ICYMI – School Voucher Tax Shelter

Did you know that some Pennsylvania businesses can turn a tidy profit when they make contributions to school voucher programs?

It’s true.

When businesses contribute to scholarship/private school voucher organizations through Pennsylvania’s Educational Improvement and Opportunity Scholarship Tax Credit (EITC/OSTC) programs they receive a double dip of tax giveaways that can be worth more than the amount they contributed to the voucher program.

This isn’t charity, it is tax avoidance.

Businesses receive up to a 90% credit on their tax bills for contributions to EITC/OSTC voucher programs. Under current regulations, they can also claim a federal charitable deduction on the same contribution and end up with MORE MONEY than before they contributed to a school voucher program.

A new proposed IRS regulation would end the school voucher tax shelter.

Under the new regulation, both individual taxpayers and businesses that see a large portion of their “charitable donations” reimbursed through state tax credit programs would no longer be allowed to pretend that these “donations,” for which they have received reimbursement, came out of their own pockets. Instead, they would only be allowed to claim a charitable deduction for money that was NOT reimbursed through a state tax credit program.

For example, if a business “donates” $100 to a school voucher provider through the EITC/OSTC program and receives $75 back in tax credits, that business would only be allowed to write off $25 as a federal charitable deduction.

The school privatization lobby isn’t happy.

As you might imagine, organizations that want to privatize public education have been aggressively targeting the IRS and Treasury Department, seeking a special carve out in the regulation to exempt donors to private school voucher funds.

In addition, the IRS, at the urging of Senator Pat Toomey, is considering a workaround that would allow businesses that contribute to school voucher programs to continue to reap profits off of these contributions. Instead of classifying their their contributions to voucher organizations as charitable gifts, businesses that classify them as business expenses would continue to be able to enjoy this tax shelter.

What can you do to help shut down the school voucher tax shelter?

The IRS is accepting public comment on the proposed regulation. Help demonstrate strong public support for sound tax policy and public education by taking two minutes to submit a comment at the link below. We need to make sure the IRS isn’t hearing only from school privatizers!

You may copy and paste the italicized comment below or write your own. All comments must be received by Thursday, October 11th. Please make sure to comment soon!

the deadline to submit comments to the IRS asking them to end the school voucher tax haven is this Thursday, October 11th
Click HERE for a form you can use to send a comment to the IRS.

I am writing to express strong support for the proposed IRS regulation on contributions in exchange for state or local tax credits.

This proposed regulation is sound tax policy that represents a principled, even-handed reform of the charitable giving deduction. Implementing this regulation will eliminate the misuse of the deduction by opportunistic taxpayers who are not engaging in genuine charitable acts, but are instead seeking to improve their own financial standing.

I respectfully request that the IRS and Treasury Department reject petitions from private school organizations to dilute the proposed regulation by either narrowing its focus to include only donations to public entities or by exempting programs that were enacted before a certain date. Either of these changes would substantially erode the regulation’s impartiality and effectiveness.

I also respectfully request that the IRS and Treasury Department clarify that businesses will NOT be able to repackage their charitable contributions as business expenses in order to generate tax cuts that are larger than their actual contributions. 

(Article courtesy of Education Voters of PA)

 

BASD Proud Parents is strictly pro-public education. We are an independent group with no affiliations to the BASD school board or any political parties. Our goals are to help parents stay informed about educational policy discussions and to facilitate ways for any of us who would like the chance to have our voices heard, to get more involved in those policy conversations.