Frequently Asked Questions

The school would need to create a SO an SPE. You can reach out BLOCS, Central PA
Scholarship Fund, or PennGift Foundation.

The first step is to apply through DCED. Schools must setup a SO and/or SPE to accept donations on behalf of the school.

The maximum family income for EITC and OSTC applicants, according to the state website, is $108,444 , plus $19,088 for each dependent member of the household. In addition, students receiving OSTC scholarships must who live within the attendance boundaries of a low-achieving public school, as determined by PDE.

The formula is set by law and is based on family income which is tied to the federal poverty level.

Yes, you can work with as many SPEs as you need, but usually a school will create their own foundation OR setup their own SPE through a broker such as BLOCS, Central PA Scholarship Fund, or PennGift Foundation.

Yes.

Yes, you can search for new donors. Existing donors can also continue to give annually.

Yes.

No, not unless the Delaware resident is in the category of worker who pays income tax in Pennsylvania and or/files a Pennsylvania tax return.

Yes. Non-profit employees are allowed to participate in the SPE program, as they have their own state tax liability. (Your employer has no control over what you as a private citizen do with your paycheck/tax dollars). However, a non-profit organization cannot participate in the EITC program as they are tax exempt. Speaking from personal experience, I participate in the SPE program and am a nonprofit employee. View the law and see this FAQ on the topic.

EITC/OSTC tax credits are only for PreK and K-12 scholarships. However, if your program serves PreK students then you can apply to DCED to receive EITC funding for the Montessori students (but not for the college students.)

The DCED website provides guidelines for this. (Scroll down to the section titled Organizations, near the bottom of the page.) It does not appear that this is a time sensitive matter because DCED has been flexible on accepting applications. Reach out to Jim O’Donnell at DCED: jaodonnell@pa.gov

You need to be listed as a participating organization with DCED to start accepting donations.  Donors can start applying for tax credits in anticipation of your inclusion on the DCED list, but you will need to have an SPE setup to accept donations.

No. Schools should NOT do this. It is unlawful to donate to individual students. However, some SOs allow donors to direct their contributions to a specific school, which is lawful

Yes. Pennsylvania’s tax credit programs grow from year to year and there is continued push from lawmakers for annual increases to EITC and OSTC tax credit scholarships. A policy issue that could ensure continued grow would be an automatic index policy. This would allow the tax credit scholarship programs to grow with student need. For example, with an automatic index, the program cap would increase by 25 percent annually when 90 percent of available tax credits (allocated in the previous year) are utilized. This is a legislative action and something that lawmakers may adopt in the future.

Pennsylvania was the first state to enact tax credit scholarships in 2001 and is currently the 2^nd largest in the nation behind Florida. Florida’s program is in excess of $1 billion dollars, whereas Pennsylvania’s program is capped at $630 million (2024-25 school year). (For comparison, there are 1.7 million K12 students living in Pennsylvania, and 3.2 million living in Florida.) Visit the EdChoice School Choice in America dashboard to see a comparison of tax credit programs across the country.

No. Pennsylvania’s tax credit scholarship program is the first of its kind in the nation and was funded in 2001 at $30 million annually. Since then, the program has grown to $630 million annually (2024-25 school year.)

Yes, the SPE should be following up with the donor to let them know that their contribution was received.

No, the withholding for administrative fees is a maximum of 10 percent for any donation. If the SPE charges 10 percent, then your organization may not hold any of the donation for administrative expenses. There are SPEs that provide this service free of charge, which allows schools/scholarship organizations to utilize the 10 percent to cover their program administration costs.

Both are correct – it’s complicated! Technically a donor can claim 100 percent of the donation on their federal tax return, but then they lose the ability to deduct the donation on their state/local tax return. Donors who deduct 90 percent of the donation on their state/local tax return may only deduct the remaining 10 percent on their federal return.

Correct. However, the law allows organizations to utilize up to 15 percent, but only when utilizing a designated SO and when using a 990 form.

Information regarding unused tax credits is not public. Each SO tracks their own credits. The number of tax credits utilized will depend on the number of people opting into or out of the program. SOs cannot know how many credits are available until they reach out to the broker. If your broker doesn’t have credits available, they may be able to put you in touch with a different broker who may still have available credit.

The broker manages the credits and the contributions and is responsible for sending funds to the SOs. The SO manages only the contributions that come from the broker. SOs don’t have any control over credit or credit availability.

A homeschool cooperative is not eligible to receive EITC funds, unless your organization is a PDE approved private school. However, your organization could setup an EIO scholarship program for homeschoolers who exit your organization to attend a private school (Example: if your organization serves K-8 homeschool students, you could setup a scholarship for those matriculating to a private high school). Your organization would need to raise tax credit donations, use an SPE to process the donations, and award scholarships to students. The law allows EIOs to utilize 15 percent of the donations for administrative fees. However, this would be a lot of work for very little money. (Example: If your organization raises $10,000 in tax credits, and awards $8,500 in scholarships, the organization could utilize the remaining $1,500 for administrative costs.)

BLOCS has a tax calculator that might help with this. But to answer in more detail:

The state tax savings on a $10,000 donation is $7,500 for a one year commitment. If a business or individual donates $10,000 to a scholarship organization, the donor will receive a refund of $7,500 from the state and will pay the remaining balance $2,500 to the state for taxes due.

For a two year commitment, the donor would write a check to a scholarship organization in the amount of $10,000 and would receive a refund of $9,000 from the state. The donor would write a check of $1,000 (‘out of pocket’ expense) to the state to cover the donor’s tax liability.

The tax credit amount is the amount of credit (or refund) the donor will receive on their Pennsylvania tax return. The ‘out of pocket’ expense is the percentage they don’t receive in credit, either 10 percent (two year commitment) or 25 percent (one year commitment.)

A better way to look at it, instead of referring to it as an ‘out of pocket’ expense, is to tell donors: “You can pay $10,000 to Harrisburg or $1,000 to Harrisburg.” It’s not really an ‘out of pocket’ expense because they’d be paying that money in state taxes regardless.

One SO said: “Educating donors is a huge part of the success of our program. We tell them, “You’re going to pay Harrisburg either way. But why not help scholarship students with a majority of that money and give as little as possible to Harrisburg?” The response to that is usually, “Where do I sign up!?”

The adjustments to LLC caps are a legislative action that requires changing the law. DCED may be able to answer this question in more detail.

Unfortunately, no.

Yes, for EITC but not for EDS. EDS funds go into a bucket of money that gets distributed equally to EDS students across the state.

No. To be an applicant, you must be a designated 501c3 nonprofit.

An EIO is for public school students only. If your organization is bringing in students from
a local public school district for your programming, then you could consider is becoming an
EIO. But, if the students attending your programming are the same students that are attending the
private school, then you cannot qualify as an EIO.

Unfortunately, there's not. You can't just switch back and forth. The business is welcome to apply for EITC as an initial applicant to try to get their foot in the door to get approved for EITC tax credits.

There is no maximum, however, the total scholarship award may not exceed the amount of tuition charged by the school.

The timeline for SPEs is the same as the timeline for all who utilize tax credits for scholarships. You can find the timeline here. Additionally, the DCED provides a document for scholarship organizations that may be helpful.

In this scenario, the SO must award the scholarship and the scholarship must be used in either the current fiscal year or next fiscal year.

To clarify, there are three “years” at any given point:

1. The State Fiscal Year: July 1st to June 30th. This is the period during which DCED must award the tax credits, even if the donation occurs after the award letter. There is some leeway for renewal (starting in May) and awarding returned credits based on the waiting list.
2. Scholarship Organization Fiscal Year/School Year. The scholarships must be distributed during the fiscal year or the year following the year when the donation was received.
3. Calendar Year/Tax Year. Example: the donor must make the donation by December 31, 2024, to get the credit on the current year’s (2024) tax return. A donation made after January 1, 2025, would apply to the next year’s tax return (i.e., filed by April 15, 2025.)

Payout to organizations from the broker take place in 2 cycles: spring and fall. The broker will prompt the donor when to make their contribution to the SPE depending on which cycle the donor has chosen. 

If an SO utilizes the SPE program the SO will typically get paid either in the spring or the fall, depending on the cycle their donors select. Funds are paid in both cycles, but most of the funds are sent from SPE to the SO in the spring. (SOs cannot send contributions. Instead, SOs are the beneficiaries of contributions.) 

Typically, there is a waiting list of businesses who want to take advantage of credits. However, there is not usually a waiting list for individuals who want to utilize the program since individuals have less tax liability than businesses. SPEs can be helpful in assisting individuals to access the tax credit program. 

If going directly through the DCED, the companies seeking tax credit refunds apply directly to the state for credit. It is then the company’s responsibility to make their contribution to the SO within the timeframe outlined by the DCED in the approval letter.

Yes, that is correct. The $150 million increase that was approved in December 2023 is and will be available well into 2024. Businesses that didn’t cut donation checks by December 31st will still get the credit, but the credits won’t apply until the 2024 tax year.

There are several steps you can take:

1. You can proactively “set expectations” up front by letting donors know about the slow timeline. Some SOs are telling donors that the refund will take 18 months. (The refund may occur sooner but setting the expectation up front might alleviate frustration down the road.)
2. You can also work more closely with DCED to see if the process can be improved.
3. Encourage your SPE to file their tax returns and Form 1123 sooner, rather than take the full extension, so that individual donors can get their refunds sooner. 
4. Donors who are experiencing delays have been able to get the process moving by contacting their PA state representative and ask the representative to intervene.

There are several reasons for the delays. According to DCED, they cannot release the credits until the Pennsylvania Department of Revenue clears all the LLCs out of their compliance checks, and that seems to be what is delaying the process. One suggestion Revenue offered was for SPEs to file their tax returns and Form 1123 sooner, rather than take the full extension that they are allowed, so that individual donors can get their refunds sooner. (SPEs often file for an extension, and then wait to file tax returns until September. Filing for an extension if often necessary given the delays in receiving contributions.) The Department of Revenue then must allocate from the SPE (Rev-1123) to each individual donor to process their return. This process is why individuals returns for EITC aren’t being processed until October or later, with refunds following several months later.

Yes, the slow processing of tax returns regarding EITC is a widespread issue. This is affecting both the approval of Special Purpose Entities (SPEs) and refunds for individual donors. 

The timeline for returns and refunds:

1. April: Individual files tax return with the state.
2. The Pennsylvania Department of Revenue needs to get these forms from the SPE:
   1. REV-1123: Educational Improvement/Opportunity Scholarship Tax Credit Election Form.
   2. PA-65: Tax Return for LLC.
   3. Letter from DCED confirming contribution to scholarship organizations.
3. Summer: Typically, SPEs will file extensions, then wait to file tax returns until September. (Extensions are often necessary, given delays in contributions).
4. The Department of Revenue then must allocate from the SPE (Rev-1123) to each individual donor to process their return.
5. Fall: Individual returns are usually processed in October.
6. Winter: Due to the above timeline, refunds aren’t distributed until the end of the calendar year, or even as late as January of the new year. This delays the renewal of SPEs for the next year, as they must be verified for the prior year before the renewal is approved. Note that it can take 12-18 months for a refund.

Schools must do their own fundraising; scholarship organizations are not equipped to do so. School must manage their own donors and donor relationships, while the scholarship organization handles the financial transactions.

Yes, your school can participate! You need to contact DCED to apply to be considered for EITC/OSTC. Your school will need to solicit tax credit donations, as well as manage donors and donor relationships. Your organization can withhold up to 10 percent of tax donations to cover expenses related to administering the program, which can include hiring a staff member to handle Development and/or Fundraising.

You should contact both organizations that you’re currently working with because it is likely that both can create an SO for your school, which you can then market that to potential donors. Once you have the SO in place, you could market your school as being able to accept donations through CTF and CPSF. While those organizations may not resonate with donors in the same way that your school’s name does, if donors know where and how to donate, they should be able to navigate giving through an SO.

An Economically Disadvantaged School (EDS) is one where 51% or more students receive at least $500 in EITC scholarships.

Email Kathleen Harvey at BLOCS and put “school qualification worksheet” in the subject line.

Yes. EDS supplemental scholarships are up to $2,000 per K8 student, per year. High school students receive up to $4,000 per student per year in EDS funds. This is in addition to EITC and OSTC.

Yes. However, the total scholarship award may not exceed the amount of tuition charged by the school.

Yes.

Yes, for EITC but not for EDS. EDS funds go into a bucket of money that gets distributed equally to EDS students across the state.

It depends on the amount of funding raised from year to year for the program.

December 15th of the current school year. Starting in 2025 schools and families will find out in October.

No, but we prefer donations of $3000 or higher. But if an individual wants to participate in EDS with a lower amount, reach out to Kathleen Harvey at BLOCS.

You can view a list of schools on the BLOCS website and on pages 42 and 43 of this report.