Increase the Impact of your Gift

GA Announces Plans to Accept Donations under Pennsylvania Educational Improvement Tax Credit Program

Increase the IMPACT of your gift for GA! For every dollar donated to Germantown Academy’s scholarship program, the state of Pennsylvania will credit 90¢ to the donor’s state income tax (up to his total state tax liability). The remaining 10¢ is a deductible federal contribution. Therefore, Germantown Academy will receive ten times the amount of a donor’s gift.

If a donor gives $10,000, Germantown Academy keeps all of the money but the donor receives deductions and credits for over 93% of their gift:

What is the Educational Improvement Tax Credit (EITC)?

The EITC program is a state run program that allows individuals who donate money to certain approved 501(c)(3) charities with an educational mission to receive a tax credit (i.e., not a deduction) towards their personal state income tax liability. (1 below) Under the program, donors, who make a two-year commitment to contribute to an approved charity, receive a 90% state income tax credit towards their state income tax liability each year. The remaining 10% is deductible as a charitable contribution. Donations to GA’s scholarship fund have been approved for this program.

How do the tax benefits work?

Under the EITC program, an individual who makes $10,000 donation will receive a $9,000 credit (not a deduction) towards their Pennsylvania state income tax liability. For example, a Pennsylvania resident that earns $300,000 would have no state income tax liability. (2 below) Individuals may also deduct the remaining $1,000 of their donation. The individual would have to make a $10,000 donation in 2018 and 2019. The same tax benefits will apply in 2019. Individuals who donate may be eligible to adjust their state withholdings. Any prospective donors should consult with their tax advisor.

Must I give now?

YES! Our application has been approved by the State, there is now narrow window to make the full contribution for tax year 2018. All donations must be made by January 20, 2019. After then, no additional donations will be accepted to be applied to this allotment.

Do I donate to Germantown Academy?

NO! The donations are accepted by the Special Purpose Entities (“SPE”), Friends of Education LLC or Montgomery County Education Friends LLC, which are private companies administered by Jed Silversmith, a GA parent. The private company will pool the donations, receipt them to donors and give the funds to GA. Germantown Academy will send a gift receipt to the SPE which will then be filed in Harrisburg for the distribution of the tax credits. Later, you will receive a check from the state in the amount of your credits based on your contribution. Gifts made in December will count for the 2018 tax year, those made in January will result in tax credits in the following tax year. At the end of the year, the SPE will issue the donor a K-1. The federal and state K-1 forms will arrive the first week of February, 2019.

Who can contribute?

The SPE is considered a security under Pennsylvania’s blue state laws even though this is not an investment and donors will not receive a financial return. Because this is a security, donors must be “Accredited Investors”. Accredited Investors are individuals whose (i) net worth (exclusive of home, furnishings and automobile(s)) or the joint net worth of the undersigned his/her spouse (if any), exceeds $1,000,000 at the present time; (ii) individual income in each of the last two years exceeded $200,000; or (c) whose joint income with his/her spouse in each of the last two years exceeded $300,000.

https://www.investor.gov/additional-resources/news-alerts/alerts-bulletins/investor-bulletin-accredited-investors

What are the next steps?

Contact Martin Dean at the Office of Institutional Advancement
Martin.Dean@germantownacademy.org
267-405-7458

or Jed Silversmith P’29, ‘32
jsilversmith@blankrome.com
215-569-5789