OUR THOUGHTS ON:

Pennsylvania Budget Expands Education Tax Credits

State and Local Tax

By Matthew Dodge

The existing Educational Improvement Tax Credit (EITC) had its funding increased by $25 million for the 2012 fiscal year, which means that $100 million in tax credits will be available. The EITC allows businesses to make contributions to eligible Scholarship Organizations, Educational Improvement Organizations and/or Pre-Kindergarten Scholarship Organizations in exchange for tax credits.

The budget also establishes a new tax credit program, the Educational Opportunity Scholarship (OSTC), with $50 million in funding. Approved Scholarship Organizations will provide scholarships for students to attend private schools or participating public schools. Students from the poorest-performing 15% of public schools in the Commonwealth will be eligible for the scholarships. The maximum amount a student may receive annually is $8,500, or $15,000 if they are disabled. The OSTC program provides tax credits to entities that contribute to approved Scholarship Organizations.

The EITC and OSTC tax credits are available on a first-come, first-served basis, and applications are now being accepted for EITC and on August 8th for the OSTC for the current fiscal year for all business entities by the Pennsylvania Department of Community and Economic Development. Businesses making contributions may be approved for tax credits equal to 75% of their contribution for one year and 90% if they commit to contributions in consecutive years. A business is eligible for up to $400,000 in tax credits under each program, the EITC and the OSTC, in 2012-2013 and $750,000 per program in 2013-2014.

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