PA Educational Improvement Tax Credit Program (EITC) STAR Foundation June 2018

History of the credit Act 4 of 2001 amended the Public School Code to provide for the establishment of the Educational Improvement Tax Credit (EITC). This Act authorized the award of tax credits to businesses that made contributions to certain organizations (scholarship and/or educational improvement organizations).

History of the credit Beginning in 2008/2009, the credit became available to individuals, via a pass-through of the credit from an S corp., partnership, or LLC. Today, the credit pool is $135 million $85 million to Scholarship Organizations (SO); $37.5 million to Education Improvement Organizations (EIO); and $12.5 million to Pre-K Scholarship Organizations (PKSO).

History of the credit In July 2012, Governor Tom Corbett signed the tax code bill that expands the existing Educational Improvement Tax Credit (EITC) program, eliminates the delay for some companies that wish to contribute, and creates another category of tax-credit supported scholarships called Opportunity Scholarship Tax Credit Program (OSTC) targeted at students in neighborhoods with perpetually underperforming public schools. $50 million is available in this pool.

Thought process Do you like paying PA taxes? Do you like paying federal income taxes? Are you philanthropic? NO to question one and/or two and YES to question three should prompt you to consider this credit and discuss it with your tax advisor.

Taxes the credit can be claimed against Corporate net income tax Malt Beverage tax Bank and trust company shares tax Title insurance companies shares tax Insurance premiums tax Mutual thrift institutions tax PERSONAL INCOME TAX (via pass-through entities such as S corps. and LLCs) NOTE – the business must be an operating business and authorized to do business in Pennsylvania.

Application The application is incredibly simple: One page form Very simple/basic information regarding the company applying for the credit Disclose amount of donation and credit for which you are applying Which “type” of organization the contribution is being made to – do not have to disclose who the nonprofit organization (NPO) is on the application.

PA Department of community & Economic development Links EITC Overview: Click here https://dced.pa.gov/programs/educational-improvement-tax-credit-program-eitc/ OSTC Overview: Click here https://dced.pa.gov/programs/opportunity-scholarship-tax-credit-program-ostc/

PA Department of community & Economic development Links EITC Business Application Guide: Click here https://dced.pa.gov/download/educational-improvement-tax-credit-program-eitc-guidelines/ Single Application Login: Click here https://www.esa.dced.state.pa.us/Login.aspx

What can be contributed? Cash (Cash is king!) Personal property (additional information must be attached to the application)

To Whom can you contribute? THE STAR FOUNDATION OF THE DIOCESE OF ERIE

To Whom can you contribute? Scholarship Organizations (SO) and Opportunity Scholarship Tax Credit Organizations (OSTC) (STAR FOUNDATION) Educational Improvement Organizations (EIO) Pre-K Scholarship Organizations (PKSO) All of the above types of organizations must go through an application process to be approved by Pennsylvania Department of Community and Economic Development (PA DCED).

To Whom can you contribute? STAR Foundation 429 East Grandview Blvd. Erie, PA 16504 https://www.eriercd.org/schools/tuition.html Contact: Charles Banducci Phone: (814) 824-1188 E-mail: cbanducci@eriercd.org

Amount of Credit SO or EIO Tax credit is 75% of amount contributed to an SO or EIO. If a company commits to making two years of contributions, the credit is 90% of the contribution in each year to an SO or EIO. Maximum credit a company can receive in any one year for contributions to an SO or EIO is $750,000.

Amount of Credit PKSO Tax credit is 100% of the first $10,000 contributed and 90% for amount above $10,000. Maximum credit a company can receive in any one year for contribution to a PKSO is $200,000.

Timing of Application First Timers: Application is due ON or AFTER July 2nd.

Timing of Application Renewal Applications: Second year of two-year commitment (for the 90% credit for SO and EIO contributions) and businesses just completing a two-year commitment: Applications can be submitted beginning on May 15th through June 30th. If received after June 30th the application is processed along with all other 1st year applications with no guarantee of receiving the credit.

Earning the Credit Typically, in August or September, the company will receive an approval (or denial) letter from DCED for the credit applied for. The company has 60 days from the date of DCED letter to make the contribution to the eligible SO, OSTC, EIO, or PKSO. The company has 90 days from the date of the DCED letter to remit proof (written acknowledgement from the STAR Foundation) of the contribution to the DCED. If either of these deadlines is missed, DCED will rescind the credit.

Earning the Credit Once DCED has received the proof of the contribution, they submit the information to the Pennsylvania Department of Revenue so the company’s account is updated for the credit. When the company files its tax return, the credit is applied first before any cash payments that may have been made.

STAR Foundation Awards Thank you 2017-2018 STAR Foundation Awards Pre-K Number of Awards     Award Amount Avg. Award 134 $52,000 $390 K-12       Number of Awards Award Amount Avg. Award 1648   $1,670,000 $1,000 OSTC       67              $79,000 $1,200

From: Chuck Banducci and Michelle Basista Thank you From: Chuck Banducci and Michelle Basista