Under the Educational Improvement and Opportunity Scholarship Tax Credit Programs, businesses can claim a credit for taxes imposed by the Commonwealth of Pennsylvania for contributions made to qualified educational improvement organizations, pre-kindergarten organizations, and scholarship organizations.

A list of qualified organizations can be found on the PA Department of Community & Economic development's website via the links below:

The credit can be claimed by both C corporations, as well as pass through entities such as S corporations, partnerships, and LLCs. Qualified businesses, including pass through entities, can apply the credit against the following taxes:

  • Capital Stock/Foreign Franchise Tax
  • Corporate Net Income Tax
  • Bank and Trust Company Shares Tax
  • Title Insurance Tax
  • Insurance Premiums Tax
  • Mutual Thrift Tax
  • Gross Receipts Tax
  • Personal Income Tax

Businesses applying for the credit are eligible for a tax credit equal to 75 percent of the contribution. If at the time of making the application, the business agrees to make the same contribution for two consecutive years, the tax credit will be increased to 90 percent of the contribution.

Tax credits are available on a first come, first served basis and must be used in the year in which the contribution is made. The tax credits cannot be carried forward or back, are non-transferable, and are not refundable. Pass through entities can elect to transfer some or all of their credits to shareholders, partners, or members. The election must be in writing and the credit can either be utilized in the year the contribution is made or in the year immediately following the year in which the contribution is made, depending on the election made by the entity. The election must be made no later than the due date of the entity's return.

APPLICATION TIMELINE

May 15, 2013 through June 28, 2013 - Businesses that are in the middle of a two year commitment must file their application on or before June 28, 2013. If the business fails to file its application on time, it will not be given priority status and the application will be considered on a first come, first served basis.

May 15, 2013 - Deadline for businesses that have completed their two year commitment and wish to renew their two year commitment. Due to the popularity of the program and funding limits, businesses in this category should plan to file their application on May 15, 2013.

July 1, 2013 - Deadline for all first time applications. Businesses that are filing an application for the first time should plan to file their application on July 1, 2013 to increase their chance of participating in the program.

All applications must be submitted using the online, single application process created by the Department of Community and Economic Development. Upon successfully submitting the on-line application, businesses must print and sign the hard copy signature page and submit to the Department within 15 days of the on-line submission. Paper applications will no longer be accepted by the Department.

Pass through entities can now apply on the same dates as C corporations.

Please feel free to contact Thomas Frascella, Director, Tax Strategies with any questions about this topic.  Tom can be reached at 215.734.0092 or Email. 

Information contained in this alert should not be construed as the rendering of specific accounting, tax, or other advice. Material may become outdated and anyone using this should research and update to ensure accuracy. In no event will the publisher be liable for any damages, direct, indirect, or consequential, claimed to result from use of the material contained in this alert. Readers are encouraged to consult with their advisors before making any decisions.