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Educational Improvement Tax Credit Program (EITC)

What is EITC?

Enacted by the Pennsylvania Legislature in 2001, the Educational Improvement Tax Credit (EITC) program authorizes tax credits for businesses that make contributions to educational improvement or scholarship organizations. The EITC is administered by Pennsylvania’s Department of Community and Economic Development (DCED).

This program is unique to Pennsylvania in that it allows businesses to make charitable contributions based on the amount of Pennsylvania state taxes they pay. A business may receive a tax credit equal to 75% of its contribution to an eligible Scholarship Organization and/or to an Educational Improvement Organization, such as Foundations, Inc., up to a maximum of $400,000 per taxable year. Tax credits may be increased to 90% of the contribution made, up to a maximum of $400,000 per taxable year, if the business agrees to provide the same amount of contribution to an organization for two consecutive years.

What are Scholarship and Educational Improvement Organizations?

Foundations, Inc. has been designated as an eligible Educational Improvement Organization by the DCED. In order to qualify for this designation, Foundations has been recognized as providing "innovative educational programs." Specifically the Philadelphia Center for Arts and Technology (PCAT) is eligible for support through EITC.

Why should a business participate?

The EITC program was designed to encourage Pennsylvania organizations and businesses to partner in support of local communities. Contributions made under the EITC program help community organizations continue the valuable work they do.

In addition to generating goodwill, participating Pennsylvania businesses can reduce their tax liability by supporting organizations like Foundations. Specifically, businesses are able to reduce their actual tax bill – dollar for dollar – once a tax liability has been established.

For example, a $100,000 donation generates a $75,000 tax credit. This same donation can also be claimed as a donation on federal tax returns. A net donation of $100,000 each of two consecutive years is eligible for a 90% percent tax credit or, $90,000 for each of the two years.

Which businesses are eligible?

Eligible businesses are those authorized to operate in Pennsylvania and subject to one or more of the following taxes: Corporate Net Income Tax, Capital Stock Franchise Tax, Title Insurance Companies Shares Tax, Insurance Premiums Tax; Mutual Thrift Institution Tax, and Personal Income Tax of S Corporation shareholders or partners in a general or limited partnership.

When does the tax credit program begin?

The EITC program year is July 1 – June 30. Applications for FY12-13 will be accepted by the DCED beginning July 2, 2012. Interested parties are encouraged to apply early as the number of tax credits is limited and available on a “first come, first served” basis. The EITC scholarship and educational improvement programs are currently funded with more than $75 million.

How are EITC funds utilized by Foundations, Inc.?

These funds enable Foundations, Inc. to provide youth across Pennsylvania with opportunities to develop the academic, work, and life skills they need to thrive in the 21st century. Foundations provides both school day and out-of-school instruction.

Under the EITC program, Foundations, Inc. has been approved to receive funds for two of its endeavors:

  • Philadelphia Center for Arts and Technology (PCAT), is an arts and technology education initiative for youth to explore their interests and develop new talents and skills
  • Achieving Community Transformation (ACT) Academy Charter School is a free cyber high school that blends real-time, online instruction with face-to-face interaction and independent work

As a donor, your contribution is made directly to Foundations, however you may specify to Foundations whether you have a program preference.

How do I apply?

A one-page application form is available through the Department of Community and Economic Development at www.newpa.com or at (717) 787-7120.

Step One: Businesses submit a one-page application to the DCED indicating what amount they plan to contribute.

Step Two: The DCED will notify businesses that have been approved.

Step Three: After receiving approval, businesses have 60 days to make the contribution to an approved Educational Improvement Organization.

Step Four: Businesses must provide the DCED with a copy of the confirmation of contribution from the Educational Improvement Organization (i.e., Foundations, Inc. will provide a contribution receipt).

Step Five: The DCED will communicate with the PA Dept. of Revenue and applicable tax credit is applied to the business tax account.

Step Six: Credit is taken as a payment of taxes on annual business tax return filing.

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To learn more about Philadelphia Center for Arts and Technology (PCAT), call 267-297-6231, stop by 2111-31 Eastburn Avenue Philadelphia, PA 19138, or email pcat@foundationsinc.org.