Questions & Answers About the Educational Improvement Tax Credit Program
What is the "Educational Improvement Tax Credit?"
Officially known as Act 4 of 2001, this new program in Pennsylvania amends the Public School Code to authorize tax credits for businesses that make contributions to educational improvement organizations or scholarship. Pennsylvania's Department of Community and Economic Development (DCED) administer the program.
What are "Educational Improvement Organizations?"
The Educational Improvement Tax Credit Program grants available to public schools to support innovative educational programs that do not fall within the typical academic program, or for scholarships in private education grades one through twelve. In our region, scholarship gifts may be designated for our catholic schools through this program.
Educational improvement organizations are non-profit organizations approved to accept business contributions. Non-profits must submit applications to the DCED to be a designated educational improvement organization.
The Elk County Community Foundation has been designated as an approved Educational Improvement Organization.
Who can participate?
Any business that pays Pennsylvania taxes including Corporate Net Income Tax, Capital Stock Franchise Tax, Bank and Trust Company Shares Tax, Title Insurance Company Shares Tax, Insurance Premiums Tax or Mutual Thrift Institutions Tax.
How is the tax credit applied?
Tax credits are limited to 75% of the business's contribution, with a maximum of $100,000 annually (meaning that the business would have to contribute $133,333 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 $100,000 annually (meaning the business would have to contribute $111,111 each year for two years in order to obtain the maximum tax credit amount.)
Why should businesses participate?
Businesses can significantly reduce their tax liability while making contributions that provide expanded educational opportunities for Elk County students.
What types of contributions are eligible for the tax credit?
Businesses may contribute cash, property or services.
How do businesses apply for the tax credit?
Businesses must submit a brief application to the DCED stating what amount they plan to contribute. The DCED will notify businesses if their applications are approved. After receiving approval, businesses have 60 days to make the contribution to an approved educational improvement organization. The business must also send the DCED a copy of the confirmation of contribution from the school to which the contribution was made.
Award of Tax Credit applications are available on the DCED website, www.inventpa.com, and through The Elk County Community Foundation.
When does the tax credit program begin, and is there a limit to credits available?
In the past, a total of up to $10 million has been available for educational improvement organizations. Applications for tax credits are processed until the tax credits are exhausted; therefore it is important for business to act now.
As a business owner, what is my next step?
Business owners interested in the Educational Improvement Tax Credit program should share this information with their accounting advisors to evaluate the potential benefits to their companies. If your business can reduce its tax liability through this program and you would like to make a contribution the educational improvement organization, contact The Elk County Community Foundation for an application today or visit the Pennsylvania's Department of Community and Economic Development (DCED) website at www.inventpa.com.