Discussion:Pennsylvania Opportunity Scholarship Tax Credit

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Discussion Forum Index --> Tax Tips --> Pennsylvania Opportunity Scholarship Tax Credit

Podolin (talk|edits) said:

20 September 2012
PA recently passed this new credit. Here is an excerpt from PA's brochure on it: "A business will be approved for a tax credit equal to 75% of its contribution(s) to approved organization(s), up to a maximum of $400,000 per taxable year. The tax credit may be increased to 90% of the contribution(s) made, up to a maximum of $400,000 per taxable year, if the business agrees at the time of application to provide the same amount of contribution for two consecutive tax years. To ensure the receipt and retention of the 90% tax credit, the business must make the same amount of contribution in each of the two consecutive tax years." So, if I read this right, a corp. can apply for the credit, donate, say, $100,000, and reduce its PA income tax by either $75,000 or $90,000. The radio commercials promoting this credit refer to it as allocating part of your income tax to selected charities. Well intended, I'm sure, but overlooks some effects. For federal income tax purposes, you may have just moved some deductions for state taxes to deductions for charitable contributions, with the accompsnying limitations on the latter (i.e., might not be deductible for FIT). Then there is the reduced FIT deduction because of the reduced PA income tax. There is also an overall limit on these credits, based on the amount approved for the entire state. I assume, but am not clear, that the commitment to pay the contribution can be withdrawn if the credit is not approved. The red tape is pretty funny (maybe less funny if you have to fill out the forms, etc.) All in all, this is a lot of fuss for little benefit, I think. Also, the brochure says: "No tax credits shall be approved for activities that are part of the applicant business’ normal course of business." Whatever that means. Maybe if a business gives a charity a certain amount regularly, they can only apply for the credit if they give more than that amount. It should be interesting to see how badly PA screws this up.

Podolin (talk|edits) said:

2 October 2012
Just realized it also applies to personal income tax in the case of flow through companies; not sure about Sch C. Raises in my mind loads of questions. For example, suppose the company is a partnership that loses money but its partners make lots of tax able income from other sources. Etc.....

Gplourde (talk|edits) said:

7 August 2013
I smell an increase in billable hours for both CPAs and EAs cleaning up after the state :)

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