Washington, D.C. - U.S. Senator Pat Toomey (R-Pa.) issued the following statement regarding the Department of Treasury's clarification on corporate giving to state tax credit programs:
"Pennsylvania's Educational Improvement Tax Credit (EITC) program, which provides scholarships to tens of thousands of disadvantaged students annually, is largely funded through corporate giving. Treasury took a step in the right direction today by clarifying that these types of donations to the EITC can still be deducted as a trade or business expense. I will continue my work with Treasury to ensure that businesses have the guidance they need to continue supporting school choice programs."
On August 27th, the Treasury Department released a notice of proposed rulemaking on contributions in exchange for state or local tax credits that disallows any charitable deduction for contributions with a state and local tax credit component. This guidance was prompted by the new limitation on state and local tax deductions in the Tax Cuts and Jobs Act (TCJA) and efforts by some states to work-around the limitations with state-run charities. The state and local tax deduction limitation in the TCJA does not apply to corporations, thus corporations have no incentive to work around TCJA's new limits. Congressional intent was not to limit either state or local tax deductions or charitable deductions for businesses.
Pennsylvania's educational improvement tax credit program was established in 2001 and today provides $160 million annually in funds for scholarships to children in families meeting certain income requirements, as well as for innovative programs in public schools. In 2012, a parallel program known as the opportunity scholarship tax credit was created to provide an additional $50 million in funds for scholarships exclusively to students in low-achieving school zones. These programs provide children across Pennsylvania with access to choice in education, and an escape route from underperforming schools.