Businesses located in specific areas of PA could qualify for both a KIZ and federal R&D tax credit.
Since 2004, the Keystone Innovation Zone (KIZ) tax credit program has been helping young, innovative PA companies reduce their tax burden.
Bear in mind that the KIZ tax credit program does restrict who can apply for it as the program was designed for companies that conduct research and development (R&D) in specific industries and locations. Keep reading to learn more about this PA tax credit.
What Type of Businesses Qualify for a KIZ Tax Credit?
Since companies that apply for the KIZ credit could potentially be awarded as much as $100,000, it’s in your best interest to determine if your business qualifies for this credit.
You may be able to apply for the KIZ tax credit if:
- your business is less than eight years old
- your business is in an eligible zone
- your business operates within a KIZ approved industry or sector
- your business meets all requirements set by the Pennsylvania Department of Community and Education Development
In addition to these requirements, you’ll need to identify if your company is in an approved county.
Which Counties are Eligible for this Credit?
As surprising as it may be, the KIZ tax credit program doesn’t extend throughout the entirety of the Keystone State. Even if your business meets all the other criteria, if you don’t live in one of these counties, you won’t be able to apply for the KIZ tax credit:
- Erie
- Crawford
- Mercer
- Warren
- Beaver
- Clarion
- Jefferson
- Elk
- Clearfield
- Allegheny
- Indiana
- Washington
- Fayette
- Greene
- Westmoreland
- Cambria
- Blair
- Bedford
- Centre
- Hungtingdon
- Lycoming
- Union
- Northumberland
- Montour
- Columbia
- Dauphin
- York
- Lancaster
- Berks
- Chester
- Delaware
- Montgomery
- Bucks
- Philadelphia
- Lehigh
- Northampton
- Luzerne
- Lackawanna
- Monroe
It’s important to note that each county has its own select list of industries that can acquire this credit.
Thankfully, you can see exactly which industries in these counties can apply for the tax credit by making use of resources provided by the Pennsylvania Department of Community and Education Development.
Now, if you’ve discovered that your county isn’t on this list, there’s no need to worry. Businesses conducing research and development could be eligible for Federal R&D tax credit too.
The Federal R&D Tax Credit
Unlike the KIZ tax credit program, the Federal R&D tax credit program has much broader geological borders. As long as your business is based in the United States and passes a four part test, you can apply for the credit. Let’s see if you can answer ‘yes’ to these four questions:
- Has your business developed a new product or process or improved upon existing functionality?
- Has your company dealt with some form of uncertainty in the development process (appropriateness of design, method used, etc.)?
- Has your company utilized a process of experimentation to eliminate uncertainty (modeling, prototyping, trial and error or other testing)?
- Has your company conducted experimentation which relied on engineering, biological, physical or computer science?
If you positively answered these questions and have a workforce based in the United States, you could receive up to 10% of your qualified research expenditures back in the form of a tax credit. Use our free R&D tax credit calculator to see how much your business could get back.
How to Apply for an R&D Tax Credit
When applying for a KIZ or Federal R&D tax credit, it’s best to reach out to a professional. With potentially thousands of dollars at stake, you’ll want to be sure that your R&D study is correct.
Once you’ve begun your study, be ready to provide information like your company’s research and development expenses, which will include the pay of the employees who work specifically on R&D.
You will also need to share basic background on your business and explain what R&D your company conducted, as well as how it was done.
The KIZ Tax Credit: What You Need to Know
Qualifying businesses in counties across the Keystone state could take advantage of a KIZ tax credit. Key qualifying factors include your company’s age, location, and industry.
Eligible companies could also qualify for a Federal R&D tax credit. Contact a research and development tax credit team today to get the credit you deserve.