Pennsylvania Special Purpose Entities create new opportunities for Individual Donors

A new way for individuals to donate EITC eligible funds is now available thanks to changes in the EITC administrative rules. Individuals can redirect their PA tax liability to local scholarships using SPE entities.  The individual makes a donation and receives a K-1 that shows the donation on the federal K-1 and the state tax credit on the Pennsylvania K-1.  These partnership SPE K-1s are then included with individuals tax filings to get a refund of 90% of the scholarship donation and 0% to 28% federal refund depending on the donors federal tax situation.

Most SPEs limit donors to accredited investors due to securities laws that require this limitation on SPE investors.  The PA rule change requires the individual to work for a business so individuals who work for nonprofits are not allowed to participate.

​SPEs apply for and receive tax credit awards and have 60 days to donate to EITC charities so the window for individuals to participate is limited to when the SPE has a tax credit award available.