Pennsylvania R&D Tax Credit Summary

Pennsylvania R&D tax credit, R&D tax Credit

Pennsylvania State R&D Tax Credit

A corporation that incurs qualified research and development expenses may apply for a research and development tax credit. Unique to Pennsylvania, with the R&D Tax Credit Assignment Program, technology companies can sell any unused R&D tax credits in the open market to help advance and grow their businesses.


Download A Practical Guide to Identifying, Gathering, and Documenting A Sustainable Research Tax Credit Claim

Refundable Tax Credit – Yes

  • The credit is equal to 10% of the amount by which the corporation’s qualified research and development expenses exceed the taxpayer’s Pennsylvania base amount
  • A qualified small business (for-profit corporation, limited liability company, partnership or proprietorship with net book value of assets totaling, less than $5 million at the beginning or end of the taxable year for which Pennsylvania qualified research and development expense is incurred, as reported on the balance sheet, less than five million dollars) may apply for a research and development credit equal to 20% of the amount by which the corporation’s qualified research and development expenses exceed the taxpayer’s Pennsylvania base amount
  • Effective July 2, 2012, the total amount of credits approved by the Department could not exceed $55 million for any fiscal year (previously $40 million), of which $11 million (previously $8 million) must be allocated to small businesses

Sale or assignment of credit

  • Taxpayers entitled to a research and development credit may sell or assign all or any portion of the credits awarded, with the approval of the Department of Community and Economic Development
  • The sale or assignment of the credit will not be approved if the seller has any outstanding state taxes
  • All reports must have been filed and all outstanding tax liabilities paid before the sale or assignment is approved

The purchaser or assignee must claim the credit in the tax year in which it is purchased or assigned. However, the amount of credit the purchaser or assignee may use against any one qualified tax liability cannot exceed 75% of the qualified tax liability for that tax year. The purchaser or assignee may not carry over, carry back or carry forward any amount of the purchased or assigned credit, nor may they obtain a refund or assign the purchased or assigned credit.

Carryforward

No portion of the credit may be carried back, however, once a credit is approved and applied against the tax liability for the year in which the credit was approved, any unused credit can be carried forward for up to 15 years.

Flow-Through Entities
Effective for awards made Dec. 15, 2006, and after, pass-through entities included limited liability companies and partnerships, thus the credit can be transferred (passed-though) in writing to shareholders, members or partners in their proportionate share.  The shareholder, member or partner must use the credit in the taxable year in which the transfer is made.  R&D credits cannot be used against employer withholding of employees’ personal income tax.  Also effective for awards made Dec. 15, 2006, and after, the tentative credit on Line 7 is equal to 10 percent (10%) for large companies and 20 percent (20%) for small companies.

How to obtain the credit? 

The application must be submitted by September 15 for research and development expenses incurred in the prior year and The Department of Revenue must notify the corporation of the amount of the approved credit by December 15 of the year following the close of the tax year for which the credit is claimed.

See who received R&D Tax Credits in 2016.  Report to the Pennsylvania General Assembly the Research And Development Tax Credit 2016

Find out if you qualify for the R&D tax credit

SELL YOUR NOL’s AND R&D CREDITS

If your company hasn’t considered the R&D credit in the past because you have net operating losses (NOLs) and could not utilize the credit contact us today to find out which states allow you to sell your credits and losses for up to 95 cents on the dollar. Also, qualified start-up companies can now take a credit on their payroll taxes for their R&D credit, allowing your company to utilize the R&D credit immediately, even if your company does not have taxable income.
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States Offering R&D Credit:

                             States Without R&D Credit

Alabama
District of Columbia
Missouri
Montana
Nevada
Oklahoma
South Dakota
Tennessee
Washington
West Virginia
Wyoming