When I was young, my father took us on a “free” vacation. That is, until he had to sit through a three-hour seminar on purchasing property at the resort and then the family climbed into the salesman’s station wagon (remember those?) to tour the development and available lots.
Or what about that free software you downloaded whose screen is cluttered by streaming advertisements that you cannot stop? The menswear store I frequent is known for their BOGO (buy-one-get-one) offers. But the second one is not really free; I never purchase from them at full price to begin with, it’s simply just a 50-percent-off discount for each.
We all know that free is not always free culturally (e.g. “you get what you pay for…”) and we are conditioned to believe that free is bad, or that free is something less desirable or less valuable.
Well, that’s not always true.
And here’s the proof text: You can make a contribution for educational scholarships and it will cost you nothing, or in some cases just pennies on the dollar. The PA Educational Improvement Tax Credit Program (EITC) allows you to convert your state tax liability to a charitable donation for less than a nickel on the dollar and in most cases for nothing. Free!
The only catch: you must apply for the tax credit.
Pennsylvania has created a simple online application process for these tax credits. It will take no more than a few minutes and the benefit is available to Pennsylvania tax-paying businesses, including C-Corporations, S-Corporations, Single and Multi-Member LLCs, and LLPs. That’s it.
In 2001 the Commonwealth of Pennsylvania, by overwhelming bi-partisan support, established the EITC program that enables businesses, including individuals with pass-through business tax liability, to claim tax credits against their tax liability for scholarship contributions made to state-certified scholarship organizations. The scholarships benefit lower income families, providing them with more choices of educational providers.
In the Lehigh Valley, the Jewish Federation is a state-approved scholarship organization and we directly benefit qualified students at the Jewish Community Center and the Jewish Day School.
The program is so simple it makes people think it is not real. Businesses, including S-Corp shareholders or partners in a general or limited partnership, simply submit a short online application to the PA Department of Community and Economic Development. The business (or individual for pass-through entities) makes the contribution to the Federation within 60 days of receiving the approval from the state. Then, they claim the tax credit for the tax year in which the contribution was made. The state tax credits can be as high as 100 percent, but typically it is 90 percent. And when factoring in the federal tax deduction for charitable contributions, the net cost might be nothing (free) or perhaps up to a mere 4.5 cents on the dollar, or only $450 for a $10,000 contribution.
The Federation awards the scholarships to low-income families who meet the state’s household income criteria.
More information, sample calculations and application information can be found at www.jewishlehighvalley.org/eitc.
Let’s get back to the catch. Each year, the Commonwealth of Pennsylvania budgets a certain amount of funds for the EITC program. Applications for the tax credits are accepted beginning on July 1 – early applications are not accepted and applications are processed on first-come, first-served basis until the budgeted credits are reserved. Because of the popularity of the program, the credits usually go fast and are exhausted within a few days of the July 1 opening day.
If you are interested, or know someone (or a business) that might be interested, please call me as soon as possible. More information is on our website. Your accountant can also substantiate how you can provide educational scholarships at the JDS and the JCC to low income families for virtually nothing.
For me there is a spring in my step – my happy walk! – when I get a really good deal, including something that is actually free or only costs me pennies on the dollar. With the EITC program you can convert your state tax liability, something you are already paying, to a charitable contribution to the Jewish Federation for the direct benefit of lower income families at the JCC and the JDS. You will feel great having accomplished something for (virtually) nothing and can join me in the happy walk!