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Introduction to the Pennsylvania Education Improvement Tax Credit for Bishop Canevin High School

Introduction to the Pennsylvania Education Improvement Tax Credit for Bishop Canevin High School March 2009. Educational Im pro vement Tax Credit Program

kylee-bennett
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Introduction to the Pennsylvania Education Improvement Tax Credit for Bishop Canevin High School

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  1. Introduction to the Pennsylvania Education Improvement Tax Credit for Bishop Canevin High School March 2009

  2. Educational Improvement Tax Credit Program Any business entity that pays taxes in Pennsylvania* can receive a PA Tax Credit under the Educational Improvement Tax Credit Program that will reduce the net cost of the contribution to 10-25% of the actual donation (maximum donation of $300,000/year). The credit is 75% for a 1-year commitment, 90% for a 2-year commitment of the same amount of money. Thus, a business donating $300,000 to Bishop Canevin for 2 years can actually make a net contribution to BC of $30,000/year, with the remaining $270,000 paid by the State through the tax credits. Federal Tax savings may push the net cost to the donor even lower. (See following examples.) * This credit is now available against 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, or personal income tax or S Corporations, or partners in a general or limited partnership.

  3. Educational Improvement Tax Credit • Program Background and Details • The Educational Improvement Tax Credit (“EITC”) was enacted by the Pennsylvania State Legislature in 2001, to provide a tax credit to corporations which make donations to scholarship and educational improvement organizations. • Bishop Canevin is a scholarship organization, and all EITC donations to BC must go to a needs-based scholarship fund. They cannot go to the general operating fund, nor can they be earmarked by the donor to specific students. • The EITC provides a 75% tax credit for qualified donations. This increases to a 90% tax credit if the company commits to making the same donation for two consecutive years. • The credit is also allowed against personal income tax if the income is generated by a pass-through entity. • The maximum credit per year per taxpayer is $300,000. That amount can be split across multiple scholarship (or educational improvement) organizations. • The credit must be used in the year of application (no carry-forward or carry-back) and cannot exceed the tax liability for that year. Applications are generally made in July of the tax year, although they can be made later in the year if the State’s EITC budget has not been exhausted. • In 2008, the total amount of EITCs available was $75 million with $44.7 million allocated to scholarship organizations. In 2008, not all of those available credits were used. • The donation may also yield Federal tax savings, depending on the donor’s situation.

  4. Educational Improvement Tax Credit Program Sample Tax Calculation for a C Corporation

  5. Educational Improvement Tax Credit Program Sample Tax Calculation for an S Corporation with PA Income Tax

  6. Educational Improvement Tax Credit Program Sample Tax Calculation for an S Corporation with Capital Stock and Franchise Tax

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