Revised February 2009
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20. Pennsylvania—Educational Improvement Tax Credit Program
Program type: Tax credits for corporations for contributions to scholarship organizations
Description: Under the Educational Improvement Tax Credit Program (EITC), corporations may receive Pennsylvania tax credits for charitable contributions to scholarship organizations (SOs) or to educational improvement organizations (EIOs). The amount of credit is equal to 75 percent of the amount contributed and may not exceed $300,000 in any year. If a corporation pledges the same contribution for two consecutive tax years, the amount of credit rises to 90 percent of the amount contributed (with the same annual limit). The maximum aggregate amount of tax credits allowed in any year is $67 million, two-thirds of which ($44.67 million) must credit contributions to SOs. Tax credits are awarded to corporations on a first-come, first-served basis.
SOs provide scholarships for attendance at a private school or at a public school outside a student's district of residence; EIOs provide grants to public schools for innovative education programs. SOs award scholarships according to a household income limit of $50,000, plus an allowance of $10,000 for each dependent member.
Amount of assistance: SOs establish scholarship amounts individually. To attend a private school, the annual amount may not exceed the tuition customarily charged by the school. Effective Dec. 1, 2005, and thereafter each September, SOs are required to report annually on the total and average scholarship amounts awarded to elementary and secondary school students.
Number of participants: In the 2007-08 school year, 48,803 students in grades pre-K through 12 received scholarships from 329 SOs (and prekindergarten scholarship organizations) to attend private schools. SOs are required to report annually on the number of scholarships awarded to pre-K, elementary, and secondary school students.
Authorizing statute: 24 Pennsylvania Statutes §§20-2001-B-20-2008-B
Legislative history: The program was signed into law in May of 2001 and was first implemented in 2001, and was expanded in 2003, in 2005, and in 2007. In 2005, the law was changed to increase the cap on the aggregate amount of credits allowed from $40 million to the current amount of $44 million, and the reporting requirements on SOs were signed into law. In 2007, the law was changed to increase the cap on the aggregate amount of credits from $44 million to $67 million. In 2008, the law was amended to increase the maximum individual credit amount from $200,000 to $300,000 and enable participating businesses to pass the credit on to their shareholders or partners for use on their personal income taxes.
Judicial history: No legal suits have been filed regarding the program.
For more information, see: www.newPA.com/eitc.