Enacted in 2001, the EITC program allows private businesses to donate up to $200,000 to a registered and approved 501 (c)(3) Scholarship Organization (SO) or Educational Improvement Organization (EIO) of their choice. The state then provides each donating business with a tax credit of 75% of their donation amount (or 90% if they pledge the donation for two consecutive years).

The General Assembly established a $75 million cap for the program for 2007-08, an increase of $16 million over the previous year. Total contributions are capped at $44.7 million for K-12 scholarships, $22.3 million for Educational Improvement Organizations (EIOs), and $8 million for Pre-K scholarships. The EITC provided approximately 33,000 students with scholarships during the 2006-07 academic year.

Through the EITC program, scholarship and educational improvement organizations receive contributions from businesses and grant scholarships to families meeting income requirements. Scholarship organizations can restrict the use of scholarships to particular schools but cannot limit the choice of parents to one school. Students receiving EITC-funded scholarships put them to use at private schools and public schools outside their district.

More About the EITC from the REACH Foundation

How the EITC Saves Money

• Policy Analysis: The Fiscal Impact of the Education Improvement Tax Credit Program
• News Release: Cost Savings of EITC
• Budget Testimony - EITC Expansion is fiscally responsible solution
• Policy Brief: Getting More, Paying Less: Children, Taxpayers, and Public Schools Benefit from the Educational Improvement Tax Credit
• PA Diet Plan: Ideas to Improve Pennsylvania’s Fiscal and Economic Health