We had another great webinar presented by Greg Lowe (Partner/COO) and Michael Eby, CPA (Tax Supervisor) with McKonly & Asbury! Thank you to everyone that attended. We discussed Pennsylvania’s Educational Improvement Tax Credit Program and learned what this program is all about, what type of businesses can participate, and what the eligible taxes are for which the credit can be applied. We then reviewed several examples for increased understanding of the tax credit and wrapped up with instructions for how an organization can apply. Check out our Upcoming Events page for news and updates on our future seminars and webinars. For more information on this topic or to submit a question for Greg or Michael, use our contact page at www.macpas.com/contact or email them directly at glowe@macpas.com and meby@macpas.com. http://www.macpas.com/webinar-recap-maximizing-community-impact-through-eitc

1. 5/15/2013
MAXIMIZING COMMUNITY
IMPACT USING THE PENNSYLVANIA
EDUCATIONAL IMPROVEMENT TAX
CREDIT PROGRAM (EITC)
GREG LOWE, (PARTNER, COO)
MICHAEL EBY, CPA, (TAX SUPERVISOR)

2. 5/15/2013
FRAUD ENGAGEMENT
FROM A TO Z
SAMUEL BOWERCRAFT, MSIS, CISA
&
DAVID HAMMARBERG,
CPA, CFE, CISSP, MCSE, WXYZ

3. 05/15/13

4. 5/15/2013
MAXIMIZING COMMUNITY
IMPACT USING THE PENNSYLVANIA
EDUCATIONAL IMPROVEMENT TAX
CREDIT PROGRAM (EITC)
GREG LOWE, (PARTNER, COO)
MICHAEL EBY, CPA, (TAX SUPERVISOR)

5. Michael Eby
• CPA
• Supervisor
• Tax Specialist
Greg Lowe
• COO
• Management &
Consulting Specialist
A BIT ABOUT US

6. WHAT IS THE EITC PROGRAM?
• Administered by the Department of Community and Economic Development (DCED)
• A tax credit is awarded to businesses that make contributions to qualified:
• Scholarship Organizations
• Educational Improvement Organizations
• Pre-K Scholarship Organizations
• List of qualifying organizations can be found on DCED website - www.newpa.com
• 2012-2013 State budget has allocated $100 million for program

7. WHAT IS THE BENEFIT FOR BUSINESSES PARTICIPATING IN
THE EITC PROGRAM?
• Either a 75% tax credit (1 year commitment) or 90% tax credit (2 year commitment) up
to $750,000 maximum annual credit
• Scholarship Organizations
• Educational Improvement Organizations
• Contributions to Pre-Kindergarten Scholarship Organizations:
• 100% credit for first $10,000 contributed, 90% credit after that up to a maximum
$200,000 credit per year

8. WHAT ARE THE ELIGIBLE TAXES FOR WHICH THE CREDIT
CAN BE APPLIED?
• Capital Stock/Foreign Franchise Tax
• Corporate Net Income Tax
• Bank and Trust Shares Tax
• Title Insurance Companies Shares Tax
• Insurance Premiums Tax
• Mutual Thrift Institution Tax
• Tax under the Insurance Company Law of 1921
• Personal Income Tax

9. EXAMPLE 1 - C CORPORATIONS
Without EITC
contribution
Contribution (2-year
commitment)
Net Taxable Income prior to contribution and income taxes 300,000 300,000
EITC Contribution N/A 10,000
State Addback of contributions qualifying for PA EITC N/A N/A
Adjusted PA Taxable Income 300,000 290,000
PA State Income Tax (9.99%) (29,970) (28,971)
Reduction in State Income Tax Due To Credit 9,000
PA State Income Tax Expense After Reductions (29,970) (19,971)
Adjusted Federal Taxable Income After State Taxes 270,030 270,029
Federal income taxes 88,562 88,562
Federal Income Tax Savings 0
PA Income Tax Savings 9,999
Total Tax Savings 9,999
Net Cost of $10,000 EITC Contribution 1

10. EXAMPLE 1 - C CORPORATIONS
Without EITC
contribution
Contribution (2-year
commitment)
Net Taxable Income prior to contribution and income taxes 300,000 300,000
EITC Contribution N/A 10,000
State Addback of contributions qualifying for PA EITC N/A N/A
Adjusted PA Taxable Income 300,000 290,000
PA State Income Tax (9.99%) (29,970) (28,971)
Reduction in State Income Tax Due To Credit 9,000
PA State Income Tax Expense After Reductions (29,970) (19,971)
Adjusted Federal Taxable Income After State Taxes 270,030 270,029
Federal income taxes 88,562 88,562
Federal Income Tax Savings 0
PA Income Tax Savings 9,999
Total Tax Savings 9,999
Net Cost of $10,000 EITC Contribution 1

11. EXAMPLE 1 - C CORPORATIONS
Without EITC
contribution
Contribution (2-year
commitment)
Net Taxable Income prior to contribution and income taxes 300,000 300,000
EITC Contribution N/A 10,000
State Addback of contributions qualifying for PA EITC N/A N/A
Adjusted PA Taxable Income 300,000 290,000
PA State Income Tax (9.99%) (29,970) (28,971)
Reduction in State Income Tax Due To Credit 9,000
PA State Income Tax Expense After Reductions (29,970) (19,971)
Adjusted Federal Taxable Income After State Taxes 270,030 270,029
Federal income taxes 88,562 88,562
Federal Income Tax Savings 0
PA Income Tax Savings 9,999
Total Tax Savings 9,999
Net Cost of $10,000 EITC Contribution 1

12. EXAMPLE 1 - C CORPORATIONS
Without EITC
contribution
Contribution (2-year
commitment)
Net Taxable Income prior to contribution and income taxes 300,000 300,000
EITC Contribution N/A 10,000
State Addback of contributions qualifying for PA EITC N/A N/A
Adjusted PA Taxable Income 300,000 290,000
PA State Income Tax (9.99%) (29,970) (28,971)
Reduction in State Income Tax Due To Credit 9,000
PA State Income Tax Expense After Reductions (29,970) (19,971)
Adjusted Federal Taxable Income After State Taxes 270,030 270,029
Federal income taxes 88,562 88,562
Federal Income Tax Savings 0
PA Income Tax Savings 9,999
Total Tax Savings 9,999
Net Cost of $10,000 EITC Contribution 1

13. EXAMPLE 1 - C CORPORATIONS
Without EITC
contribution
Contribution (2-year
commitment)
Net Taxable Income prior to contribution and income taxes 300,000 300,000
EITC Contribution N/A 10,000
State Addback of contributions qualifying for PA EITC N/A N/A
Adjusted PA Taxable Income 300,000 290,000
PA State Income Tax (9.99%) (29,970) (28,971)
Reduction in State Income Tax Due To Credit 9,000
PA State Income Tax Expense After Reductions (29,970) (19,971)
Adjusted Federal Taxable Income After State Taxes 270,030 270,029
Federal income taxes 88,562 88,562
Federal Income Tax Savings 0
PA Income Tax Savings 9,999
Total Tax Savings 9,999
Net Cost of $10,000 EITC Contribution 1

14. EXAMPLE 1 - C CORPORATIONS
Without EITC
contribution
Contribution (2-year
commitment)
Net Taxable Income prior to contribution and income taxes 300,000 300,000
EITC Contribution N/A 10,000
State Addback of contributions qualifying for PA EITC N/A N/A
Adjusted PA Taxable Income 300,000 290,000
PA State Income Tax (9.99%) (29,970) (28,971)
Reduction in State Income Tax Due To Credit 9,000
PA State Income Tax Expense After Reductions (29,970) (19,971)
Adjusted Federal Taxable Income After State Taxes 270,030 270,029
Federal income taxes 88,562 88,562
Federal Income Tax Savings 0
PA Income Tax Savings 9,999
Total Tax Savings 9,999
Net Cost of $10,000 EITC Contribution 1

15. EXAMPLE 1 - C CORPORATIONS
Without EITC
contribution
Contribution (2-year
commitment)
Net Taxable Income prior to contribution and income taxes 300,000 300,000
EITC Contribution N/A 10,000
State Addback of contributions qualifying for PA EITC N/A N/A
Adjusted PA Taxable Income 300,000 290,000
PA State Income Tax (9.99%) (29,970) (28,971)
Reduction in State Income Tax Due To Credit 9,000
PA State Income Tax Expense After Reductions (29,970) (19,971)
Adjusted Federal Taxable Income After State Taxes 270,030 270,029
Federal income taxes 88,562 88,562
Federal Income Tax Savings 0
PA Income Tax Savings 9,999
Total Tax Savings 9,999
Net Cost of $10,000 EITC Contribution 1

16. EXAMPLE 1 - C CORPORATIONS
Without EITC
contribution
Contribution (2-year
commitment)
Net Taxable Income prior to contribution and income taxes 300,000 300,000
EITC Contribution N/A 10,000
State Addback of contributions qualifying for PA EITC N/A N/A
Adjusted PA Taxable Income 300,000 290,000
PA State Income Tax (9.99%) (29,970) (28,971)
Reduction in State Income Tax Due To Credit 9,000
PA State Income Tax Expense After Reductions (29,970) (19,971)
Adjusted Federal Taxable Income After State Taxes 270,030 270,029
Federal income taxes 88,562 88,562
Federal Income Tax Savings 0
PA Income Tax Savings 9,999
Total Tax Savings 9,999
Net Cost of $10,000 EITC Contribution 1

17. EXAMPLE 2 - PASS-THROUGH ENTITIES
Without EITC
contribution
Contribution (2-year
commitment)
Net Taxable Income prior to contribution and income taxes 300,000 300,000
EITC Contribution N/A 0
State Addback of expenses qualifying for PA EITC N/A 0
Adjusted PA Taxable Income 300,000 300,000
PA State Income Tax (3.07%) (9,210) (9,210)
Reduction in State Income Tax (Itemized Deductions) 9,000
Federal Charitable Contribution Deduction (10,000)
Adjusted Federal Taxable Income After Itemized Deductions 290,790 289,790
Federal income taxes (Assuming 35% marginal bracket) 101,777 101,427
Federal Income Tax Savings 350
PA Income Tax Savings 9,000
Total Tax Savings 9,350
Net Cost of $10,000 EITC Contribution 650

18. EXAMPLE 2 - PASS-THROUGH ENTITIES
Without EITC
contribution
Contribution (2-year
commitment)
Net Taxable Income prior to contribution and income taxes 300,000 300,000
EITC Contribution N/A 0
State Addback of expenses qualifying for PA EITC N/A 0
Adjusted PA Taxable Income 300,000 300,000
PA State Income Tax (3.07%) (9,210) (9,210)
Reduction in State Income Tax (Itemized Deductions) 9,000
Federal Charitable Contribution Deduction (10,000)
Adjusted Federal Taxable Income After Itemized Deductions 290,790 289,790
Federal income taxes (Assuming 35% marginal bracket) 101,777 101,427
Federal Income Tax Savings 350
PA Income Tax Savings 9,000
Total Tax Savings 9,350
Net Cost of $10,000 EITC Contribution 650

19. EXAMPLE 2 - PASS-THROUGH ENTITIES
Without EITC
contribution
Contribution (2-year
commitment)
Net Taxable Income prior to contribution and income taxes 300,000 300,000
EITC Contribution N/A 0
State Addback of expenses qualifying for PA EITC N/A 0
Adjusted PA Taxable Income 300,000 300,000
PA State Income Tax (3.07%) (9,210) (9,210)
Reduction in State Income Tax (Itemized Deductions) 9,000
Federal Charitable Contribution Deduction (10,000)
Adjusted Federal Taxable Income After Itemized Deductions 290,790 289,790
Federal income taxes (Assuming 35% marginal bracket) 101,777 101,427
Federal Income Tax Savings 350
PA Income Tax Savings 9,000
Total Tax Savings 9,350
Net Cost of $10,000 EITC Contribution 650

20. EXAMPLE 2 - PASS-THROUGH ENTITIES
Without EITC
contribution
Contribution (2-year
commitment)
Net Taxable Income prior to contribution and income taxes 300,000 300,000
EITC Contribution N/A 0
State Addback of expenses qualifying for PA EITC N/A 0
Adjusted PA Taxable Income 300,000 300,000
PA State Income Tax (3.07%) (9,210) (9,210)
Reduction in State Income Tax (Itemized Deductions) 9,000
Federal Charitable Contribution Deduction (10,000)
Adjusted Federal Taxable Income After Itemized Deductions 290,790 289,790
Federal income taxes (Assuming 35% marginal bracket) 101,777 101,427
Federal Income Tax Savings 350
PA Income Tax Savings 9,000
Total Tax Savings 9,350
Net Cost of $10,000 EITC Contribution 650

21. EXAMPLE 2 - PASS-THROUGH ENTITIES
Without EITC
contribution
Contribution (2-year
commitment)
Net Taxable Income prior to contribution and income taxes 300,000 300,000
EITC Contribution N/A 0
State Addback of expenses qualifying for PA EITC N/A 0
Adjusted PA Taxable Income 300,000 300,000
PA State Income Tax (3.07%) (9,210) (9,210)
Reduction in State Income Tax (Itemized Deductions) 9,000
Federal Charitable Contribution Deduction (10,000)
Adjusted Federal Taxable Income After Itemized Deductions 290,790 289,790
Federal income taxes (Assuming 35% marginal bracket) 101,777 101,427
Federal Income Tax Savings 350
PA Income Tax Savings 9,000
Total Tax Savings 9,350
Net Cost of $10,000 EITC Contribution 650

22. EXAMPLE 2 - PASS-THROUGH ENTITIES
Without EITC
contribution
Contribution (2-year
commitment)
Net Taxable Income prior to contribution and income taxes 300,000 300,000
EITC Contribution N/A 0
State Addback of expenses qualifying for PA EITC N/A 0
Adjusted PA Taxable Income 300,000 300,000
PA State Income Tax (3.07%) (9,210) (9,210)
Reduction in State Income Tax (Itemized Deductions) 9,000
Federal Charitable Contribution Deduction (10,000)
Adjusted Federal Taxable Income After Itemized Deductions 290,790 289,790
Federal income taxes (Assuming 35% marginal bracket) 101,777 101,427
Federal Income Tax Savings 350
PA Income Tax Savings 9,000
Total Tax Savings 9,350
Net Cost of $10,000 EITC Contribution 650

23. EXAMPLE 2 - PASS-THROUGH ENTITIES
Without EITC
contribution
Contribution (2-year
commitment)
Net Taxable Income prior to contribution and income taxes 300,000 300,000
EITC Contribution N/A 0
State Addback of expenses qualifying for PA EITC N/A 0
Adjusted PA Taxable Income 300,000 300,000
PA State Income Tax (3.07%) (9,210) (9,210)
Reduction in State Income Tax (Itemized Deductions) 9,000
Federal Charitable Contribution Deduction (10,000)
Adjusted Federal Taxable Income After Itemized Deductions 290,790 289,790
Federal income taxes (Assuming 35% marginal bracket) 101,777 101,427
Federal Income Tax Savings 350
PA Income Tax Savings 9,000
Total Tax Savings 9,350
Net Cost of $10,000 EITC Contribution 650

24. EXAMPLE 2 - PASS-THROUGH ENTITIES
Without EITC
contribution
Contribution (2-year
commitment)
Net Taxable Income prior to contribution and income taxes 300,000 300,000
EITC Contribution N/A 0
State Addback of expenses qualifying for PA EITC N/A 0
Adjusted PA Taxable Income 300,000 300,000
PA State Income Tax (3.07%) (9,210) (9,210)
Reduction in State Income Tax (Itemized Deductions) 9,000
Federal Charitable Contribution Deduction (10,000)
Adjusted Federal Taxable Income After Itemized Deductions 290,790 289,790
Federal income taxes (Assuming 35% marginal bracket) 101,777 101,427
Federal Income Tax Savings 350
PA Income Tax Savings 9,000
Total Tax Savings 9,350
Net Cost of $10,000 EITC Contribution 650

25. EXAMPLE 2 - PASS-THROUGH ENTITIES
Without EITC
contribution
Contribution (2-year
commitment)
Net Taxable Income prior to contribution and income taxes 300,000 300,000
EITC Contribution N/A 0
State Addback of expenses qualifying for PA EITC N/A 0
Adjusted PA Taxable Income 300,000 300,000
PA State Income Tax (3.07%) (9,210) (9,210)
Reduction in State Income Tax (Itemized Deductions) 9,000
Federal Charitable Contribution Deduction (10,000)
Adjusted Federal Taxable Income After Itemized Deductions 290,790 289,790
Federal income taxes (Assuming 35% marginal bracket) 101,777 101,427
Federal Income Tax Savings 350
PA Income Tax Savings 9,000
Total Tax Savings 9,350
Net Cost of $10,000 EITC Contribution 650

26. HOW DOES A BUSINESS APPLY FOR THE CREDIT?
• July 1, 2013 for first year applicants
• First come, first served by day basis
• www.newpa.com
• New requirement for 2013: “Single Application for Assistance”
• Hard copy signature page also required
• Renewal applications due between May 15th and June 28th 2013

27. IMPORTANT LIMITATIONS/DEADLINES TO KEEP IN MIND
• $750,000 total credit limit per business per year
• $200,000 maximum credit for Pre-K scholarship
• Must make contribution within 60 days of date of approval letter
• DCED must receive written notification of contribution within 90 days of approval
letter
• Cannot be sold, assigned, or carried forward except for an election to “pass-through”
the credit to owners
• Credits can be utilized against 100% of taxpayer’s tax liability.

28. HOW DOES THE CREDIT GET REPORTED ON THE
TAX RETURNS?
• Credit is available for the tax year in which the contribution was made
• PA Rev-1123 “EITC Election Form”
• PA Schedule OC
• If passing through the credit to the owners, they can elect to utilize the credit in the
current tax year or the next tax year

29. OPPORTUNITY SCHOLARSHIP TAX CREDIT PROGRAM
(“EITC 2.0”)
• New in 2012 as part of the Governor’s State Budget
• Organizations that provide tuition assistance to eligible students residing in the
boundaries of a “low achieving school”
• Similar guidelines as the original EITC Program
• $50 million allocated to program from 2012-2013 budget

30. EITC PROGRAM CONTACT INFORMATION
Pennsylvania Department of Community & Economic Development
(DCED), Center for Business Financing-Tax Credit Division
• Website: www.newpa.com
• Phone number: (717) 787-7120
• Email: RA-EITC@pa.gov

31. Michael Eby
meby@macpas.com
Greg Lowe
glowe@macpas.com
A BIT ABOUT US

32. 05/15/13

33. 5/15/2013
FRAUD ENGAGEMENT
FROM A TO Z
SAMUEL BOWERCRAFT, MSIS, CISA
&
DAVID HAMMARBERG,
CPA, CFE, CISSP, MCSE, WXYZ