Learn How to Turn Your Tax Liability into Scholarships for Our Students
Launched in 2001, Pennsylvania’s Educational Improvement Tax Credit program (EITC) is a mutually beneficial initiative for businesses wishing to both save on their annual taxes and also to give back to the community. The outcome for participating businesses is a reduced tax liability (both state and federal), awarded in exchange for donations to a nonprofit scholarship or educational improvement organization such as KenCrest. Individuals can also take advantage of this tax savings opportunity through a Special Purpose Entity (SPE).
One of the first things to do when considering EITC participation is talk with an accountant to determine whether traditional EITC participation or a Special Purpose Entity is more advantageous. For some, the choice will be clear, based on eligibility, but others may qualify for both – another reason EITC participation is so attractive.
For contributions to Pre-Kindergarten Scholarship Organizations (PKSO), a business may receive a tax credit equal to 100% of the first $10,000 contributed, and up to 90% of the remaining amount contributed up to a maximum credit of $200,000 annually. A business may qualify to participate if it pays one or more of these taxes:
- Pennsylvania Income Tax
- Capital Stock/Foreign Franchise Tax
- Corporate Net Income Tax
- Bank Shares Tax
- Title Insurance & Trust Company Shares Tax
- Insurance Premiums Tax
- Mutual Thrift Tax
- Malt Beverage Tax
- Retaliatory Fees Under Section 212 of the Insurance Law of 1921
Special Purpose Entity (SPE) Information
Under SPE guidelines, a person is eligible as an individual or couple (married filing jointly) if they work in Pennsylvania and earn a minimum of $115,000 in state taxable income and owe at least $3,500 in state income taxes. Eligibility is also extended to retirees who own a small business (receive annual K-I form) or work for a business (receive annual W-2 form) and possess a net worth of at least $1,000,000. Unlike the traditional business model, there are no strict deadlines to follow, and there is a simple one-page application. Additionally, there may be federal tax benefits to taxpayers who deduct charitable contributions – potentially allowing donors to make money.
How EITC Helps KenCrest Early Learning Centers
Quality Pre‐K programs in our community cost an average of nearly $15,000 per year. For low‐income, working families in Philadelphia, this is about 33% of their household’s expenditure — often their largest expense. This article describes the struggle for many families who want to give their children a Pre-K experience but simply cannot afford it. EITC donations enable low- and moderate-income families to receive full and partial scholarships for their children to one of our seven Philadelphia-based Early Learning Centers.
Thanks to the EITC program as well as the generosity of business and individual donors, during the 2019-2020 school year, KenCrest awarded well over $200,000 in needs-based scholarships, enabling 107 preschool students from low- to moderate-income homes to attend a KenCrest Early Learning Center.
For more information about KenCrest’s EITC-approved early learning programs, contact Dawn Warden at 610-825-9360 ext. 1123 or via email at: firstname.lastname@example.org.
To learn more about EITC, visit the DCED website, or contact the DCED Center for Business Financing at 717-787-7120 or RA-EITC@pa.gov.
Click here for a downloadable information sheet about how to get started with EITC.