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.
  • Unused Pennsylvania research credits can be carried forward for fifteen years.
  • 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 Philadelphia company manufactures components for the aerospace industry. The company claims R&D credits each year for the development activities of its engineers. This project involved a multi-year study. 

The Company qualified for federal R&D credits of $327,833 and an additional $65,000 in Pennsylvania.

FEDERAL
PENNSYLVANIA
Year
Total QREs
Credit
Total QREs
Credit
Year 4
$1,300,000
$135,333
$1,300,000
$65,000
Year 2
900,000
91,000
Year 2
650,000
63,000
Year 1
450,000
38,500
Total $3,300,000 $327,833 $1,300,000 $65,000