What is the Opportunity Scholarship Tax Credit?

What is the Opportunity Scholarship Tax Credit (OSTC)?    

OSTC is a recently enacted tax credit for PA businesses that make a donation to a scholarship organization.  Participating businesses receive a 75% or 90% tax credit by contributing their taxes owed to a qualified scholarship organization. Businesses who pay Corporate Net Profits tax (paid by C corps, S corps and partnerships) and the capital stock franchise tax and certain other state taxes can gain the credit. The program is patterned after the very successful and universally acclaimed Educational Improvement Tax Credit (EITC) program in PA begun in 1999.

Why was the OSTC program begun?

Legislators responded to the fact that many PA urban public schools are destructive environments for low-income students –despite a dozen public school reform efforts since 1960.  In Philadelphia, for example:

• 67% of low-income boys drop out of high school.
• Only 6% of low-income 16 year olds in District Schools will be proficient in reading and math.
• Only some charters are educationally excellent and have sufficient capacity to meet the demand from parents – with 30,000 on waiting lists. This equals the number of immediately available seats in non-public and faith based schools.

• Only 20% of low-income youth will enroll in college
• Some 100,000 children remain in persistently failing schools and want a better education at a school of their choice.

Does the OSTC Program Work?

Some Facts:

• 40,000 children receive EITC scholarships now and attend non-public schools with virtually universal parent satisfaction.
• These youth have an increased high school graduation rate (by 50 %) and an increased college entrance rate (by 70%).
• The EITC program saves the Commonwealth and school districts $450,000,000 per year.
• The average EITC scholarship only has to be $1200 and average family income is $28,000.

Why should a business make a contribution through the OSTC program?

• To strategically reinvest in the region’s youth – targeted to those who need it most.
• To build the company’s brand as a compassionate, socially responsible and generous company.
• To invest in an educated workforce, increase the graduation and school proficiency rate, decrease the incarceration and economic dependency rates in the Delaware Valley.
• To build a connection with particular youth for future internships, summer work or recruitment after college.
• To accomplish all this at virtually no cost to the company– because of the 90% credit combined with the federal deduction for the charitable contribution.