Pennsylvania R&D Tax Credits

Pennsylvania provides a research and development tax credit equal to 10% of the amount by which the taxpayer's qualified R&D expenses exceed the taxpayer's Pennsylvania base amount. After calculating the credit using PA Form REV-545, the application is submitted electronically using an online application system. The submission deadline is September 15th, and the Pennsylvania Department of Revenue will approve the credit by December 15th.

In order to submit an application for R&D tax credits, your business must meet the following criteria:

1. Must be an entity subject to Personal Income Tax (Article III) or Corporate Net Income Tax (Article IV.)
2. Must have research expenses incurred for R&D activities conducted within Pennsylvania.
3. Must be in state tax compliance with the laws and regulations of the Commonwealth, as determined by the Department of Revenue.
4. Must have at least two years of R&D expenditures.

The federal due date is not relevant. Federal Form 6765 has to be completed and sent to the department by September 15 in order for an applicant to be eligible for the Pennsylvania Research and Development Tax Credit.

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Learn more about Pennsylvania R&D Tax Credit law here and here. 

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R&D Tax Credit Available:

Yes

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Eligible Entities:

C-Corporations, S-Corporations, LLCs, Partnerships

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Deadline for Tax Filing:

Application due by 9/15

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Data Required to Compute Credit:

Claim Period Qualified Research Expenses (QREs)

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What Information is needed?

QREs for Prior 4 Tax Years

Federal Form 6765

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Credit Carryforward:

15 years

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The R&D tax credit equals:

• The Pennsylvania R&D tax credit equals 10% (large businesses) or 20% (small businesses) of Pennsylvania QREs less the greater of a) 50% of expenses b) average of prior 4 years of QREs (i.e. a 4-year ASC equivalent).

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Specific Items to Note:

• Large Businesses: Total Assets > $5M
• Small Businesses: Total Assets < $5M
  
• If filing as a small business, must provide a copy of the balance sheet showing total assets lessthan $5 million at the beginning or end of the year.
• The PA R&D credit cannot be carried back