Summer vacation is still in full swing, but thousands of students are celebrating the chance to go to a new school this fall. This week the Pennsylvania General Assembly passed what is called the School Code Bill enabling support for public schools to move forward and providing a $25 million increase in the Educational Improvement Tax Credit (EITC) and Opportunity Scholarship Tax Credit (OSTC) programs. The $175 million total line items fund scholarships for parents to send their children to a school that best suits their needs. Tens of thousands of students are able to attend Catholic schools with EITC and OSTC scholarships.
Both the EITC and OSTC programs provide businesses with a tax credit for donating to nonprofit scholarship or educational improvement organizations. These groups grant scholarships to students giving parents the economic means to choose the learning environment they believe is best for their children.
Scholarships are awarded according to the scholarship organization’s criteria. Minimally, EITC scholarships go to families with an annual household income of $75,000 or less with an additional $12,750 allowance per student and each other dependent living in the same home. Each diocese has its own program criteria. OSTC scholarships are for students who live within the attendance boundaries of a low-achieving public school as determined by the Pennsylvania Department of Education are eligible to receive a scholarship if their household’s annual income is the same as the EITC program discussed above. However, it is targeted to students with the greatest need, so priority is given to families closest to the poverty line.
Tax credits are not deductions; they are an actual reduction in the tax liability of a business. A onetime donation to a K-12 scholarship program earns a 75% tax credit; a two-year commitment yields a 90% tax credit. A business contributing to a pre-kindergarten scholarship program receives a 100% tax credit for the first $10,000 and a 90% credit thereafter. To be eligible for a tax credit, a business must pay at least one of Pennsylvania’s business taxes.
Pennsylvania’s 2016-2017 state budget debate has been a difficult one, but fortunately for parents everywhere, EITC and OSTC scholarships will be a welcome blessing.