Investing in Our Future
Significant funding is spent on public education, yet some schools are better than others at delivering the best opportunities for our children. Today more than ever we need to promote “school choice” and recognize that local Catholic schools provide an important alternative in developing the mind, body and spirit, and better serving our communities. Pennsylvania provides tax credits for corporate contributions to approved Scholarship Organizations—nonprofits that provide private school scholarships. For more information, click to download the brochure below.
CASTA-SOS III, LLC Frequently Asked Questions
CASTA-SOS III, LLC (the “Issuer”) is a Pennsylvania limited liability company that has been organized as a Special Purpose Entity (“SPE”) whose business purpose is to participate in the Pennsylvania Educational Improvement Tax Credit (“EITC”) and Opportunity Scholarship Tax Credit (OSTC) programs.
The EITC program allows qualified businesses, including special purpose entities like the Issuer, to fulfill their state tax burden while supporting financial aid to eligible educational and scholarship programs. Likewise, the OSTC program allows qualified businesses, including special purpose entities like the Issuer, to fulfill their state tax burden while supporting low-income students who reside in low-achieving school districts in Pennsylvania. The programs require a two (2) year commitment in order to qualify for the maximum tax credit under both programs.
The EITC program awards tax credits to businesses that make contributions to certain educational organizations. In 2014, the program was expanded to permit special purpose entities formed specifically to participate in the EITC program. The EITC is a direct, dollar for dollar tax credit applicable against the donor’s Pennsylvania tax liabilities, not a tax deduction. If a business pays any of the following corporate taxes to the Commonwealth of Pennsylvania, the EITC program allows that business to contribute almost all of those tax dollars to a qualifying educational organization:
- Corporate Net Income Tax (CNIT)
- Capital Stock Franchise Tax
- Bank and Trust Company Shares Tax
- Title Insurance Companies Shares Tax
- Insurance Premiums Tax
- Mutual Thrift Institutions Tax
- Malt Beverage Tax
- Personal Income Tax of S corporation shareholders or Partnership partners.
Business firms that apply and qualify for the EITC program receive a tax credit equal to Seventy-Five Percent (75%) of its donation to an approved non-profit scholarship or educational improvement organization. The tax credit increases to Ninety Percent (90%) if the business firm, commits to making the same level of donations for two consecutive years.
The OSTC Program is modeled after the EITC program and provides financial aid support to children who live within the attendance boundaries of Pennsylvania’s worst performing 15% of schools. Just like the EITC program, the OSTC program awards Pennsylvania businesses a tax credit of 75% if the gift is made for one year or 90% if the company commits to making the same donations for two consecutive years. OSTC funds are available in addition to any credits received under the EITC program. Under the OSTC program, any entity that qualifies for EITC tax credits will also qualify for OSTC tax credits. Therefore, the Issuer will also qualify for OSTC tax credits.
The offering of Units of Membership Interests in the Issuer is limited to Accredited Investors only. Accredited Investors are individuals who meet the following criteria:
(a) earns an individual income of more than $200,000 per year, or a joint income with his or her spouse of $300,000, in each of the last two years and expect to reasonably maintain the same level of income in the current year; or
(b) has a net worth exceeding $1 million, either individually or jointly with his or her spouse, excluding the value of their primary residence.
In addition, Pennsylvania law restricts who may be a member of a special purpose entity formed to participate in the EITC and OSTC tax credit programs. In order to be a Member, a potential purchaser must be an individual who is a shareholder, partner, member or employee of a business firm.
A business firm is a corporation, limited liability company or partnership that is organized as a for-profit entity. The statutory definition of “business firm” does not include sole proprietorships or entities not subject to Pennsylvania tax.
Act 194 of 2014, effective October 31, 2014, amended Article XVII-F of the Tax Reform Code (Educational Improvement Tax Credit now called “Education Tax Credits”) to expand the definitions of “business firm” and “pass-through entity.” Effective as of October 31, 2014, Special Purpose Entities (“SPEs”) can be formed for the sole purpose of participating in the EITC and OSTC programs.
Yes, owners of a single member Pennsylvania limited liability company can be members of the SPE.
Unfortunately, no; if a potential purchaser is an owner, member or an employee of a non-profit entity, they may not participate in the offering. Only persons who are a shareholder of a business corporation, a member of a limited liability company (including single member LLCs) or a partner in a general or limited partnership engaged in business in Pennsylvania and subject to Pennsylvania taxes may participate.
It should be noted that if you are employed by a non-profit but you also are a shareholder, member or partner of a Pennsylvania business entity that is subject to Pennsylvania tax, you can still participate based on your ownership interest in that entity. An example of a person who could participate would be a doctor employed by a non-profit hospital who has a separate for-profit business organized as an LLC that provides consulting services or is a member or shareholder in a business entity that owns and operates a sports training or fitness facility.
The Department of Revenue has recently expanded this so that persons who an owner, member or an employee of a non-profit entity, may participate in the offering if they own shares of stock in a publicly traded for profit company.
Generally, no; if a potential purchaser is the owner of a sole proprietorship he or she cannot participate in this Offering. The statute allowing for the creation of SPEs to participate in the EITC and OSTC programs does not include sole proprietorships in the definition of “Business Entity”. The Department of Revenue has recently ruled that a sole proprietor may participate in the offering if he or she owns shares of stock in a publicly traded for profit company
Generally, employees of governmental entities cannot participate in an SPE. This includes people working for local, county, state or federal governmental bodies, including authorities, agencies and departments, as well as the governing body itself. If you serve as an elected official (councilperson, supervisor, commissioner, school board member, etc.) but are also otherwise employed by or are the owner of a business entity, you can participate. In addition, if you own shares of stock in a publicly traded for profit company, you may participate in the offering.
Yes, your spouse may participate, provided that your spouse qualifies as an Accredited Investor. Your income from the non-profit can be combined with your spouse’s income for purposes of the Accredited Investor determination, but only your spouse would be a member. In addition, if you own shares of stock in a publicly traded for profit company, you may participate in the offering.
Unfortunately, no; you cannot participate if this is your only connection to a business entity. By virtue of the fact that you receive a 1099, you are considered to be an independent contractor and not an employee of that business entity. Only W-2 employees are considered employees for the purpose of these programs. If you own shares of stock in a publicly traded for profit company, you may participate in the offering.
Yes; the Department of Revenue has ruled that ownership of shares of stock in a publicly traded company will make you eligible to participate in an SPE.
Yes. Prior to 2015, when only one spouse was a member of an SPE, a married couple was not able to file jointly and claim the credit. Each spouse was required to file a separate PA-40 and only the spouse who was a member of the SPE was able to claim the credit against their income. This changed beginning with the 2015 Tax Year. Now, married couples can file jointly and claim the credit against their combined tax obligation.