New EITC Law Provisions of 2019/2020 Budget

A plan to increase Pennsylvania’s Education Improvement Tax Credit program, which allows  tax credits for 90 percent of approved donations to non-profit educational programs and scholarships is getting a second chance, at least on a smaller scale.  Earlier this month Gov. Tom Wolf vetoed House Bill 800, which would have increased funding for the program by $100 million.  Under the newly approved plan, House Bill 1615, which has been approved by the legislature and signed by the governor , the pool of tax credits would be raised by $25 million.

EITC Changes included in House Bill 1615:

Section 2002-B. Definitions – The various definitions for eligible students in this section are amended to include any student who has received a scholarship or opportunity scholarship in any prior year. In addition, the maximum annual household income for the Educational Improvement Tax Credit (EITC) is increased from $85,000 to $90,000. It also adds "Qualified Subchapter S trust" as defined in section 1361(d)(3) of the Internal Revenue Code of 1986 to the definitions in the section. It then adds “qualified subchapter S trust” to the definition of “Pass- through entity.” Economically disadvantaged school is defined as any school within this Commonwealth at which at least 75% of the students attending the school in the immediately preceding school year received a scholarship pursuant to this article.
Section 2003-B. Qualification and Application by Organizations – This section is amended to provide for an Opportunity Scholarship Organization for Economically Disadvantaged Schools. In addition to meeting the other scholarship organization requirements in this section, this new organization must demonstrate a history of serving schools throughout this Commonwealth and the capacity to distribute opportunity scholarships statewide to applicants from economically disadvantaged schools. The organization must also agree to distribute Opportunity Scholarships to applicants from economically disadvantaged schools not later than December 1 of the school year. The Department of Community and Economic Development (DCED) may not designate more than one such organization for any school year.
Section 2004-B. Application by Business Firms – Changes to this section require business firms that intend to apply to DCED for a tax credit for contributions to an Opportunity Scholarship Organization for Economically Disadvantaged Schools must submit a separate application from any applications submitted for tax credits to other types of scholarship organizations.
Section 2005-B. Tax credits – This section is amended to provide that applications for tax credits submitted on July 1 for a two-year commitment by a business firm that applied for and was denied credits in the prior fiscal year and that had been approved for tax credits in a prior fiscal year, shall be considered prior to an application from a business firm that does not meet these criteria.
Section 2006-B. Limitations - This section currently provides for a total of $160 million in Educational Improvement Tax Credits (EITC) and a total of $50 million in Opportunity Scholarship Tax Credits (OSTC). This legislation increases the amount of tax credits available under the EITC program to $185 million. The additional $25 million in tax credits made available under the EITC program is provided to scholarship organizations. The amount of tax credits available under the OSTC program increases to $55 million. The additional $5 million must be used to provide tax credits for contributions from business firms to increase the scholarship amount to students attending an economically disadvantaged school by up to $1,000 more than the amount provided during the immediately preceding school year. The total tax credit increase is $30 million.
Section 2009-B. Opportunity Scholarships – For students attending an economically disadvantaged school, the maximum amount of an opportunity scholarship is increased to $9,500 for an applicant without a disability and to $16,000 for an applicant with a disability, an increase of $1,000 for each.
Each school that seeks designation as an economically disadvantaged school must report additional information to DCED by the January 1 preceding the applicable school year on a form supplied by DCED no later than the preceding October 15. DCED must notify each school of its decision on its application by March 1. Amendments to this section also place additional reporting requirements on schools designated as economically disadvantaged.

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