McKonly & Asbury Webinar - Maximizing Community Impact Through EITC
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The document outlines the Pennsylvania Educational Improvement Tax Credit (EITC) program, which offers tax credits to businesses contributing to qualified educational organizations, with a total budget of $100 million for 2012-2013. Businesses can receive up to a 90% tax credit for contributions, with detailed examples illustrating the tax savings and application procedures. Important deadlines and limitations for participation, including application requirements and maximum credits, are also provided.
McKonly & Asbury Webinar - Maximizing Community Impact Through EITC
- 1. 5/15/2013 MAXIMIZING COMMUNITY IMPACT USING THE PENNSYLVANIA EDUCATIONAL IMPROVEMENT TAX CREDIT PROGRAM (EITC) GREG LOWE, (PARTNER, COO) MICHAEL EBY, CPA, (TAX SUPERVISOR)
- 2. 5/15/2013 FRAUD ENGAGEMENT FROM A TO Z SAMUEL BOWERCRAFT, MSIS, CISA & DAVID HAMMARBERG, CPA, CFE, CISSP, MCSE, WXYZ
- 3. 05/15/13
- 4. 5/15/2013 MAXIMIZING COMMUNITY IMPACT USING THE PENNSYLVANIA EDUCATIONAL IMPROVEMENT TAX CREDIT PROGRAM (EITC) GREG LOWE, (PARTNER, COO) MICHAEL EBY, CPA, (TAX SUPERVISOR)
- 5. Michael Eby • CPA • Supervisor • Tax Specialist Greg Lowe • COO • Management & Consulting Specialist A BIT ABOUT US
- 6. WHAT IS THE EITC PROGRAM? • Administered by the Department of Community and Economic Development (DCED) • A tax credit is awarded to businesses that make contributions to qualified: • Scholarship Organizations • Educational Improvement Organizations • Pre-K Scholarship Organizations • List of qualifying organizations can be found on DCED website - www.newpa.com • 2012-2013 State budget has allocated $100 million for program
- 7. WHAT IS THE BENEFIT FOR BUSINESSES PARTICIPATING IN THE EITC PROGRAM? • Either a 75% tax credit (1 year commitment) or 90% tax credit (2 year commitment) up to $750,000 maximum annual credit • Scholarship Organizations • Educational Improvement Organizations • Contributions to Pre-Kindergarten Scholarship Organizations: • 100% credit for first $10,000 contributed, 90% credit after that up to a maximum $200,000 credit per year
- 8. WHAT ARE THE ELIGIBLE TAXES FOR WHICH THE CREDIT CAN BE APPLIED? • Capital Stock/Foreign Franchise Tax • Corporate Net Income Tax • Bank and Trust Shares Tax • Title Insurance Companies Shares Tax • Insurance Premiums Tax • Mutual Thrift Institution Tax • Tax under the Insurance Company Law of 1921 • Personal Income Tax
- 9. EXAMPLE 1 - C CORPORATIONS Without EITC contribution Contribution (2-year commitment) Net Taxable Income prior to contribution and income taxes 300,000 300,000 EITC Contribution N/A 10,000 State Addback of contributions qualifying for PA EITC N/A N/A Adjusted PA Taxable Income 300,000 290,000 PA State Income Tax (9.99%) (29,970) (28,971) Reduction in State Income Tax Due To Credit 9,000 PA State Income Tax Expense After Reductions (29,970) (19,971) Adjusted Federal Taxable Income After State Taxes 270,030 270,029 Federal income taxes 88,562 88,562 Federal Income Tax Savings 0 PA Income Tax Savings 9,999 Total Tax Savings 9,999 Net Cost of $10,000 EITC Contribution 1
- 10. EXAMPLE 1 - C CORPORATIONS Without EITC contribution Contribution (2-year commitment) Net Taxable Income prior to contribution and income taxes 300,000 300,000 EITC Contribution N/A 10,000 State Addback of contributions qualifying for PA EITC N/A N/A Adjusted PA Taxable Income 300,000 290,000 PA State Income Tax (9.99%) (29,970) (28,971) Reduction in State Income Tax Due To Credit 9,000 PA State Income Tax Expense After Reductions (29,970) (19,971) Adjusted Federal Taxable Income After State Taxes 270,030 270,029 Federal income taxes 88,562 88,562 Federal Income Tax Savings 0 PA Income Tax Savings 9,999 Total Tax Savings 9,999 Net Cost of $10,000 EITC Contribution 1
- 11. EXAMPLE 1 - C CORPORATIONS Without EITC contribution Contribution (2-year commitment) Net Taxable Income prior to contribution and income taxes 300,000 300,000 EITC Contribution N/A 10,000 State Addback of contributions qualifying for PA EITC N/A N/A Adjusted PA Taxable Income 300,000 290,000 PA State Income Tax (9.99%) (29,970) (28,971) Reduction in State Income Tax Due To Credit 9,000 PA State Income Tax Expense After Reductions (29,970) (19,971) Adjusted Federal Taxable Income After State Taxes 270,030 270,029 Federal income taxes 88,562 88,562 Federal Income Tax Savings 0 PA Income Tax Savings 9,999 Total Tax Savings 9,999 Net Cost of $10,000 EITC Contribution 1
- 12. EXAMPLE 1 - C CORPORATIONS Without EITC contribution Contribution (2-year commitment) Net Taxable Income prior to contribution and income taxes 300,000 300,000 EITC Contribution N/A 10,000 State Addback of contributions qualifying for PA EITC N/A N/A Adjusted PA Taxable Income 300,000 290,000 PA State Income Tax (9.99%) (29,970) (28,971) Reduction in State Income Tax Due To Credit 9,000 PA State Income Tax Expense After Reductions (29,970) (19,971) Adjusted Federal Taxable Income After State Taxes 270,030 270,029 Federal income taxes 88,562 88,562 Federal Income Tax Savings 0 PA Income Tax Savings 9,999 Total Tax Savings 9,999 Net Cost of $10,000 EITC Contribution 1
- 13. EXAMPLE 1 - C CORPORATIONS Without EITC contribution Contribution (2-year commitment) Net Taxable Income prior to contribution and income taxes 300,000 300,000 EITC Contribution N/A 10,000 State Addback of contributions qualifying for PA EITC N/A N/A Adjusted PA Taxable Income 300,000 290,000 PA State Income Tax (9.99%) (29,970) (28,971) Reduction in State Income Tax Due To Credit 9,000 PA State Income Tax Expense After Reductions (29,970) (19,971) Adjusted Federal Taxable Income After State Taxes 270,030 270,029 Federal income taxes 88,562 88,562 Federal Income Tax Savings 0 PA Income Tax Savings 9,999 Total Tax Savings 9,999 Net Cost of $10,000 EITC Contribution 1
- 14. EXAMPLE 1 - C CORPORATIONS Without EITC contribution Contribution (2-year commitment) Net Taxable Income prior to contribution and income taxes 300,000 300,000 EITC Contribution N/A 10,000 State Addback of contributions qualifying for PA EITC N/A N/A Adjusted PA Taxable Income 300,000 290,000 PA State Income Tax (9.99%) (29,970) (28,971) Reduction in State Income Tax Due To Credit 9,000 PA State Income Tax Expense After Reductions (29,970) (19,971) Adjusted Federal Taxable Income After State Taxes 270,030 270,029 Federal income taxes 88,562 88,562 Federal Income Tax Savings 0 PA Income Tax Savings 9,999 Total Tax Savings 9,999 Net Cost of $10,000 EITC Contribution 1
- 15. EXAMPLE 1 - C CORPORATIONS Without EITC contribution Contribution (2-year commitment) Net Taxable Income prior to contribution and income taxes 300,000 300,000 EITC Contribution N/A 10,000 State Addback of contributions qualifying for PA EITC N/A N/A Adjusted PA Taxable Income 300,000 290,000 PA State Income Tax (9.99%) (29,970) (28,971) Reduction in State Income Tax Due To Credit 9,000 PA State Income Tax Expense After Reductions (29,970) (19,971) Adjusted Federal Taxable Income After State Taxes 270,030 270,029 Federal income taxes 88,562 88,562 Federal Income Tax Savings 0 PA Income Tax Savings 9,999 Total Tax Savings 9,999 Net Cost of $10,000 EITC Contribution 1
- 16. EXAMPLE 1 - C CORPORATIONS Without EITC contribution Contribution (2-year commitment) Net Taxable Income prior to contribution and income taxes 300,000 300,000 EITC Contribution N/A 10,000 State Addback of contributions qualifying for PA EITC N/A N/A Adjusted PA Taxable Income 300,000 290,000 PA State Income Tax (9.99%) (29,970) (28,971) Reduction in State Income Tax Due To Credit 9,000 PA State Income Tax Expense After Reductions (29,970) (19,971) Adjusted Federal Taxable Income After State Taxes 270,030 270,029 Federal income taxes 88,562 88,562 Federal Income Tax Savings 0 PA Income Tax Savings 9,999 Total Tax Savings 9,999 Net Cost of $10,000 EITC Contribution 1
- 17. EXAMPLE 2 - PASS-THROUGH ENTITIES Without EITC contribution Contribution (2-year commitment) Net Taxable Income prior to contribution and income taxes 300,000 300,000 EITC Contribution N/A 0 State Addback of expenses qualifying for PA EITC N/A 0 Adjusted PA Taxable Income 300,000 300,000 PA State Income Tax (3.07%) (9,210) (9,210) Reduction in State Income Tax (Itemized Deductions) 9,000 Federal Charitable Contribution Deduction (10,000) Adjusted Federal Taxable Income After Itemized Deductions 290,790 289,790 Federal income taxes (Assuming 35% marginal bracket) 101,777 101,427 Federal Income Tax Savings 350 PA Income Tax Savings 9,000 Total Tax Savings 9,350 Net Cost of $10,000 EITC Contribution 650
- 18. EXAMPLE 2 - PASS-THROUGH ENTITIES Without EITC contribution Contribution (2-year commitment) Net Taxable Income prior to contribution and income taxes 300,000 300,000 EITC Contribution N/A 0 State Addback of expenses qualifying for PA EITC N/A 0 Adjusted PA Taxable Income 300,000 300,000 PA State Income Tax (3.07%) (9,210) (9,210) Reduction in State Income Tax (Itemized Deductions) 9,000 Federal Charitable Contribution Deduction (10,000) Adjusted Federal Taxable Income After Itemized Deductions 290,790 289,790 Federal income taxes (Assuming 35% marginal bracket) 101,777 101,427 Federal Income Tax Savings 350 PA Income Tax Savings 9,000 Total Tax Savings 9,350 Net Cost of $10,000 EITC Contribution 650
- 19. EXAMPLE 2 - PASS-THROUGH ENTITIES Without EITC contribution Contribution (2-year commitment) Net Taxable Income prior to contribution and income taxes 300,000 300,000 EITC Contribution N/A 0 State Addback of expenses qualifying for PA EITC N/A 0 Adjusted PA Taxable Income 300,000 300,000 PA State Income Tax (3.07%) (9,210) (9,210) Reduction in State Income Tax (Itemized Deductions) 9,000 Federal Charitable Contribution Deduction (10,000) Adjusted Federal Taxable Income After Itemized Deductions 290,790 289,790 Federal income taxes (Assuming 35% marginal bracket) 101,777 101,427 Federal Income Tax Savings 350 PA Income Tax Savings 9,000 Total Tax Savings 9,350 Net Cost of $10,000 EITC Contribution 650
- 20. EXAMPLE 2 - PASS-THROUGH ENTITIES Without EITC contribution Contribution (2-year commitment) Net Taxable Income prior to contribution and income taxes 300,000 300,000 EITC Contribution N/A 0 State Addback of expenses qualifying for PA EITC N/A 0 Adjusted PA Taxable Income 300,000 300,000 PA State Income Tax (3.07%) (9,210) (9,210) Reduction in State Income Tax (Itemized Deductions) 9,000 Federal Charitable Contribution Deduction (10,000) Adjusted Federal Taxable Income After Itemized Deductions 290,790 289,790 Federal income taxes (Assuming 35% marginal bracket) 101,777 101,427 Federal Income Tax Savings 350 PA Income Tax Savings 9,000 Total Tax Savings 9,350 Net Cost of $10,000 EITC Contribution 650
- 21. EXAMPLE 2 - PASS-THROUGH ENTITIES Without EITC contribution Contribution (2-year commitment) Net Taxable Income prior to contribution and income taxes 300,000 300,000 EITC Contribution N/A 0 State Addback of expenses qualifying for PA EITC N/A 0 Adjusted PA Taxable Income 300,000 300,000 PA State Income Tax (3.07%) (9,210) (9,210) Reduction in State Income Tax (Itemized Deductions) 9,000 Federal Charitable Contribution Deduction (10,000) Adjusted Federal Taxable Income After Itemized Deductions 290,790 289,790 Federal income taxes (Assuming 35% marginal bracket) 101,777 101,427 Federal Income Tax Savings 350 PA Income Tax Savings 9,000 Total Tax Savings 9,350 Net Cost of $10,000 EITC Contribution 650
- 22. EXAMPLE 2 - PASS-THROUGH ENTITIES Without EITC contribution Contribution (2-year commitment) Net Taxable Income prior to contribution and income taxes 300,000 300,000 EITC Contribution N/A 0 State Addback of expenses qualifying for PA EITC N/A 0 Adjusted PA Taxable Income 300,000 300,000 PA State Income Tax (3.07%) (9,210) (9,210) Reduction in State Income Tax (Itemized Deductions) 9,000 Federal Charitable Contribution Deduction (10,000) Adjusted Federal Taxable Income After Itemized Deductions 290,790 289,790 Federal income taxes (Assuming 35% marginal bracket) 101,777 101,427 Federal Income Tax Savings 350 PA Income Tax Savings 9,000 Total Tax Savings 9,350 Net Cost of $10,000 EITC Contribution 650
- 23. EXAMPLE 2 - PASS-THROUGH ENTITIES Without EITC contribution Contribution (2-year commitment) Net Taxable Income prior to contribution and income taxes 300,000 300,000 EITC Contribution N/A 0 State Addback of expenses qualifying for PA EITC N/A 0 Adjusted PA Taxable Income 300,000 300,000 PA State Income Tax (3.07%) (9,210) (9,210) Reduction in State Income Tax (Itemized Deductions) 9,000 Federal Charitable Contribution Deduction (10,000) Adjusted Federal Taxable Income After Itemized Deductions 290,790 289,790 Federal income taxes (Assuming 35% marginal bracket) 101,777 101,427 Federal Income Tax Savings 350 PA Income Tax Savings 9,000 Total Tax Savings 9,350 Net Cost of $10,000 EITC Contribution 650
- 24. EXAMPLE 2 - PASS-THROUGH ENTITIES Without EITC contribution Contribution (2-year commitment) Net Taxable Income prior to contribution and income taxes 300,000 300,000 EITC Contribution N/A 0 State Addback of expenses qualifying for PA EITC N/A 0 Adjusted PA Taxable Income 300,000 300,000 PA State Income Tax (3.07%) (9,210) (9,210) Reduction in State Income Tax (Itemized Deductions) 9,000 Federal Charitable Contribution Deduction (10,000) Adjusted Federal Taxable Income After Itemized Deductions 290,790 289,790 Federal income taxes (Assuming 35% marginal bracket) 101,777 101,427 Federal Income Tax Savings 350 PA Income Tax Savings 9,000 Total Tax Savings 9,350 Net Cost of $10,000 EITC Contribution 650
- 25. EXAMPLE 2 - PASS-THROUGH ENTITIES Without EITC contribution Contribution (2-year commitment) Net Taxable Income prior to contribution and income taxes 300,000 300,000 EITC Contribution N/A 0 State Addback of expenses qualifying for PA EITC N/A 0 Adjusted PA Taxable Income 300,000 300,000 PA State Income Tax (3.07%) (9,210) (9,210) Reduction in State Income Tax (Itemized Deductions) 9,000 Federal Charitable Contribution Deduction (10,000) Adjusted Federal Taxable Income After Itemized Deductions 290,790 289,790 Federal income taxes (Assuming 35% marginal bracket) 101,777 101,427 Federal Income Tax Savings 350 PA Income Tax Savings 9,000 Total Tax Savings 9,350 Net Cost of $10,000 EITC Contribution 650
- 26. HOW DOES A BUSINESS APPLY FOR THE CREDIT? • July 1, 2013 for first year applicants • First come, first served by day basis • www.newpa.com • New requirement for 2013: “Single Application for Assistance” • Hard copy signature page also required • Renewal applications due between May 15th and June 28th 2013
- 27. IMPORTANT LIMITATIONS/DEADLINES TO KEEP IN MIND • $750,000 total credit limit per business per year • $200,000 maximum credit for Pre-K scholarship • Must make contribution within 60 days of date of approval letter • DCED must receive written notification of contribution within 90 days of approval letter • Cannot be sold, assigned, or carried forward except for an election to “pass-through” the credit to owners • Credits can be utilized against 100% of taxpayer’s tax liability.
- 28. HOW DOES THE CREDIT GET REPORTED ON THE TAX RETURNS? • Credit is available for the tax year in which the contribution was made • PA Rev-1123 “EITC Election Form” • PA Schedule OC • If passing through the credit to the owners, they can elect to utilize the credit in the current tax year or the next tax year
- 29. OPPORTUNITY SCHOLARSHIP TAX CREDIT PROGRAM (“EITC 2.0”) • New in 2012 as part of the Governor’s State Budget • Organizations that provide tuition assistance to eligible students residing in the boundaries of a “low achieving school” • Similar guidelines as the original EITC Program • $50 million allocated to program from 2012-2013 budget
- 30. EITC PROGRAM CONTACT INFORMATION Pennsylvania Department of Community & Economic Development (DCED), Center for Business Financing-Tax Credit Division • Website: www.newpa.com • Phone number: (717) 787-7120 • Email: RA-EITC@pa.gov
- 31. Michael Eby meby@macpas.com Greg Lowe glowe@macpas.com A BIT ABOUT US
- 32. 05/15/13
- 33. 5/15/2013 FRAUD ENGAGEMENT FROM A TO Z SAMUEL BOWERCRAFT, MSIS, CISA & DAVID HAMMARBERG, CPA, CFE, CISSP, MCSE, WXYZ
Editor's Notes
- #27: May 15 th -not just for year 2 of 2, but also for year 1 of a new 2 year commitment after a two year commitment had been fulfilled.