EITC Program
What is the EITC Program?
Through Pennsylvania's Educational Improvement Tax Credit (EITC) program, a qualified business can fund education rather than pay a percentage of its state taxes. To do this, the business makes a gift, through the EITC program, to an EITC-registered scholarship organization or an EITC-registered education improvement organization.* The state Department of Community and Economic Development (DCED) gives the business a tax credit equal to a percentage of the business's contribution. DCED determines the eligibility of businesses, application procedures, application deadlines, and tax-credit limits.
A company is eligible to participate in EITC if the company pays one of these six taxes:
- Corporate Net Income Tax
- Capital Stock Franchise Tax
- Bank and Trust Company Shares Tax
- Title Insurance Companies Shares Tax
- Insurance Premiums Tax
- Mutual Thrift Institutions Tax
- Personal Income Tax of S corporation shareholders or Partnership partners.
The Pennsylvania Department of Community and Economic Development determines the eligibility of businesses, scholarship organizations, and education improvement organizations.
How Does a Company Apply to Participate?
A company applies to participate by completing a one-page application form. The form is available by calling the Department of Community and Economic Development (DCED) at (717) 787-7120 or online from the EITC page of www.newpa.com. On the EITC page, find information and an application by clicking EITC Business Guidelines.
DCED determines the eligibility of businesses, scholarship organizations, and education improvement organizations.
When Should a Company Apply?
Whether your business is a new or renewing EITC applicant, be aware that the Department of Community and Economic Development (DCED) allocates credits on a first-come, first-served basis. Businesses first in line with their applications and allocation requests will be able to contribute to their chosen scholarship organization or educational program. When the tax credits dispensed equal the total credits allocated for the year, DCED can offer no additional credits and businesses cannot contribute through EITC during that year.
First-time applicants. The first day you can apply depends on the fiscal year (FY) in which you would like your company to participate.
- For FY 2009-2010. The first day that DCED accepted applications from businesses was July 1, 2009. Typically, all the tax credits are allocated within days.
- For FY 2010-2011. To maximize your chance of receiving a 2010 credit before the credits run out, submit your application so that it reaches the department on the morning of the first day DCED accepts applications. Typically, that day is July 1. However, if July 1st falls on a weekend in 2010, DCED will alter the application schedule. DCED has not yet announced the 2010 application-acceptance date.
Renewing applicants. If your business participated in EITC in FY 2008-2009, the first day you could have submitted a renewal application for FY 2009-2010 was May 15, 2009.
How Can My Company Benefit?
By participating in the EITC program, an organization accrues the public relations benefits that occur whenever a company supports a worthy cause in the area where it does business. By supporting an education organization in which employees have a special interest, an employer can gain the appreciation of the people who make the business work.
Financially, a company that agrees to contribute to the same organization for two consecutive years receives a tax credit equal to 90% of the contribution amount. A business that contributes through EITC to an EITC-registered organization in one year will receive a tax credit equal to 75% of the contribution.
What Kind of Contributions Do Businesses Make? What Credits Do They Earn?
Suppose you are the chief financial officer of a business and you have decided to contribute through EITC to a specific organization. Your goal is to give as much as you can to the organization and to earn the maximum tax credit for your business. From this perspective, the question "What is the maximum contribution?" is better phrased as "What is the maximum tax credit?" In all cases the largest tax credit a business can earn is $200,000.
The Department of Economic and Community Development calculates the tax credit based on the length of the business's commitment to the same organization.
- The tax credit received for a one-year commitment. A business that commits to earning the maximum tax credit in one year receives a tax credit equal to 75% of the amount contributed with a maximum allowable credit of $300,000.
- The tax credit received for a two-year commitment. A business that commits to earning the maximum tax credit by contributing to the same organization for two consecutive years receives a tax credit equal to 90% of the amount contributed- not to exceed the maximum allowable credit of $300,000.
From the point of view of a scholarship or educational improvement organization, a contribution of any amount is welcome. A large corporation may be able to contribute an amount that results in the maximum tax credit. A small business may contribute far less but the contribution may be a source of great pride for the business owner and employees. Each gift, no matter the size, helps a student to receive the education he or she needs to reach personal potential and take a fulfilling, rewarding place in society.
For More Information
To find out more about how, at little cost, your company can provide help to our children, please contact:
Dawn Woodfill
Director of Development
Providence Connections, Inc.
3113 Brighton Road
Pittsburgh, PA 15212
412-766-3860, ext. 325
dwoodfill@providenceconnections.org