The Pennsylvania legislature enacted and launched the Educational Improvement Tax Credit Program in 2001. The program offers corporations tax credits for donating to organizations that provide low- and middle-income families private school and prekindergarten scholarships, as well as organizations that support innovative public school programs. Learn more about this program’s funding, eligibility and regulations on this page.
Pennsylvania offers tax credits for corporate contributions to the following nonprofit organizations: Scholarship Organizations (SOs), which provide private school scholarships; Educational Improvement Organizations (EIOs), which support innovative programs in public schools; or prekindergarten scholarship organizations (PKSOs).
Each approved organization determines scholarship amounts. Tax credits are worth 75 percent of the contribution; however, a 90 percent credit can be claimed if the corporation commits to two consecutive annual contributions. In either case, the maximum tax credit is $750,000 per company; however, this cap will be lifted from October 1 through November 30 if credits go unclaimed. Credits are awarded to companies on a first-come, first-served basis until the $160 million cap is reached.
Children are eligible for scholarships if their household incomes are less than $85,000 plus $15,608 for each child in the family. For example, a family with one child must have an income below $100,608, whereas a family with three children must have an income below $131,824. The figures will increase in future years to account for inflation. Students with special needs are eligible for scholarships if they come from families who earn 150 percent of the baseline income level (for example, a family with one child may earn up to $150,912) or less, and those with the most severe special needs are eligible if they come from families who earn 299 percent of the baseline income level ($301,120 for a one-child family) or less.
Pennsylvania’s tax-credit scholarship program has considerable room to grow on overall funding. Although lawmakers increased the total credits available by $25 million, it falls short of providing scholarships for all applicants. In 2017, more than half of applicants were rejected due to insufficient funds. However, the income requirements in the program are among the most generous of the means-tested school choice programs and are appropriately higher for students with special needs based on their particular types of special needs. As for scholarship funding, the program gives SOs the opportunity to determine scholarship mounts. Unfortunately, that is mitigated by the cap on overall funding, which tends to incentivize SOs to give smaller scholarships. The program fares well on school regulations. There are no unnecessary testing or admissions requirements, and all private schools can qualify as long as they satisfy the state’s mandatory attendance requirements and obey the Civil Rights Act of 1964. Pennsylvania’s program should increase the overall cap on tax credits, which would allow scholarship sizes and student participation numbers to grow.
72 P.S. §§ 8701-F through 8708-F and 9902E
No legal challenges have been filed against the program.
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