Reduce your Personal Tax Liability via EITC/OSTC
Join CSFP’s fully-managed SPE program and we will handle the details for you!
CSFP's Special Purpose Entity Program
Invest in Philadelphia children while lowering your state and federal tax liability through the PA Opportunity Scholarship Tax Credit (OSTC) and the PA Educational Improvement Tax Credit (EITC) programs. CSFP is a state-approved scholarship organization (OSTC and EITC-SO). Both businesses and individuals can utilize PA tax credits.
EITC/OSTC reduces PA tax liability when individuals or corporations not already approved to participate join a Special Purpose Entity (SPE) by making a gift that earns credit on their PA taxes as well as a small federal deduction. You can join CSFP’s fully-managed SPE and we will handle the details for you! Joining gives you or your clients the opportunity to transform their tax liability and help under-resourced children receive a quality K-8th grade education.
Special Purpose Entity (SPE) Process
SPE Contribution Timeline: Sept. 1 to Dec. 31
- Early Summer: The donor reviews and completes a commitment form. The commitment form may be completed in the fall as space remains available in the SPE.
- Early Fall: CSFP receives the EITC/OSTC approval letter for each SPE from the Department of Community and Economic Development (DCED). CSFP is responsible for contacting the donor to make their contribution.
- Late Fall: The donor has 45–60 days to send their contribution to the relevant SPE, or December 31, whichever is sooner. CSFP must receive the contribution by this deadline, so the donor should plan for mail delays accordingly. Please note that this deadline is subject to change based on the date the SPE receives their approval letter from the state.
- Contribution methods include check, ACH/wire transfer, or stock (select SPE’s only). Contributions must be made payable to the SPE that the donor is contributing through, NOT to Children’s Scholarship Fund Philadelphia.
- If the donor plans to contribute via stock, the deadline is expedited to ensure that CSFP has enough time to complete the paperwork. Refer to the SPE Stock Giving Program section for more information.
- Deadlines for contributions are based on the state of PA’s tax credit approval timeline for the year. CSFP staff will provide updates as deadlines are announced.
Filing Taxes
- Early Spring: The donor files their taxes with a K-1 form. CSFP’s accounting firm will prepare and distribute all forms needed to file the donor’s tax credits with their returns.
- If a donor chooses to take all of the tax credit availability in a single SPE, then the paperwork differs slightly: the individual/company needs to file a REV-1123 instead which CSFP’s accounting firm, Brinker Simpson & Company, will walk the donor through.
- SPE Membership Agreements
- The donor must complete a membership agreement in order for CSFP’s accountants to generate a K-1 form.
- CSFP's accounting representatives advise against donors contributing via single-member LLCs and recommend that contributions be made using the donor’s name and social security number. If the donor must contribute through a single-member LLC, there is additional paperwork that the donor or their accountant needs to file to pass the credits successfully from the LLC to the donor as an individual.
- Please note that the donor must have a large enough PA tax liability (before factoring in any withholding or estimated payments) to use the entire credit. CSFP does not allow for credits to carry over to subsequent tax year. Typically, you would list the spouse with the larger income as the donor/contributor in the membership agreement.
Commitment Terms
- With a two-year commitment, businesses and individuals can receive 90% dollar-for-dollar PA tax credits for their donations, along with the opportunity for a small federal deduction.
- CSFP occasionally offers alternative length commitment terms on a case-by-case basis. Contact Megan Staples Jacob for details.
Tax Credit/Refund Timing
- If the donor is expecting a refund based on their tax credit contribution, it may be delayed due to the timing of the state’s review process.
Who Can Participate
- S-Corp, sole proprietorship, LLC, LLP, or C-Corp authorized to do business in PA
- Owners of shares in a corporation that conducts business in PA
- Individuals or households with a PA tax liability (CSFP suggested minimum is $2,500)
This information was created in collaboration with CSFP’s accounting firm, Brinker Simpson & Company. Donors should consult their tax professionals to confirm their tax liability. CSFP will support donors through our accounting firm, Brinker Simpson & Company, as needed.
Special Purpose Entity (SPE) Stock Giving Program
Stock Contribution Deadline
- The deadline to contribute via stocks is expedited from the typical SPE contribution deadline. CSFP needs at least one full business week to receive stock in order to achieve capital gains tax exemptions.* See the “SPE Timeline” section below for details.
- CSFP’s broker of record is Sanford C. Bernstein & Co., LLC
- Only a select number of CSFP-managed SPEs can receive stock gifts. Therefore, there are limits of how much stock a donor can give from year to year depending on the capacity of the relevant SPE.
Capital Gains*
- To realize capital gains tax savings on top of state tax credits, stocks must be transferred directly to the SPE’s brokerage account in a timely manner. The value of the stock is not calculated until it is received by the scholarship organization. Meaning, the value of the stock contribution is not assigned according to the date it is transferred to the SPE, rather, it is assigned according to the date it is transferred from the SPE to the scholarship organization. There is usually a 2-3 business day delay.
Stock Value
- The Pennsylvania Department of Community and Economic Development (DCED) recognizes the average stock value based on the low/high value on a given day, unless CSFP has a receipt from its broker stating the fair market value.
- The final stock value is subject to change dependent on the high/low value on the date of trade.
- It is the responsibility of the scholarship organization to report the value of the stock, once received, based on the trade date and the broker receipt (this follows DCED’s guidelines); therefore, the donor will not be able to determine the value. (Refer to “Capital Gains” section).
Commission and Fees
- Standard commissions, markups, and sales fees from CSFP’s broker of record will be deducted from the liquidated value of the stock gift. A detailed schedule of associated fees is available upon request.
SPE Timline
- Early Summer: The donor reviews and completes a commitment form. The commitment form may be completed in the fall as space remains available in the SPE.
- Early Fall: CSFP receives the EITC/OSTC approval letter for our SPEs. CSFP contacts the donor at this time to make their contribution.
- Late Fall: The donor has 30–45 days to send their stock contribution to the relevant SPE to allow CSFP enough time to process the necessary paperwork. The deadline to contribute stock will be no later than one week before the final contribution deadline for the relevant SPE, or December 24, whichever is sooner. Please note that this deadline is subject to change based on the date the SPE receives their approval letter from the state.
- Early Spring: The donor files their taxes with a K-1 form. CSFP’s accounting firm will prepare and distribute all forms needed to file the donor’s tax credits with their returns.
- Deadlines for contributions are based on the state of PA’s tax credit approval timeline for the year. CSFP staff will provide updates as deadlines are announced.
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