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Shortly after 10pm, Monday, May 7, the Pennsylvania House of Representatives approved an omnibus education bill, HB 996, PN 1878, by concurring in Senate amendments, thus sending the bill to Governor Tom Ridge, who will sign it since it includes provisions he insisted upon in return for compromises on separate legislation expected to pass on May 8.

The bill includes provisions permitting schools boards to establish independent schools, similar in many respects to a charter school law passed in June of 1997; professional teacher assessment; increases for special education; an educational support services program; and, the subject of this article, an educational improvement tax credit.

The Educational Support Services Program applies to 3rd, 4th, 4th, or 6th grade students within Pennsylvania who will, under certain circumstances, be eligible for grants of up to $500 to assist them in obtaining instruction from an approved provider, at a time other than regularly scheduled school hours, to strengthen their reading and mathematics skills so they can meet the required state standards.

Tax deductions under the Educational Improvement Tax Credit Program are available only to business firms because of a uniformity clause in the Pennsylvania State Constitution which prohibits the application of such tax credits to personal income taxes. A summary of key provisions of the Educational Improvement Tax Credit Program is as follows:

A Scholarship Organization (SO) is defined as a 501(c)(3) nonprofit exempt from federal taxation under the Internal Revenue Code which contributes at least 80% of its annual receipts to a scholarship program which, in turn, is defined as a program to provide tuition to eligible students to attend a school located in this Commonwealth. A scholarship must include an application and review process for the purpose of making awards to eligible students. The award of scholarships to eligible students shall be made without limiting availability to only students of one school.

An Educational Improvement Organization (EIO) is defined as a 501(c)(3) nonprofit exempt from federal taxation under the Internal Revenue Code and which contributes at least 80% of its annual receipts as grants to a pubic school for innovative educational programs

In order to qualify under this article, a scholarship organization (S0) or an (EIO) must submit information to the Department of Education that enables the Department to confirm that the organization is a nonprofit 501(c)(3) organization. It must also certify to the Department that it is eligible to participate in the program.

An application submitted by an EIO must describe its proposed innovative educational program or program in a form prescribed by the Department.

The Department shall annually publish a list of each qualified SO or EIO and the list shall be accessible worldwide on the Department's website.

A business firm shall apply to the Department for a tax credit which is shall receive if the scholarship organization that receives the contribution appears on the approved list.

Tax credits under this article shall be made available by the Department on a first-come-first-served basis with the established limitation.

A contribution by a business firm to a SO or EIO shall be made no later than 60 days following the approval of an application.

The Department of Revenue shall grant a tax credit against any tax due to a business firm providing proof of a contribution to an SO or EIO in the taxable year in which the contribution is made which shall not exceed 75% of the total amount contributed during the taxable year by the business firm. Such credit shall not exceed $100,000 annually per business firm.

The Department of Revenue shall grant a tax credit of up to 90% of the total amount contributed during the taxable year if the business firm provides a written commitment to provide the SO or EIO with the same amount of contribution for two consecutive tax years. The business firm must provide the written commitment at the time of application.

The total aggregate amount of all tax credits approved shall not exceed $30,000,000 in a fiscal year. No less than $20,000,000 of this total shall be used to provide tax credits for contributions from business firms to SOs. No less than $10,000,000 of the total aggregate amount shall be used to provide tax credits for contributions from business firms to EIOs.

No tax credit shall be approved for activities that are a part of a business firm's normal course of business.

A tax credit granted for any one taxable year may not exceed the tax liability of a business firm.

A tax credit not used in the taxable year the contribution was made may not be carried forward or carried back and is not refundable or transferable.

A scholarship received by an eligible student shall not be considered to be taxable income.

The Department of Revenue shall provide a list for all S0s and EIOs receiving contributions from business firms granted a tax credit under this article to the General Assembly by June 30 of each year. This provision of the Act shall take effect July 1, 2001.

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Further information may be obtained from the Pennsylvania Governor's Communications and Press Office, (717) 783-1116; the Department of Education's Office of Press and Communications, (717) 783-9802; or, for copies of the complete 33-page Act, House Bill 996, Printer's Number 1878, the Legislative Reference Bureau, (717) 787-7385.