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PA Budget Impasse Puts PA Tax Credits on Hold

PA Budget Impasse Puts PA Tax Credits on Hold

As of Monday December 14, 2015, the Commonwealth of PA still did not have an approved budget for the 2016 fiscal year.  Among the many troublesome aspects of the budget impasse is the current uncertainty of the status of several PA tax credits that businesses applied for in 2015.

Many businesses that applied for these PA tax credits have been inquiring regarding the status of the credits. Based on these inquiries we have prepared this summary, which is our understanding, to the best of our knowledge, of the current status of several of these PA tax credits:

Educational Tax Credits – may be best to hold off making contributions until budget passes

  • The Educational Improvement Tax Credit (EITC) is a program that provides tax credits to eligible businesses contributing to scholarship organizations or educational improvement organizations.
  • The Opportunity Scholarship Tax Credit Program (OSTC) is a related program that allows businesses to contribute to specifically approved opportunity scholarship organizations and receive a tax credit for their contribution.
  • Both EITC and OSTC are administered by the PA Department of Community and Economic Development (DCED). Businesses apply for the applicable credits in May through July and are typically notified by the DCED when the application is approved, normally early enough for the business to make the contribution in the tax year in which it hopes to use the tax credit.
  • However, for 2015, since the total amount of educational tax credits have not been approved in the budget, the DCED has not been able to notify businesses if their credit applications have been approved.
  • Therefore - due to uncertainty regarding when and how much of the total educational tax credits will be in the final budget - representatives of the DCED suggest that if obtaining the tax credit was the primary reason for a business to contribute to an educational organization then the taxpayer should not make their contributions until the status of the credits are known.
  • We understand that some educational organizations waiting for contributions have already sent similar suggestions to their potential donors.

PA research tax credits – general information letters will be sent by the Department of Revenue on 12/15/2015

Taxpayers performing qualified research in Pennsylvania are eligible for a PA Research & Development (R&D) Tax Credit.

  • Eligible businesses apply for the credit by filing an application form by September 15.
  • Then, typically on December 15, the PA Department of Revenue sends letters to the applicants advising them of the amount of the research credit they have been awarded, in any.
  • Per discussions with the Accounting Division of the PA Department of Revenue (DOR) we have been advised that DOR will send letters on December 15, 2015.
  • However, since the total amount of the research credits is not yet known, the letters sent on December 15, 2015 will not indicate the amount of credit awarded to the applicant but will instead provide information regarding the status of the overall Research Credits.

We regret that we are unable to provide more definitive information at this time. If you have any questions regarding these PA tax credits or need assistance with correspondence you may receive from an educational organization or the PA Department of Revenue please contact Barry D. Groebel, CPA at 484-525-4648 or bdgroebel@herbein.com.