EDUCATIONAL IMPROVEMENT TAX CREDIT PROGRAM (EITC) for INDIVIDUALS
SPECIAL PURPOSE ENTITIES
FREQUENTLY ASKED QUESTIONS:
Why are tax credits more attractive than a standard donation?
While donations reduce your amount of taxable income, tax credits reduce your actual tax bill, dollar-for-dollar. Tax credits are utilized AFTER your tax liability is established.
What is a SPECIAL PURPOSE ENTITY (SPE)?
An SPE is a partnership that exists solely for the purpose of earning and passing on Educational Improvement Tax Credits. The Central PA Scholarship Fund (CPSF) is a non-profit that manages the distribution of tax credits through SPEs at no cost to the school.
Who Qualifies to Participate as a donor?
Any individual or any corporation who pays PA income tax is eligible. There are also options available to individuals who work for non-profits and retirees. CPSF acts as an intermediary. They provide services to connect individuals and companies who would ordinarily have trouble giving to EITC and OSTC because of their structure. The minimum donation to join the SPE is $3,500.
Do I need to earn a particular income to qualify?
This is based on tax liability, not income. Therefore, each taxpayer’s situation will differ. An individual or couple filing jointly must have a state tax liability of $3,500 or more to participate. To see if you may qualify, you can find your PA tax liability on Form PA-40 Line 12 of your most recent tax return. Note that you risk the chance of losing a portion of your EITC tax credit if you choose an amount over your tax liability.
Why donate through an SPE?
Donors will receive a 90% state tax credit for their donation. So, a donation of $10,000 will result in a $9,000 state tax credit. The 10% that cannot be used as a state credit can be used as a charitable donation deduction on the donor’s federal tax return.
What percentage of my contribution goes to the school of my choice?
100% of your contribution goes to the school of your choice for scholarship purposes. No portion of your donation is used for administrative purposes.
When and where do I submit my application/joinder?
Your application may be submitted at any time during the year. Tax credits will be distributed on a first come first served
basis until the tax credits which have been awarded to all SPE’s by the Department of Community and Economic Development are depleted.
Do I reapply each year to the SPE?
Each year you are asked to reinvest. If you fail to do so, your membership is terminated.
When will I receive documents to file with my income taxes?
Your Federal and State K-1 forms will arrive in February of 2025. The Federal K-1 will list your investment and Federal
charitable contribution, which you deduct on Schedule A if you itemize. Your PA K- 1 will list your 90% PA tax credit, which
will go on Payment line 23 OC for Other Credit on your PA-40.
EDUCATIONAL IMPROVEMENT TAX CREDIT PROGRAM (EITC)
SPECIAL PURPOSE ENTITIES
DONOR GUIDE:
1. Completing Joinder Agreement - Sign Joinder Agreement and submit through:
Fax: (814) 684-1061
Email:
CentralPAScholarshipFund@gmail.com
Mail:
Central Pennsylvania Scholarship Fund
Attn: Tami Clark
227 Jefferson Ave.
Tyrone, PA 16686
2. Making Initial Capital Contribution
a. The Central Pennsylvania Scholarship Fund will contact the donor when it receives notification that it has
been awarded tax credits and request the donor’s initial capital contribution. The donor will receive a copy of the award letter from the DCED with the letter requesting any capital contribution. The Central Pennsylvania Scholarship Fund has 60 days from the date on the letter to collect all capital contributions and make a donation to the Central Pennsylvania Scholarship Fund.
b. Donor sends their capital contribution directly to the Special Purpose Entity that they are a member of.
c. The Central Pennsylvania Scholarship Fund via numerous Special Purpose Entities acknowledges receipt of the capital contribution with the donor.
3. Activity in the Year Following the Donation
a. The donor will receive the following tax documents from their partnership in the Special Purpose Entity in February.
o PA Department of Revenue form 1123 for the SPE: Verifies that the tax credit exists for the SPE and the member’s personal portion has been transferred to their Tax ID or Social Security Number.
o Schedule K-1: Indicates the members share in the SPE and used when filling Federal Income Tax Return
b. The school will receive 100% of the donor’s contribution for tuition assistance in the next school year.
c. The state of Pennsylvania begins processing EITC tax credits on July 1. Credit disbursement usually happens beginning in mid-August to the end of August.
4. Making Second Capital Contribution
a. The Central Pennsylvania Scholarship Fund will contact the donor when it receives notification that it has been awarded tax credits and request the donor’s second capital contribution.
b. The rest of the process for Year 2 is the same as above.
5. Process in Year 3
a. The process in Year 3 will mirror the process in Year 1. The donor will be asked by the Central Pennsylvania Scholarship Fund to sign a new two-year Joinder Agreement and an initial capital contribution, when it is awarded tax credits. The rest of the process will mirror Years 1 & 2.
b. Therefore, donors will be asked for capital contribution (initial or second) every year and to resign Joinder
Agreement every other year.
