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§ 20-2005-B. Tax credits

Purdon's Pennsylvania Statutes and Consolidated StatutesTitle 24 P.S. EducationEffective: July 8, 2022

Purdon's Pennsylvania Statutes and Consolidated Statutes
Title 24 P.S. Education
Chapter 1. Public School Code of 1949 (Refs & Annos)
Article XX-B. Educational Tax Credits (Refs & Annos)
Effective: July 8, 2022
24 P.S. § 20-2005-B
Formerly cited as PA ST 72 P.S. § 8705-F
§ 20-2005-B. Tax credits
(a) Scholarship or educational improvement organizations.--In accordance with section 2006-B,1 the Department of Revenue shall grant a tax credit against any applicable tax to a business firm providing proof of a contribution to a scholarship organization or educational improvement organization in the taxable year in which the contribution is made in accordance with the following:
(1) The tax credit shall not exceed 75% of the total amount contributed during the taxable year by the business firm.
(2) For fiscal year 2014-2015, and each fiscal year thereafter, the tax credit shall not exceed $750,000 annually per business firm for contributions made to scholarship organizations or educational improvement organizations except as provided under subsection (i).
(a.1) Opportunity scholarship organizations.--In accordance with section 2006-B, the Department of Revenue shall grant a tax credit against any applicable tax to a business firm providing proof of a contribution to an opportunity scholarship organization in the taxable year in which the contribution is made in accordance with the following:
(1) The tax credit shall not exceed 75% of the total amount contributed during the taxable year by the business firm.
(2) For fiscal year 2014-2015, and each fiscal year thereafter, the tax credit shall not exceed $750,000 annually per business firm for contributions made to opportunity scholarship organizations, except as provided in subsection (i).
(b) Additional amount.--In accordance with section 2006-B, the Department of Revenue shall grant a tax credit of up to 90% of the total amount contributed during the taxable year if the business firm provides a written commitment to provide the scholarship organization, educational improvement organization or opportunity scholarship organization with the same amount of contribution for two consecutive tax years. The business firm must provide the written commitment under this subsection to the department at the time of application.
(c) Pre-kindergarten scholarship organizations.--In accordance with section 2006-B, the Department of Revenue shall grant a tax credit against any applicable tax to a business firm providing proof of a contribution to a pre-kindergarten scholarship organization in the taxable year in which the contribution is made in accordance with the following:
(1) The tax credit shall be equal to 100% of the first $10,000 contributed during the taxable year by the business firm and shall not exceed 90% of the remaining amount contributed during the taxable year by the business firm. At the time of application, a business firm may provide a written commitment to the department to provide the pre-kindergarten scholarship organization with at least the same amount of contribution for two consecutive years.
(2) The tax credit shall not exceed $200,000 annually per business firm for contributions made to pre-kindergarten scholarship organizations, except as provided in subsection (i).
(d) Combination of tax credits.--In accordance with section 2006-B, a business firm may receive tax credits from the Department of Revenue in any tax year for any combination of contributions under subsection (a), (a.1), (b) or (c). Except as provided in subsection (i), in no case may a business firm receive tax credits in any tax year in excess of the following:
(1) $750,000 for combined contributions to scholarship and educational improvement organizations under subsections (a) and (b).
(2) $750,000 for contributions to opportunity scholarship organizations under subsections (a.1) and (b).
(3) $200,000 for contributions to pre-kindergarten scholarship organizations under subsection (c).
(e) Pass-through entity.--
(1) If a pass-through entity does not intend to use all approved tax credits under this section, it may elect in writing to distribute for no consideration all or a portion of the credit to shareholders, members or partners in proportion to the percentage interest of the shareholder, member or partner in distributions from the pass-through entity, which credits may be used by the shareholders, members or partners in the taxable year in which the contribution is made or in the taxable year immediately following the year in which the contribution is made. The election shall designate the year in which the distributed credits are to be used and shall be made according to procedures established by the Department of Revenue. A pass-through entity that received a distribution from a pass-through entity under this paragraph may make a distribution under this paragraph.
(2) A pass-through entity and a shareholder, member or partner of a pass-through entity shall not claim the credit under this section for the same contribution.
(3) The shareholder, member or partner may not carry forward, carry back, obtain a refund of or sell or assign the credit.
(4) An individual shareholder, partner or member may apply a credit distributed under this section to income taxable under Article III of the Tax Reform Code of 19712 to the shareholder, partner or member, to the spouse of the shareholder, partner or member or to both, if both the shareholder, partner or member and the spouse report income on a joint personal income tax return.
(f) Restriction on applicability of credits.--No credits granted under this section shall be applied against any tax withheld by an employer from an employee under Article III of the Tax Reform Code of 1971.
(g) Time of application for credits.--
(1) Except as provided in paragraph (2), the department may accept applications for tax credits available during a fiscal year no earlier than July 1 of each fiscal year.
(2) The application of any business firm for tax credits available during a fiscal year as part of the second year of a two-year commitment or as a renewal of a two-year commitment which was fulfilled in the previous fiscal year may be accepted no earlier than May 15 preceding the fiscal year. In order to be eligible for the early application date under this paragraph, the contributions included in the second year of a two-year commitment or renewal of a two-year commitment must be made to the same type of organization.
(3) Applications for tax credits submitted on July 1 under paragraph (1) for a two-year commitment by a business firm that applied for and was denied credits in the prior fiscal year and that had been approved for tax credits in a prior fiscal year, shall be considered prior to an application from a business firm that does not meet the criteria in this paragraph. A business firm seeking preference under this paragraph shall include proof of prior approval tax credits in its July 1 application.
(g.1) Approval of tax credits.--Unless otherwise requested by the business firm and agreed to by both the business firm and the department, and unless all authorized credits have already been awarded:
(1) For fiscal year 2016-2017, and each fiscal year thereafter, the department shall give written notice of its approval to each business firm that submitted a completed application under subsection (g) by August 15, or 30 days following receipt of the completed application, whichever is later.
(2) For fiscal year 2016-2017, and each fiscal year thereafter, the department shall give written notice of its approval to each business firm that submitted a completed application under subsection (j)(2) within 30 days following receipt of the completed application.
(3) Should the department fail, for a period of at least 10 days, to timely transmit any of the written notices required by this subsection, the affected business may bring an action for injunction or other appropriate relief in Commonwealth Court.
(h) Waiting list.--The department shall maintain a waiting list consisting of each business firm which chooses to be included on the list and whose application has not been approved because all available tax credits have been awarded. A business firm that was not awarded a tax credit due to a lack of available tax credits shall be notified of and offered a place on the waiting list. When tax credits become available, the department shall award the tax credits to the business firms in the order in which the business firms were placed on the waiting list.
(i) Temporary increase in maximum tax credits available.--
(1) If all tax credits authorized under this article for contributions to the category of scholarship organizations, opportunity scholarship organizations or pre-kindergarten scholarship organizations have not been awarded as of October 1 of any fiscal year, then for applications accepted by the department from October 1 through November 30 of such fiscal year, the limitations set forth in subsections (a), (a.1), (c) and (d) relating to the maximum amount of tax credits a business firm can receive during a fiscal year for contributions to each such category of organizations shall not apply. Under this paragraph, the department may accept applications under section 2004-B3 from October 1 through November 30 as follows:
(i) A business firm, including a business firm that already applied for the maximum tax credits available pursuant to subsections (a) and (d), may apply under section 2004-B(a) for up to the total amount of tax credits remaining available for contributions to scholarship organizations for the fiscal year as set forth in section 2006-B(a)(1).
(ii) A business firm, including a business firm that already applied for the maximum tax credits available pursuant to subsections (a.1) and (d), may apply under section 2004-B(a) for up to the total amount of tax credits remaining available for contributions to opportunity scholarship organizations for the fiscal year as set forth in section 2006-B(a)(3).
(iii) A business firm, including a business firm that already applied for the maximum tax credits available pursuant to subsections (c) and (d), may apply under section 2004-B(a) for up to the total amount of tax credits remaining available for contributions to pre-kindergarten scholarship organizations for the fiscal year as set forth in section 2006-B(a)(2).
(2) The provisions of subsection (b) shall not apply to applications for tax credits made under this subsection. Tax credits awarded under this subsection shall not exceed 75% of the total amount contributed during the taxable year by a business firm pursuant to an application filed under this subsection.
(3) Prior to the award of tax credits applied for under this subsection, the department shall first award tax credits applied for by a business firm during the period October 1 through November 30 in an amount no greater than the maximum amount of tax credits for which a business firm is eligible under subsections (a), (a.1), (c) and (d). The tax credits shall be awarded on a first-come, first-served basis as set forth in section 2004-B(c).
(4) After the department has awarded tax credits under paragraph (3), any tax credits remaining available within the category of scholarship organizations, opportunity scholarship organizations and pre-kindergarten scholarship organizations shall be awarded based on the total amount of tax credits within each category of organization for which applications are received under this subsection from October 1 through November 30 of the fiscal year as follows:
(i) If the total amount of tax credits applied for by all business firms under this subsection does not exceed the total amount of tax credits that remained available for award within a category as of October 1, less those tax credits awarded under paragraph (3), then each business firm may be awarded the full amount of tax credits applied for.
(ii) If the total amount of tax credits applied for by all business firms under this subsection exceeds the total amount of tax credits that remained available for award within a category as of October 1, less those tax credits awarded under paragraph (3), then each business firm may be awarded an amount of tax credits determined by multiplying the amount of tax credits applied for by the business firm by a ratio, the numerator of which is the total amount of tax credits that remained available for award within the category as of October 1, less those awarded as set forth in paragraph (3), and the denominator of which is the total amount of tax credits applied for by all business firms under this subsection.
(4.1) If all tax credits authorized under this article for contributions to the category of scholarship organizations, opportunity scholarship organizations or pre-kindergarten scholarship organizations have not been awarded as of November 30 of any fiscal year, then for applications accepted by the department from December 1 through the end of the fiscal year, the limitations set forth in subsections (a), (a.1), (c) and (d) relating to the maximum amount of tax credits a business firm can receive during a fiscal year for contributions to each such category of organizations shall not apply. Under this paragraph, the department may accept applications under section 2004-B from December 1 through the end of the fiscal year and shall award tax credits under this article for contributions to the category of scholarship organizations, opportunity scholarship organizations or pre-kindergarten scholarship organizations on a first-come, first-served basis until all tax credits available for the fiscal year have been exhausted.
(5) Notwithstanding a temporary increase in maximum tax credits available under this subsection, the limitations set forth in subsections (a), (a.1), (c) and (d) relating to the maximum amount of tax credits a business firm can receive during a year for contributions to a category of scholarship organizations, opportunity scholarship organizations or pre-kindergarten scholarship organizations shall be reinstated for all applications accepted by the department after June 30 of the fiscal year.
(j) Reallocation of tax credits.--
(1) Beginning on January 1 of any fiscal year, if any tax credits authorized under this article for contributions to any of the categories of scholarship organizations, opportunity scholarship organizations or pre-kindergarten scholarship organizations remain unawarded, such unawarded tax credits may be reallocated to any of the categories of scholarship organizations, opportunity scholarship organizations or pre-kindergarten scholarship organizations for which all available tax credits have been awarded. The department shall, within 10 business days, inform each business firm on the waiting list maintained by the department under subsection (h) that tax credits remain available under another category for which the business firm has not yet applied. If a business firm notified under this paragraph elects, the department shall reallocate available tax credits for award to the business firm in the business firm's preferred tax credit category, notwithstanding the limitations contained in section 2006-B(a). Each business firm shall have 10 business days from the date of the department's notice to elect a reallocation of tax credits under this paragraph. The department shall award tax credits on a first-come, first-served basis.
(2) After the department has awarded tax credits under paragraph (1), the department shall accept new applications for reallocation of tax credits from any of the categories of scholarship organizations, opportunity scholarship organizations or pre-kindergarten scholarship organizations for which tax credits remain available to the applicant's preferred category of scholarship organizations, opportunity scholarship organizations or pre-kindergarten scholarship organizations for which all available tax credits have been awarded, notwithstanding any limitations contained in section 2006-B(a) or the limitations in subsections (a), (a.1), (c) and (d). The department shall award tax credits on a first-come, first-served basis.
(2.1) In any fiscal year, the first $10,000,000 in tax credits available for reallocation under paragraphs (1) and (2) shall be set aside for contributions to pre-kindergarten scholarship organizations. If $10,000,000 in tax credits have not been awarded to pre-kindergarten scholarship organizations under paragraphs (1) and (2) prior to March 1 of any fiscal year, the remaining tax credits available for reallocation under paragraphs (1) and (2) shall be made available for contributions to any of the categories of scholarship organizations, opportunity scholarship organizations or pre-kindergarten scholarship organizations.
(3) No tax credits shall be awarded under this subsection until the department has completed the award of tax credits for applications made under subsection (i).
(4) The department shall not reallocate tax credits from any of the categories of scholarship organizations, opportunity scholarship organizations or pre-kindergarten scholarship organizations to the category of educational improvement organizations.
(5) Subsections (b) and (g) shall not apply to an application for reallocation of tax credits under this subsection.

Credits

1949, March 10, P.L. 30, No. 14, art. XX-B, § 2005-B, added 2016, July 13, P.L. 716, No. 86, § 13, imd. effective. Amended 2018, June 22, P.L. 241, No. 39, § 15, effective July 1, 2018; 2019, June 28, P.L. 117, No. 16, § 13, effective July 1, 2019; 2022, July 8, P.L. 620, No. 55, § 39, imd. effective.

Footnotes

24 P.S. § 20-2006-B.
72 P.S. § 7301 et seq.
24 P.S. § 20-2004-B.
24 P.S. § 20-2005-B, PA ST 24 P.S. § 20-2005-B
Current through Act 13 of the 2024 Regular Session. Some statute sections may be more current, see credits for details.
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