Fillable Form Rev-1123 Ct - Educational Improvement Tax Credit Election Form (Page 3 of 3) in pdf

REV-1123 CT (05-12)

Use of Educational Improvement Tax Credits

Upon receipt of proof of a contribution, the Department of Community and Economic Development will

notify the Department of Revenue to apply the Educational Improvement Tax Credit (EITC) against the

appropriate taxes identified by the business in its application.

A business, including a pass-through entity, granted an EITC is entitled to a credit in the taxable year

in which the contribution is made. The definition of a pass-through entity includes: (1) an unincorpo-

rated entity that is classified as a partnership for federal income tax purposes; (2) a single-member

limited liability company that is classified as a disregarded entity for federal income tax purposes; and

(3) a Pennsylvania S corporation. A pass-through entity may choose to pass through the credit to

shareholders, members or partners (owners) in the following manner:

•

Make an irrevocable election in writing to pass through the entire EITC to its owners, in proportion

to the entity’s distributive income share to which owners are entitled in the taxable year in which

the contribution is made, or in the taxable year immediately following.

•

Apply all or a portion of the EITC to the entity’s tax liability for use in the taxable year in which

the contribution is made and make an irrevocable election in writing to pass through the

remaining EITC to its owners, in proportion to the entity’s distributive income share to which

owners are entitled in the taxable year in which the contribution is made.

•

Apply all or a portion of the EITC to the entity’s tax liability for use in the taxable year in which

the contribution is made and make an irrevocable election in writing to pass through the

remaining EITC through to its owners, in proportion to the entity’s distributive income share

to which owners are entitled in the taxable year immediately following the year in which the

contribution was made.

IMPORTANT: Married couples with joint ownership in pass-through entities must identify husband and

wife separately on the entities’ pass through of credit requests in order for credit to be applied to each

individual.

Example: Husband and wife Jim and Jane jointly own a 50 percent interest of a partnership, and their

son John owns the other 50 percent. All income is distributed according to the ownership percentages.

The request to pass through credit must identify Jim’s and Jane’s tax numbers separately, each receiv-

ing 25 percent of the credit, and identify the other 50 percent to be passed through to John under his

tax number. This method must be followed even though the partnership reports Jim and Jane’s income

together on the same RK-1 or NRK-1.

An election to pass through an EITC must be made by the pass-through entity on or

before the tax report due date for the year in which the contribution is made. A sepa-

rate election must be submitted for each year. If an election is not made to pass through any unused

EITC to the owners, the EITC will expire.

An EITC granted for any one taxable year may not exceed the combined tax liability of the entity and

its owners. Additionally, an EITC not used in the taxable year in which the contribution was made may

not be carried forward or carried back, nor is it refundable or transferable, except for an approved

election to apply unused EITC to the tax liability of the owners in the taxable year immediately follow-

ing the year in which the contribution is made. A pass-through EITC can be applied to all classes of

income earned by the owners.

Return the election form to:

PA DEPARTMENT OF REVENUE

BUREAU OF CORPORATION TAXES

PO BOX 280701

HARRISBURG PA 17128-0701

Form Rev-1123 Ct - Educational Improvement Tax Credit Election Form Page 3

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