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Businesses get tax credits with scholarships

  • TERRY AHNER/TIMES NEWS  Robert Buck, CPA, of Buckno Lisicky & Company, gives tips on how to compute and calculate the EITC and OSTC taxes as part of a joint luncheon recently between the Greater Northern Lehigh and Palmerton Area Chambers of Commerce.
    TERRY AHNER/TIMES NEWS Robert Buck, CPA, of Buckno Lisicky & Company, gives tips on how to compute and calculate the EITC and OSTC taxes as part of a joint luncheon recently between the Greater Northern Lehigh and Palmerton Area Chambers of Commerce.
Published February 22. 2014 09:00AM

Businesses can earn valuable tax breaks through their support of private primary and secondary education.

Exactly how they can go about doing so was discussed by Robert L. Buck, CPA, of Buckno Lisicky & Company, as part of a recent joint luncheon between the Palmerton Area and Greater Northern Lehigh Chamber of Commerce.

Buck explained the Educational Improvement Tax Credit and Opportunity Scholarship Tax Credit, and how to compute and apply for them.

EITC

Buck said the Educational Tax Credit is for businesses that make contributions to the Eastern Pennsylvania Scholarship Foundation.

It allows businesses to obtain tax credits while supporting private education; it's a low cost (or even no cost) way to make sizable donations; and it keeps state tax dollars in your community, he said.

"This means that if your business pays certain state income taxes, your donation could end up costing you nothing," Buck said.

Buck said the EITC was established in 2001 via Act 4, which amends the Public School Code. It allows for tax credits to companies who make donations to state-approved scholarship foundations and educational improvement organizations. It was amended in 2003 to allow for a Pre-Kindergarten Tax Credit Program. Hence, the Opportunity Tax Credit Program was established in June 2012.

In essence, the dollars your business would pay to the state in taxes will instead be diverted to provide tuition assistance in the form of scholarships to eligible students residing within the boundaries

of a low-achieving school to attend another public school outside of their district or nonpublic school.., in satisfaction of your Pennsylvania tax liability, he said.

If your business pays one or more of the 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, and All Sub-Chapter S Corporations and other "pass through" entities (LLC, LLP, and other partnerships) that pay personal income tax on PA business income are eligible to fully participate in the EITC program, he said.

Buck said the maximum contribution of $750,000 per tax year allows businesses to receive up to a 90-percent tax credit for a two-year commitment, and up to a 75-percent tax credit for a one-year commitment. The contribution can also be deducted from your Federal taxes, he said.

One-hundred percent of all EITC contributions go directly to the schools designated by the business donor. No administrative costs are deducted.

To apply, visit www.newPA.com and complete the single online application. For step-by-step directions on how to complete the online application, go to www.allentowndiocese.org/giving, and scroll down to Eastern Pennsylvania Scholarship Foundation.

For a one-on-one walk-through of the online application, call Janis E. Geist at 610-871-5200, Ext. 244.

Applications for tax credits will be accepted beginning July 1 if this is the first time the business has applied for tax credits. Applications must be made online at www.newPA.com.

Apply between May 15 and June 30 if the business has completed the second year of a two-year commitment and wants to reapply for a Year One of a two-year commitment. Completed 1 year of a 2-year commitment and is reapplying for Year 2.

Apply on July 1 if the business is applying for tax credits for the first time.

OSTC

Buck said the Opportunity Scholarship Tax Credit awards tax credits to operating businesses that make contributions to the Eastern Pennsylvania Scholarship Foundation.

Much like the EITC, the OSTC enables the dollars your business would pay to the state in taxes to instead be diverted to the Catholic school of your choice, in satisfaction of your Pennsylvania tax liability.

Buck said any business entity except sole proprietorships may participate.

A maximum contribution of $750,000 per tax year will allow businesses to receive up to a 90-percent tax credit for a two-year commitment, and up to a 75-percent tax credit for a one-year commitment. Your contribution can also be deducted from your Federal taxes, he said.

As with the EITC, 100-percent of all OSTC contributions go directly to the school designated by the business donor.

Apply from February through June 30. Go to www.newPA.com and complete the single online application. For step-by-step directions on how to complete the online application under Opportunity Scholarship Tax Credit, scroll down to Businesses Application Guide for Businesses.

For application submission support, call Geist.

Allow seven to 10 business days after the application is submitted. A business will receive an approval letter from the state Department of Community & Economic Development.

Within 60 days from date of approved letter, the business must make contribution to Eastern PA Scholarship Foundation, and designate the school it wishes to receive the contribution.

Within five days of receipt of contribution by EPSF, the business will receive a letter from EPSF acknowledging the contribution.

Within 90 days from the date of the approved letter, the business must send a copy of EPSF acknowledgment letter to DCED.

If a business intends to pass-through tax credits to personal tax returns of shareowner, partners, etc., the business must file a Rev-11234 form with the PA Dept. of Revenue before or with their corporate state tax return.

Applications for OSTC tax credits are being accepted now, and must be made online at www.newPA.com. Tax credit applications are processed on a first-come-first-served basis by the day they are submitted.

All applications received on a specific day will be processed on a random basis before moving onto the next day's applications.

Applications will be approved until the amount of available tax credits is exhausted.

How is OSTC different from EITC

Buck said as far as the business is concerns, d the application process and maximum tax credits the business is able to apply for are the same.

But, the OSTC provides scholarships for K-12 (no Pre-K programs). There is a residency requirement for student eligibility for OSTC.

The student must reside within the boundaries of one of the 15-percent lowest performing schools in the state as designated by the PA Department of Education.

Also, in allocating the OSTC scholarships, priority must be given to students whose families are at or below the 185-percent of the federal poverty level (family of four must have less than $43,000 in annual income).

According to the PA Dept. of Community & Economic Development the OSTC, previously known as the EITC, program provides tax credits to eligible businesses contributing to an Opportunity Scholarship Organization.

Business contributions are then used by Opportunity Scholarship Organizations to provide tuition assistance in the form of scholarships to eligible students residing within the boundaries of a low-achieving school to attend another public school outside of their district or nonpublic school.

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