State lawmakers are giving more businesses the chance to lower their tax burden by donating money to educational organizations through a widely used tax credit program.
The state budget adopted this month increases the volume of tax credits available under the Educational Improvement Tax Credit program, or EITC, which typically runs out of funding each year.
The new cap for EITC is $160 million, up from $135 million.
The EITC program, overseen by the Department of Community and Economic Development, allows businesses to earn tax credits to offset their state tax burden if they make contributions to qualifying education organizations. The organizations – typically private or charter schools – then use the money to offer scholarships to children in kindergarten through 12th grade or to create learning improvement programs.
The additional $25 million shows the growth of the EITC from its inception in 2001, according to Otto Banks, executive director of the REACH Foundation, a Harrisburg-based coalition that advocates for parental choice in education.
“With the new $25 million that have been added to the program, we expect that thousands of new children throughout Pennsylvania will be able to gain access to quality education,” Banks said. “Each year the funding for scholarships is exhausted, and most scholarship organizations have to turn applicants away, as there is such high demand.”
Pennsylvania House Speaker Mike Turzai, (R-Alleghany) has fought to expand the EITC over the years. The program’s funding was initially capped at $30 million in 2001 and has seen steady growth since then, including a $25 million increase in 2012 that set a cap of $100 million.
“Families who want educational opportunities – to attend non-public schools or to participate in afterschool educational enhancement activities – but cannot afford them have found the educational improvement and opportunity scholarships to be positively life-changing,” Turzai said.
Lawmakers also increased the maximum annual household income at which students are eligible for EITC-funded scholarships to $85,000. The previous limit was $75,000.
The increase will allow more middle-class families to benefit from the EITC program, Turzai said in a statement
Neal Lesher, a spokesperson for Turzai’s office, said that with the expansion of the EITC program, more businesses will be able to participate rather than be turned away.
“Demand for this program continues to grow and the Commonwealth hits the cap on available credits every year,” Lesher said.
Other changes to the law include allowing businesses to file an appellate brief in the Commonwealth Court if the DCED misses the approval or disapproval notification deadlines by more than 10 days.
Lesher belives that Gov. Wolf, or any governor, should not be able to hold up EITC credits if there is an unsigned budget, as was the case in 2015 when Wolf put an impasse-related freeze on sending approval letters. As a part of the school code, the DCED must approve applications from businesses seeking tax credits by Aug. 15 or 30 days after the submission, whichever is later.
“Several lawmakers, businesses and recipients of EITC scholarships were frustrated last year when those deadlines were ignored by the Wolf Administration,” Lesher said. “We felt that the law needed additional teeth to ensure that these applications are approved timely.”
Banks also said the DCED has a history of processing applications “in a timely and efficient manner” but that the timeliness fluctuates with each administration.
The EITC program also came under fire in March after complaints of inappropriate contact surfaced involving an assistant principal at a Pittsburgh school that was benefiting from the tax-credit program.
Auditor General Eugene DePasquale announced that he would be looking into which educational organizations qualify for the EITC program and how to improve transparency and accountability from the school organizations.
Editor’s Note: This story has been updated from its original form to attribute quotes from REACH Executive Director Otto Banks.