A change in Pennsylvania law allows individual Pennsylvania taxpayers to participate in the state’s popular Education Improvement Tax Credit (EITC) program. By expanding the definition of a business to include a Special Purpose Entity (SPE), individual donors can become members of an SPE whose purpose is to make a commitment to donate your PA tax liabilities toward a scholarship instead of to Harrisburg.
Each SPE member receives a 90 percent (or a 100 percent for pre-K scholarships) tax credit for the amount of their donation, reducing or eliminating your PA taxes, and any amount donated which is not reimbursed via the tax credit can be claimed by the individual as a federal charitable tax deduction.
The Jewish Federation of the Lehigh Valley was a member of the initial EITC class, and its participation was enhanced greatly under Mark Goldstein’s, z”l, leadership. It is now administered by Jim Mueth and Temple Coldren of the Federation.
Participation was expanded when the Federation recently established the Lehigh Valley Jewish Scholarship LLC, an SPE for the purpose of assisting individuals in funding needs-based scholarships to students at the Jewish Day School and JCC Early Childhood Education. To make it easy for those interested in redirecting some or all of their PA income taxes, a "Member Donor List" was established at Federation.
Who qualifies to participate?
Almost anyone who expects to pay PA taxes over the next two years including those receiving W-2s or 1099s, consultants, shareholders, partners, members of large firms and high-income retirees.
How does it work?
First, a donor estimates their PA taxes for 2019 and 2020. He or she calls the Federation to request to be included on the Jewish Federation Member Donor List for the SPE. When the Federation receives the award letter from the state, donors will be contacted to make their donation to the Lehigh Valley Jewish Scholarship LLC for the amount for which they applied. Prior to filing taxes the following April, this individual will receive a K-1 from the Federation itemizing a tax credit of their donation. Essentially, most, if not all, of the money they donated comes back in the form of a tax refund.
Anyone interested should contact Jim Mueth, director of planned giving and endowments at the Federation, at 610-821-5500 or firstname.lastname@example.org.