Pennsylvania R&D Tax Credit Summary

The Pennsylvania research credit is very similar to the federal version including the definition of qualifying research. Below are some of the differences between the federal and Pennsylvania research credits.

  • Pennsylvania caps its total R&D credit at $55 million ($11 million set aside for qualified small businesses).
  • The credit rate in Pennsylvania is 10% (20% for qualified small businesses).
  • Pennsylvania offers a modified Alternative Simplified Credit
  • Qualified research must take place in Pennsylvania.
  • Excess Pennsylvania research credits can be carried forward for fifteen years and are not refundable.
  • Currently, there is no sunset provision for Pennsylvania’s R&D credit.
  • Qualified taxpayers must submit an application to the Department of Revenue by September 15 for research expenses incurred in taxable year that ended in the prior calendar year.

Pennsylvania R&D Tax Credit Case Study

A company in Pennsylvania, Pennsylvania claims R&D Tax Credits each year for the development activities of its engineers. This project involved a multi-year study covering the tax years 2018 – 2021.

The Company qualified for federal R&D credits of $359,917 and an additional $148,750 in Pennsylvania.

FEDERAL
PENNSYLVANIA
Year
Total QREs
Credit
Total QREs
Credit
2021
$1,300,000
$135,333
$1,300,000
$65,000
2020
900,000
91,000
900,000 43,750
2019
650,000
63,000
650,000 27,500
2018
450,000
38,500
450,000 12,500
Total $3,300,000 $359,917 $3,300,000 $148,750

You can read more about this Pennsylvania tax credit case study here.