Application extension for Educational Improvement Tax Credit (EITC) and Opportunity Tax Credit (OTC)

Educational Improvement Tax Credit (EITC) and the Opportunity Scholarship Tax Credit (OSTC) application deadlines are currently May 15 for business applicants reapplying to renew a two-year commitment and for businesses in the middle of their two-year commitment.

According to PICPA, State Representative, Steve Barrar (R-Delaware) introduced legislation (House Bill 2498) extending the deadline for business who are reapplying, in the middle of their two-year commitment and initial applicants by three months. The bill has been referred to the House Finance Committee.

July 1 is the deadline for all other businesses with initial applicants and applicants wishing to submit additional applications on top of their previously submitted two-year commitment.

The PA Department of Community and Economic Development (DCED) website states “The Since 2001, Pennsylvania’s EITC program has allowed businesses and individuals to lower their tax bills by donating to private schools, scholarship organizations, pre-K programs, and other educational enrichment initiatives.”

$110 million per year of the tax credits — are reserved for donors that give to scholarship organizations, which provide financial aid to children attending K-12 private schools.

Guidelines for donors

Guidelines state that donors can also get tax credits for giving to Educational Improvement Organizations — non-profit museums, civic clubs, and community centers that provide innovative programs in public schools. The program also sets aside a small sliver of tax credits for donors that give to pre-k scholarship funds.

Furthermore, business contributions are used by Opportunity Scholarship Organizations to provide tuition assistance through scholarships to eligible students living within the boundaries of a low-achieving school who have the desire to attend another public school outside of their district or nonpublic school. A low-achieving school is defined as a public elementary or secondary school ranking in the bottom 15 percent of their designation as an elementary or secondary school based upon combined math and reading Pennsylvania System of School Assessment (PSSA) scores.

Guidelines for students

Students who live in a district of a low-achieving school, as determined by the Pennsylvania Department of Education, are eligible to receive a scholarship if their household’s annual income is no greater than $90,000 plus $15,842 for each dependent member of the household. For the 2019-20 school year, the maximum scholarship award available to non-special education students is $8,500 and the maximum for a special education student is $15,000.

A business firm may receive a tax credit equal to 75% of its contribution to a Scholarship Organization and/or to an Educational Improvement Organization that is included on the current list published by the Department, up to a maximum of $750,000 per taxable year. The tax credit may be increased to 90% of the contribution made, up to a maximum of $750,000 per taxable year, if the business firm agrees to provide the same amount of contribution to an organization for two consecutive years.

Businesses eligible for Education Tax Credits include special purpose pass-through entities and entities. A special purpose entity is “composed of shareholders, partners or members, or employees of one or more other business firms.” A pass-through entity may transfer tax credits to another pass-through entity in which it has an ownership interest. A pass-through entity may include a business trust; however, a personal trust or family trust cannot be considered a pass-through entity. Individuals may not use the tax credits to make estimated payments but should adjust their total estimated tax to reflect the tax credit, effectively lowering their estimated tax payments.

If you are a business who would like to participate in this program contact us today.