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THANKS TO OUR 2007 PKTC DONORS |
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• Building Products Inc. |
Pre-Kindergarten Tax Credit program (PKTC)
Thanks to a little-known state tax credit program, most Pennsylvania businesses with state income tax liability can reduce that liability while helping to ensure quality education for the state's youngest students. Businesses making donations to scholarship organizations that qualify under the Pre-Kindergarten Tax Credit program (PKTC) can obtain a "dollar-for-dollar" tax credit against certain Pennsylvania business taxes. Riverview Children's Center in Verona and Shady Lane School in Point Breeze (RCC/SL) ask you to direct a portion of your state taxes to the Pre-Kindergarten Tax Credit program, helping us to fund scholarships for families who can't afford quality early care and education for their children.
As an employer, you are likely familiar with the struggles of working families to secure reliable, affordable childcare-and how doing so allows family members to be more productive, attentive employees. Participating in the tax credit program gives you a rare opportunity to be able to help families in need without increasing your own out-of-pocket expenses. The application process is simple, and we'll make it even easier for you! We hope you'll agree to help.
Here's how it works:
PKTC Benefits Businesses
The tax credits you receive through the program reduce your Pennsylvania state tax liability-in other words, the credits decrease what you'd pay in taxes by the amount of your donation. It is crucial to understand that the credit made available under the PKTC provides significantly greater benefit to your business than the standard deduction available when your business makes a typical donation to a charitable organization. While a deduction reduces the amount of your business income that is taxable, the credit available under the PKTC allows you to reduce your total tax liability by the amount of your donation on a dollar-for-dollar basis. Simply put, you are not giving away more money, you are just paying it to RCC/SL rather than to the Commonwealth of Pennsylvania.
A business with net revenues of $500,000 and therefore Pennsylvania Corporate Net Income Tax of $49,500 could reduce its state tax liability by nearly 20%, resulting in $9,000 more income - by making a $10,000 contribution through PKTC. (For details about this example, see the questions and answers page.)At the same time, your business is helping working families - in some cases, your employees-by making quality early care and education affordable, and improving the level of education available to the workforce of tomorrow.
Your Support of Early Childhood Education Helps Your Employees
As an employer, you are likely aware that an employee's ability to perform successfully at work often depends on his/her ability to secure reliable, affordable childcare. A parent who is preoccupied with childcare arrangements is not able to fully devote his/her attention to their job, which affects your success as an employer. With full-day childcare easily costing up to $10,000 per year and one out of three families earning less than $25,000 per year, the need for financial assistance for childcare is clear.
Unfortunately, nationwide, only one in ten children who are eligible for assistance actually receive help.1 True to our mission as non-profit organizations dedicated to offering a nationally accredited, comprehensive, and innovative early childhood education, enrollment at both Riverview Children's Center and Shady Lane School is open to all children, regardless of a family's ability to pay. Approximately 30% of the children attending Riverview Children's Center or Shady Lane School receive scholarships in the form of state subsidies or sliding fees.
Some may look at the smiling faces of our students and simply see cute children, but we know we've been entrusted with shaping the workforce of tomorrow at a critical stage in their development. According to a study conducted by the High/Scope Educational Research Foundation, adults born in poverty who attended a high-quality, active learning preschool program at ages three and four have half as many criminal arrests, higher earnings and property wealth, and greater commitment to marriage. Over participants' lifetimes, the public is receiving an estimated $7.16 for every dollar invested.
Sadly, only one in seven centers provides a level of early care and education that promotes healthy development and learning.5 The accreditation we hold from the National Association for the Education of Young Children (NAEYC) and our four-star ranking in the Pennsylvania Keystone Stars program (the maximum level available) are just two indications that we're providing the best possible education for our students.
You Can Help
We hope you will agree to make a contribution to our organization equal to your anticipated Pennsylvania tax liability. Be aware, though, that only $5 million in credits have been allocated for fiscal year 2006-2007. Since the funds are allocated on a first-come, first-served basis, we need your commitment by June 16 of this year. To start the process, complete the attached application form and return it to Riverview Children's Center. Alternatively, we'd be glad to complete the form for your signature, and personally pick it up if you would like.
We are grateful to all of the Pennsylvania businesses that support us through this program, and plan to publicly acknowledge our donors' support. If you would prefer that your participation remain anonymous, please let us know and we will respect your wishes.
To discuss your potential participation in the PKTC, please contact Betty Lisowski, RCC Executive Director (412/ 828-2585, x22), or RCC Board members Matt Jarrell (412/ 258-6725; maj@sgkpc.com) or Natalie Gillespie (412/ 782-3943; natalie@brilliantave.com). Thank you in advance for your consideration.
Answers to Your Questions
What is the Pre-Kindergarten Tax Credit?
PKTC is a type of Educational Improvement Tax Credit awarded to businesses that make contributions to qualified pre-kindergarten scholarship organizations. The program is administered by the Pennsylvania Department of Community and Economic Development.
What is the difference between a deduction and a credit?
A deduction is a tool allowing taxpayers to reduce their tax liability by reducing the amount of taxable income to which a tax rate will be applied. For example, a contribution to a qualifying charitable organization is generally deductible: the taxpayer is allowed to reduce taxable income by the amount of the contribution. When a business' post-deduction taxable income is multiplied by the applicable tax rate, the resulting tax due is less than it would have been had the donation not been made and had the deduction not reduced taxable income. By reducing taxable income, and thus the amount of tax due, the donor recovers some but not all of the value donated to the charity. The purpose of the deduction is to encourage charitable contribution by softening, but not eliminating, the loss of funds a business incurs when it makes a charitable contribution.
In contrast, a credit allows a donor to eliminate a portion of its ultimate tax liability. Instead of merely reducing taxable income such that the tax rate is applied to a lower number than would have been the case in the absence of the deduction, a credit is not applied until the taxpayer's total tax liability has been calculated. Once that figure is established, the amount of the credit is subtracted from the taxpayer's total tax liability.
The example below illustrates the distinction between a deduction and a credit. In the first case (left column) the taxpaying business makes a $10,000 charitable donation and takes the corresponding deduction. In the second example (right column), the same company donates its $10,000 to RCC/SL under the PKTC program and enjoys the increased benefit of a tax credit.
How much does a business participating in PKTC really save?
Consider this example of a business contributing $10,000 through the PKTC.
| Income Tax Liability WITHOUT the PKTC | Income Tax Liability WITH the PKTC |
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Net revenue: $500,000 Less deductible contribution to any charitable organization: - $10,000 |
Net revenue: $500,000 No deductible charitable contribution: $0 |
| Net Taxable Revenue $490,000 PA Corporate Net Income Tax X 9.9% rate Total Tax: $48,510 Total Tax Due: $48,510 Income After Taxes $441,490 |
Net Taxable Revenue $500,000 PA Corporate Net Income Tax X 9.9% rate Total Tax: $49,500 Less contribution to RCC/SL: $10,000 Total Tax Due, after PKTC credit: $39,500 Income After Taxes and Tax Credit: $460,500 |
| You pay:
$10,000 deductible contribution $48,510 in Pennsylvania tax Total: $58,510 |
You pay: $10,000 contribution, receiving equal tax credit $39,500 in Pennsylvania tax Total: $49,500 |
| Bottom Line: Participating in PKTC results in $9,010 more income by reducing the business's state tax liability by nearly 20%. | |
At the same time, your business is helping working families-in some cases, your employees-by making quality early care and education affordable, and improving the level of education available to the workforce of tomorrow.
Who does the PKTC benefit?
Businesses benefit in several ways: they reduce their Pennsylvania tax liability, support community education programs, and help to provide their workforce with affordable quality early care and education. Families benefit from increased access to reliable, quality early care and education-the program makes available scholarships for pre-kindergarten education to those who otherwise may not afford it. Children benefit from quality education at a developmentally crucial stage of life.
Who is eligible to participate?
Any business headquartered in or having operations in the Commonwealth of Pennsylvania and owing state taxes (as described in the question below) is eligible to participate in the program.
What tax liability can I reduce through the PKTC program?
The PKTC program reduces your Pennsylvania state tax liability for any of the following taxes:
How much may a business donate? What is the maximum tax credit?
You may donate any amount you wish, in the form of cash, personal property or services. The PKTC program allows businesses to receive a tax credit equal to 100% of the first $10,000 contributed, and up to 90% of the remaining amount contributed up to a maximum credit of $100,000 annually. Tax credits will not be granted for activities that are part of the applicant business' normal course of business.
What if my tax liability ends up being more or less than the amount of my donation?
Actual tax credits will be limited to the amount of your tax liability, up to the amount of your donation. If your actual tax liability is less than the amount of your donation, the credits will be capped at the amount of your tax liability. If your taxes exceed the amount of your donation, you'll receive credits equal to your donation and be required to pay the rest. Tax credits not used in the tax year the contribution was made may not be carried forward or back, and are not refundable or transferable.
When do I need to apply for the PKTC? When is my donation due?
Please submit your application to Riverview Children's Center by June 16, 2006. You must make your contribution within 60 days of receiving written notification from the state that your business has been approved for tax credits.
How do I participate?
Participation is simple. Complete the simple one-page application and send it to Riverview Children's Center before June 16, 2006. We will file it with the state as required. Within 60 days of receiving notification that your application is approved, you make your contribution to the Riverview-Shady Lane Pre-Kindergarten Tax Credit Scholarship Organization. Your tax credits awarded under PKTC will be effective on the first day of the taxable year in which the contribution was made. You can use the credit to offset (in full or part) the quarterly prepayment requirements and the remainder of the tax due for that taxable year.
If it would be more convenient, a representative from RCC will gladly complete the application form for your signature and/or pick it up when signed.
Why support Riverview Children's Center and Shady Lane School?
Riverview and Shady Lane have partnered to offer the PKTC. Both are non-profit organizations with a long tradition of providing nationally accredited, comprehensive, and innovative early childhood education, regardless of a family's ability to pay. Approximately 30% of the children attending Riverview Children's Center or Shady Lane School receive scholarships in the form of state subsidies or sliding fees.
Are Riverview and Shady Lane approved pre-kindergarten scholarship organizations?
While we've awarded scholarships through the generosity of local foundations and individuals for years, this is the first year that Riverview Children's Center and Shady Lane School have applied to participate in the PKTC as a source of scholarship funding. Our PKTC application is pending with the Pennsylvania Department of Community and Economic Development, and we have every reason to expect it will be accepted. We will not receive official notification until just prior to the business deadline for tax credits; we cannot afford to wait until then to ask for your participation. If the Riverview-Shady Lane Pre-Kindergarten Tax Credit Scholarship Organization application is not accepted, you may choose to withdraw your application or direct your contribution to another qualified organization. Approved pre-kindergarten scholarship organizations are listed on the Department's web site at www.inventpa.com.
Why support early childhood education?
Research has shown that the education a child receives in his/her early years pays huge dividends in the form of lifetime success-in other words, you are investing in your future workforce, our future citizens. According to a study conducted by the High/Scope Educational Research Foundation, adults born in poverty who attended a high-quality, active learning preschool program at ages three and four have half as many criminal arrests, higher earnings and property wealth, and greater commitment to marriage. Over participants' lifetimes, the public is receiving an estimated $7.16 for every dollar invested.
How will my contribution be spent?
PKTC funds will be used to provide tuition assistance for children ages 3 to kindergarten entry who are enrolled at Riverview Children's Center or Shady Lane School. Both programs exceed quality benchmarks that are proven to improve prospects for children's kindergarten readiness and later school success which in-turn results in the stronger work force of tomorrow. By making a contribution to the Riverview-Shady Lane PKTC Scholarship Organization you direct your Pennsylvania state tax liability to a specific educational organization, rather than leaving it to the discretion of the state.
What is Riverview Children's Center?
Riverview Children's Center is a non-profit private school and child care center located on the Allegheny River in Verona. Founded in 1970 by community leader Elizabeth Rockwell Raphael, the center pioneered high-quality early childhood programs long before the concept was recognized. We provide a nurturing and creative environment with careful attention to the individual needs of each child.
Our goal is for children to grow into caring, competent, and responsible citizens. As a model early care and education center, we weave education and childcare into the daily schedules and activities of the children, with a philosophy of providing a safe, nurturing, stimulating, and child-oriented environment. RCC adheres to high standards of quality for children's programs, which exceed the minimum standards established by state licensing agencies. This is evident in low staff-child ratios, small group sizes, high staff qualifications and low staff turnover, and careful attention to curriculum planning and program innovation. We were the first early care and education program in Western Pennsylvania to achieve accreditation by the National Association for the Education of Young Children; RCC has maintained continuous accreditation since 1987.
How many credits will be awarded in Pennsylvania?
A maximum of $5 million in Pre-Kindergarten Tax Credits will be awarded for the 2006-2007 fiscal year. Tax credit applications will be processed on a first-come, first-served basis by day submitted. Applications will be processed until the amount of available tax credits is exhausted.
What does my application obligate me to do?
If approved, you will be expected to make a contribution equal to the amount pledged within 60 days of receiving notification that your application is approved. Contributions should be made payable to the Riverview-Shady Lane Pre-Kindergarten Tax Credit Scholarship Organization.
What if my application for tax credit is denied?
If the Commonwealth denies your application, you are no longer under any obligation to make a donation to RCC/SL.
Is my participation in the PKTC ongoing or for one year?
Your application states your intent to participate in the PKTC during the fiscal year specified. To participate in future years, you must complete a new application.
Where can I get more information?
Please direct your questions about the PKTC program or Riverview's participation in it to Betty Lisowski, RCC Executive Director (412/ 828-2585, x22), or to RCC Board members Matt Jarrell (412/ 258-6725; maj@sgkpc.com) or Natalie Gillespie (412/ 782-3943; natalie@brilliantave.com). More information about PKTC can be found at www.newpa.com/programDetail.aspx?id=62; information about RCC is available at www.riverviewchildrenscenter.org.
Quick reference-Where to send your forms:
Mail completed application forms by June 16, 2006 to Riverview Children's Center; 655 Sylvan Way; Verona, PA 15147. Checks-due after you've received confirmation of your participation from the state-should be made payable to "Riverview/Shady Lane Scholarship Organization" and sent to the same address. Questions? Call Betty Lisowski, RCC Executive Director, at 412/ 828-2585, x22.