Educational Improvement Tax Credit (EITC) and Opportunity Scholarship Tax Credit (OSTC) Programs

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MESSAGE FROM DR. MICHAEL LATUSEK SUPERINTENDENT FOR CATHOLIC SCHOOLS

Diocese of Pittsburgh Department for Catholic Schools

The Diocese of Pittsburgh established a K-12 Scholarship Organization (SO) as well as a Pre-Kindergarten Scholarship Organization (PKSO) each called the Scholastic Opportunity Scholarship Fund (SOS).  These organizations take part in the State of Pennsylvania’s two tax credit programs, the Educational Improvement Tax Credit(EITC) and the Opportunity Scholarship Tax Credit (OSTC). Our two approved scholarship organizations receive contributions from eligible companies that do business in Pennsylvania and pay certain state taxes in exchange for business tax credits.   These business contributions are then used by our scholarship organizations to provide tuition assistance grants to eligible students attending Catholic Schools in the Diocese of Pittsburgh. Companies must apply annually for the tax credits and receive approval from the state’s Department of Community and Economic Development (DCED). Companies may designate their donation to be used for aid at a particular diocesan school or to be used for any eligible student in any diocesan school. Parents must complete a student aid application through PSAS. State mandated income guidelines determine eligibility for students to receive aid from these funds.

HOW DOES THE TAX CREDIT PROGRAM WORK?

Grades K through 12: A tax credit of 75% of Pennsylvania State Taxes is granted for a one-year commitment. A 90% tax credit is granted for a two-year commitment. The maximum is $750,000 per year per corporation. All donations up to the maximum amount are accepted.

Pre-K: A tax credit of 100% for the first $10,000 of contribution to an eligible organization is granted to a corporation regardless of the number of years for which they apply. A 90% tax credit is granted for the remaining contribution up to a maximum of $200,000 per corporation.

HOW CAN YOUR BUSINESS HELP?

Pennsylvania Corporations may take advantage of the Educational Improvement Tax Credit Program (EITC) and the Opportunity Scholarship Tax Credit Program (OSTC) offered through the State of Pennsylvania’s Department of Community and Economic Development (DCED), which allows businesses to make donations to eligible scholarship organizations such as the Diocese of Pittsburgh Scholastic Opportunity Scholarship which provides tuition assistance to students in the Catholic schools in the Diocese of Pittsburgh..

(Full information and applications may be found by logging onto the DCED website: www.newpa.com/eitc  or www.newpa.com/ostc)

WHAT BUSINESSES QUALIFY?

Businesses that pay any of the following Pennsylvania State Taxes may apply for tax credits through the EITC/OSTC program:

  • Corporate Net Income Tax
  • Title Insurance Company Shares Tax
  • Capital Stock and Franchise Tax
  • Bank and Trust Company Shares Tax
  • Insurance Premiums Tax
  • Mutual Thrift Institutions Tax
  • Personal Income Tax of S corporation shareholders or Partnership partners
  • Malt Beverage Tax (Tax Reform Code Article XX)
  • Tax credits can be distributed through more than one level of pass through entities, and new changes now include spousal participation

THE EITC/OSTC PROCESS FOR APPROVAL

  1. Fill out the application on the DCED website above.
  2. The business then receives a letter of approval from DCED for participation.
  3. The business submits their monetary contribution within sixty days to the Diocese of Pittsburgh SOS.
  4. The Diocese provides the business with an acknowledgement of the contribution.
  5. The business submits the acknowledgement to DCED.
  6. DCED communicates with the PA Department of Revenue and applicable credit is applied to business tax account. A notice is provided to the business.
  7. Credit is applied as if paid at the beginning of the tax year.
  8. The credit is taken as a payment of taxes on the businesses annual tax return filing.
  9. This entire process must take no more than ninety days.

FREQUENTLY ASKED QUESTIONS

A GUIDE FOR THE BUSINESS COMMUNITY


What are Educational Improvement Tax Credits?

The EITC is a tax credit for businesses that make donations to scholarship or educational improvement organizations. Scholarship organizations award scholarships to children across Pennsylvania to assist them in attending the schools of their choice. The EITC Program is administered by the Department of Community and Economic Development (DCED) on a first-come, first-served basis. Total tax credits approved shall not exceed $90 million per fiscal year for the EITC Program and $10 million annually for the pre-K EITC Program.

Can my business receive a $750,000 credit for the EITC and a$200,000 tax credit for the pre-K EITC at the same time?

Yes. As long as a company has the tax liability, they can receive both tax credits in the same fiscal year

Why are tax credits more attractive than a standard charitable donation?

While deductions reduce your amount of taxable income, tax credits reduce your actual tax bill, dollar-for-dollar. Tax credits are utilized AFTER your tax liability is established.

What scholarship and educational improvement organizations can businesses contribute to in order to receive the credit?

Organizations eligible to receive EITC contributions must be a recognized 501(c) (3) and approved by DCED and distribute at least 80% of their annual receipts to eligible students. Our Scholastic Opportunity Scholarship Program (SOS) is an organization recognized to provide these funds to eligible students. 

Can businesses contribute to more than one scholarship or educational improvement organization? 

Yes. Businesses can donate to as many organizations as they choose. They may also donate to a scholarship and an educational improvement organization at the same time.

What is the process for businesses to receive the tax credit?

Businesses must submit an online application for the tax credit, which is available through the DCED website. If there are funds available and the company does not owe back taxes, DCED will send an approval letter to the applicant. The company then has 60 days to make its donation(s) and then an additional 30 days to send proof of the donation(s) to DCED. This entire process must take no more than 90 days from the date of their approval.

If you have additional questions about EITC, please contact the REACH Foundation or your local EITC organization.

RESOURCE CONTACTS

Dr. Michael A. Latusek
Superintendent for Catholic Schools
Diocese of Pittsburgh
111 Boulevard of the Allies
Pittsburgh, PA 15222
Phone: 412-456-3100
Fax: 412-456-3101
Schools@diopitt.org
www.diopitt.org

REACH Foundation
Otto V. Banks, Executive Director
Sofia Cotelo, Program Manager
P.O. Box 1283
Harrisburg, PA 17108
phone : (717) 238.1878
fax : (717) 703.3182
mail@paschoolchoice.org
www.paschoolchoice.org

DCED
Center for Business Financing Commonwealth Keystone Building
400 North Street, 4th floor
Harrisburg, PA 17120
phone : (717) 7877120
fax : (717) 772.3581
www.newpa.com/eitc

www.newpa.com/ostc

Department of Revenue
Corporate Tax Office
phone : (717)705.6225 x5