tax Credits to the
extent that such tax credits remain available for the fiscal year in which
application is made.
- A business will be approved for a tax credit equal to 75 percent
of its contribution(s) to listed organization(s), up to a maximum of $300,000 per taxable
year. The tax credit may be increased to 90 percent of the contribution(s)
made, up to a maximum of $300,000 per taxable year, if the business agrees to
provide the same amount of contribution for two consecutive tax years. In
order to receive and retain the 90% tax credit, the business must make the
same amount of contribution in each of the two consecutive tax years.
- Applications for tax credits for program fiscal year 2010-11 (July 1, 2010 through June 30, 2011) will be accepted beginning July 1, 2009. Tax credit applications will be processed on a
first-come-first-served basis by day submitted. All applications received
on a specific day will be processed on a random basis before moving on to
the next day’s applications. Applications will be processed until the
amount of available tax credits is exhausted.
- A business that has been approved for tax credits and has agreed
to make the same amount of contribution for two consecutive tax years must
submit its application to receive its second year of tax credits to the
Department no later than June 30 of the first program fiscal year in order
to be assured that tax credits will be available for the second year of
the contribution. Applications for the second year of a two-year
commitment will be accepted beginning May 15 and, if received by the
Department on or before June 30, will be processed prior to any other
applications for tax credits received by the Department. Applications for
the second year of a two-year commitment that are not received on or
before June 30 will be processed on a first-come-first-served basis by day
submitted, along with all other business applications received by the
Department, with no assurance that tax credits will remain available at
the time of processing.
- Upon receipt of written notification from the Department that the
business has been approved for tax credits, the business must make its
contribution(s) to a listed scholarship organization(s) or educational
improvement organization(s) within 60 days of the date of the notification
letter, and must provide proof of the contribution to the Department
within 90 days of the date of the notification letter. Proof of
contribution may be a copy of a written acknowledgment from the
organization, in accordance with EITC Program guidelines for
- For services donated to an organization but which will not be
performed until after the 60-day period, the business must submit a copy
of a letter sent by the business to the recipient organization, dated
within 60 days of the date of the notification letter, committing the
business to donate the services described and which must be signed and
accepted by the recipient organization. The Department of Revenue will
consider tax credits awarded under this program to be effective on the
first day of the taxable year in which the contribution was made.
- If the Department does not receive proof that the contribution was
made within 60 days of the date of the notification letter, the approval
of tax credits will be rescinded.
- No tax credits shall be approved for activities that are part of
the applicant business’s normal course of business.
- Upon receipt of proof of contribution, the Department will notify
the Department of Revenue to apply the tax credits against the appropriate
taxes identified by the business in its application. The application of
tax credits approved may not exceed the tax liability of a business for
the tax year in which the contribution was made.
- A tax credit not used in the tax year the contribution was made
may not be carried forward or carried back and is not refundable or transferable.
- The Department of Revenue will consider tax credits awarded under
this program to be effective on the first day of the taxable year in which
the contribution was made. The credit will then be used to offset (in full
or part) the quarterly prepayment requirements and the remainder of the
tax due for that taxable year.
Corporate Taxes That Can
be Used for EITC Contributions
- Corporate Net Income Tax
- Capital Stock Franchise Tax
- Bank & Trust Company Shares Tax
- Title Insurance Companies Shares Tax
- Insurance Premiums Tax
- Mutual Thrift Institutions Tax
EITC Business Guidelines
Community & Economic Development
Center for Business Financing
400 North Street, 4th Floor
Commonwealth Keystone Building
Harrisburg, PA 17120-0225