Educational Improvement
The Educational Improvement Tax Credit (EITC), Pre-Kindergarten (Pre-K) Tax Credit, and Opportunity Scholarship Tax Credit (OSTC) are administered by the Department of Community and Economic Development. It authorizes the award of tax credits to businesses that make contributions to Scholarship Organizations and/or Educational Improvement Organizations and/or Pre-K Scholarship Organizations contained on a list published by the Department. Organizations must apply each year to qualify as an EITC eligible organization.
Eligibility
-
Business firms authorized to do business in the Commonwealth of Pennsylvania that are subject to Pennsylvania taxes.
-
Businesses must be approved to make contributions to Scholarship Organizations (SO) and/or Educational Improvement Organizations (EIO) and/or Pre-Kindergarten Scholarship Organizations (PKSO) that are on the list of such organizations published by the Department.
-
Businesses approved under the Opportunity Scholarship Tax Credit (OSTC) Program must give to organizations that fund students who live within the state-designated underperforming school districts.
-
Individuals may participate in the program by joining a qualified Special Purpose Entity (SPE) that has received a tax credit allocation. The Contribution to the SPE partnership is donated to a qualifying SO or EIO and the tax credit is passed through to the individual on a K-1 form.
Funding
-
Up to $70 million in tax credits are available each fiscal year.
-
A business firm will be approved for a tax credit equal to 75% of its contribution(s) to listed organization(s) for a one-year donation commitment, or increased to 90% of the contribution(s) for 2 consecutive year donation commitment, up to a maximum of $750,000 per taxable year through the EITC program. The EITC program can have donations in either the Scholarship Organization or Educational Improvement Organization categories as designated in your award letter.
-
To ensure the receipt and retention of the 90% tax credit, the business firm must make the same amount of contribution in each of the two consecutive tax years.
-
A business firm may also apply for up to $200,000 of tax credits under the Pre-K program at 100% for the first $10,000 in donations to a qualifying Pre-K program, and 90% for remaining donations.
-
A business firm may additionally apply for a tax credit equal to 75% of its contribution(s) to listed organization(s) for a one-year donation commitment, or increased to 90% of the contribution(s) for 2 consecutive year donation commitment, up to a maximum of $750,000 per taxable year through the OSTC program. These organizations or
-
schools must provide scholarships to students that live in designated disadvantaged school districts.
-
Credits must be used in the tax year they are issued or passed through to owners in that same year.
Enterprise Zone
This is an incentive program that provides tax credits to businesses or private companies investing in rehabilitating, expanding, or improving buildings or land located within designated Enterprise Zones.
Eligibility
-
Business firms must be Private for-profit companies authorized to do business in Pennsylvania and subject to PA tax.
-
The project is within portions of a distressed community designated as an Enterprise Zone, Keystone Main Street, Keystone Community, or Keystone Communities Enterprise Zone.
-
Project must create employment opportunities for low-income individuals located within the designated zones. Employment opportunities must be full-time, higher than state minimum wage at a family sustainable wage and include benefits.
-
Projects must not displace current residents or businesses.
-
Eligible activities include:
• Rehabilitation
• Expansion
• Improvement to a building(s)
• Improvement to land
• Engineering
• Architecture
• Acquisition
Funding
• Up to $36 million available each fiscal year across all NAP based programs, including the Enterprise Zone Credits.
• Tax credits equal 25% of amount invested; Up to $500,000 total tax credits per project. This may be prorated based on how many applicants are received each fiscal year.
• Once the audit is accepted by the state and the certificate is issued, credits may be used or carry forward for up to five years, be passed through to shareholders, or be sold/assigned.
Film Production
The Film Production Tax Credits program supports the entertainment industry by providing tax credits for eligible in-state activities in an effort to expand Pennsylvania’s film industry.
​
Eligibility
-
The types of film eligible for a Film Production Tax Credit under the Program are restricted to:
• A feature film
• A television film
• A television talk or game show series
• A television commercial
• A television pilot or each episode of a television series intended as programming for a national audience
-
To be eligible for a Film Production Tax Credit, Pennsylvania production expenses must comprise at least 60% of a film’s total production expenses.
-
Eligibility for a Film Production Tax Credit for postproduction expenses of original content for a Film can include traditional, emerging, and new workflow techniques such as:
• The type(s) of postproduction activity
• Picture, sound and music editorial, re-recording and mixing
• Visual effects
• Graphic design
• Animation
• And more!
-
Postproduction Expense(s) incurred at a qualified postproduction Facility receive additional tax credit allocation consideration.
Funding
-
Films with eligible expenses may receive a Film Production Tax Credit of up to 25% of their qualified film production expenses.
-
A film with eligible expenses may receive an additional 5% tax credit for a total credit of 30% if the taxpayer films a feature film, television film, or television series intended as programming for a national audience that meets the minimum stage filming requirements at a qualified production facility.
-
Applicants with eligible postproduction expenses incurred at a qualified postproduction facility, either as part of the total production activities of a film that qualifies for a tax credit or as a stand-alone postproduction project, are eligible to receive a 30% Film Production Tax Credit for these postproduction expenses.
-
Once the audit is accepted by the state and the certificate is issued, credits may be used or carry forward for three years, passed through to shareholders, or be sold/assigned.
​
Historic Preservation
The Historic Preservation Tax Credit (HPTC) provides tax credits to qualified taxpayers who will be completing the restoration of a qualified historic structure into an income-producing property. Federal credits of 20% of qualified costs are available as well.
​
Eligibility
-
Qualified taxpayers include an individual, corporation, business trust, limited liability company, limited liability partnership, or any other form of a legal business entity subject to Pennsylvania taxes.
-
Building must be individually listed on the National Register for Historic Places, or a contributing building of a Historic District.
-
Project must include a qualified rehabilitation plan that is approved by the Pennsylvania Historical and Museum Commission (PHMC) and pass the significant rehabilitation test.
Funding
-
Up to $5,000,000 in total tax credits available to be issued per fiscal year.
-
Receive Tax Credits equal to 25% of qualifying improvements made to the building. Each project may receive up to $500,000 in tax credits. Credits may be pro-rated if the program is over-subscribed.
-
Credits will be granted equally to five regions across Pennsylvania.
-
Once the audit is accepted by the state and the certificate is issued, credits may be used or carry forward for up to seven years, be passed through to shareholders, or be sold/assigned.
​
Keystone Innovation Zone
An incentive program that provides tax credits to for-profit companies less than eight years old operating within specific targeted industries within the boundaries of a Keystone Innovation Zone (KIZ). With a total pool of up to $15 million in tax credits available to KIZ companies annually, the KIZ tax credit program significantly contributes to the ability of young KIZ companies to transition through the stages of growth.
​
Eligibility
-
Company must be located within the geographic boundaries of a particular KIZ.
-
Business must be in operation for less than eight years.
-
Business must operate within one of the KIZ targeted industry segments or sectors, including Advanced or Diversified Manufacturing, Business Services, High/Advanced Technology, or Life Sciences.
-
Company must hold intellectual property of some kind, like a patent, trademark, something licensable, or the company’s “Secret Sauce”.
-
Must be a for-profit entity subject to Personal Income Tax or Corporate Net Income Tax.
-
Company and owners of 20% or more equity must be in state tax compliance with the laws and regulations of the Commonwealth as determined by the Department of Revenue.
-
Must meet any other requirements specified by the DCED.
Funding
-
Up to $15 million in tax credits available each year.
-
A KIZ company may claim a tax credit equal to 50% of the increase in that KIZ Company’s gross revenues in the immediately preceding taxable year attributable to activities in the KIZ, over the KIZ Company’s gross revenues in the second preceding taxable year attributable to its activities in the KIZ.
-
The KIZ Tax Credit is limited to $100,000 annually per KIZ company. This may be prorated based on the number of companies that apply each year.
-
Credits may be used or carry forward for four additional years, be passed through to shareholders, or be sold/assigned.
Keystone Special Development Zone
The Keystone Special Development Zone (KSDZ) program was established for the purpose of providing incentives to for-profit businesses that locate and operate in designated geographic zones. Pennsylvania continues to have a surplus of abandoned, deteriorated commercial and industrial sites in need of revitalization. The KSDZ program is an incentive-based tax credit program to foster the redevelopment of these former industrial and commercial sites.
​
Eligibility
-
Parcels of real estate must meet all criteria outlined by the DCED to be designated as a Keystone Special Development Zone. Applicants may apply for designation by submitting a letter of request.
-
The KSDZ employer must agree to maintain operations related to the KSDZ tax credits in this Commonwealth for a period of five years from the date the company first submits a KSDZ tax credit certificate to the Department of Revenue.
Funding
-
The amount of tax credits the KSDZ employer may earn in a single year is $2,100 for each Full-Time Equivalent Employee (FTE) in excess of the number of FTEs employed by the KSDZ employer in Pennsylvania prior to January 1, 2012.
-
Credits may be used or carry forward for up to 10 years, be passed through to shareholders, or be sold/assigned.
Neighborhood Assistance
Tax credit program to encourage businesses to invest in projects which improve distressed areas or support neighborhood conservation. Projects must fall under one of the following categories: affordable housing programs, community services, crime prevention, education, job training or neighborhood assistance. A tax credit of up to 55% can be awarded for most projects, with a 75% tax credit available for certain projects.
Eligibility
-
A non-profit completing a project to improve a distressed area.
-
A distressed area must demonstrate a high incidence of one or more of the demographic factors below:
• Persistent unemployment or underemployment
• Dependence upon public assistance
• Overcrowded, unsanitary or inadequate housing
• Crime and delinquency
• School dropouts
• Other evidence of low educational attainment
• Vacant and dilapidated properties, blight
• Other generally accepted indicators of widespread social problems
-
The project/program must not result in relocation or displacement of residents.
Funding
-
Up to $36 million available each fiscal year across all NAP based programs, including the Enterprise Zone Credits.
-
Amounts vary depending on the program, but generally follow the outline below:
• Neighborhood Assistance Program Tax Credit- 55% tax credit provided for 1-year projects
• Special Program Priorities- 75% tax credit provided for targeted problems designated by the state for 1-year projects
• Projects include disaster or economic recovery, weatherization or housing rehab, diversity initiatives, blight elimination, veteran initiatives and more
• Neighborhood Partnership Program- 75-80% tax credit provided for collaboration between business and a Community Strategic Plan for 5+ years
• Charitable Food Program- 55% tax credit provided for regional food banks and programs to relieve hunger, food insecurity or shortages for 1-year projects
-
Credit may be used or may carry forward for up to five years, be passed through to shareholders, or be sold/assigned.
Research & Development
Research and Development tax credits (“R&D tax credits”) are available to taxpayers incurring qualified expenses for research and development. Eligible activities include wages, direct supplies, and subcontractor expenses that support the creation or incremental improvements to a company’s products or processes. Federal credits are available for activity within the United States and is calculated as part of the Federal filed tax returns. Pennsylvania’s program is for activities within Pennsylvania only and requires a separate application. These credits can greatly support the growth and development of technologies and advancements across many industries.
​
Eligibility
-
Any for-profit business with qualified activity within Pennsylvania.
-
Must be creating new technology, products or processes, or improving a current product or process, such as cost reduction, efficiency, or increased functionality.
-
Company must maintain IP of the product or process.
-
Company must meet the 4 part test:
• Have financial risk and not be fully funded
• Activities fall in a physical science
• Uncertainty at the onset of the project
• Process of experimentation​
Funding
-
Up to $55 million of tax credits available each year with $11 million specifically for small businesses.
• A small business is defined as having less than $5 million in assets
-
Companies qualify for increases in R&D spending in the previous tax year over the average of up to four prior tax years.
-
Large businesses qualify for a tax credit of 10% of the increase. Small businesses qualify for 20% of the increase.
-
Credits may be used and carry forward for up to 15 years, be passed through to shareholders, or be sold/assigned.
Resources Enhancement and Protection
The Resource Enhancement and Protection (REAP) Program allows farmers and businesses to earn tax credits in exchange for “Best Management Practices” (BMPs) on agricultural operations that will enhance farm production and protect natural resources.
Eligibility
-
Applicants must have a current Conservation Plan or Agricultural E&S Plan, and a current Nutrient Management Plan or Manure Management Plan for all acres that are under their management control, if applicable.
-
Applicants must have BMPs for Animal Concentration Areas (ACA), if applicable.
-
Eligible Costs include:
• Project design, engineering, and associated planning
Project management costs, including constructing, document preparation and applications
• Project construction and installation
• Equipment, materials and other eligible project components
• Post-construction expenses
• Interest payments on loans for project implementation for up to one year prior to the award of the tax credit
Funding
-
Eligible applicants may receive between 50% and 75% of project costs as a state tax credit for up to $250,000 per agricultural operation. The amount of tax credit available to a recipient is dependent on the type of BMP implemented.
-
Up to $13 million in tax credits are available each fiscal year.
-
An applicant may add a sponsor to their application, which will be granted the credits directly. A sponsor is not subject to the $250,000 cap.
-
Credits may be used and carry forward for up to 15 years, be passed through to shareholders, or be sold/assigned after one year from date on credit certificate.
Video Game Production
​​​
The Video Game Production Tax Credit (VGPTC) program supports the entertainment industry by providing tax credits for eligible in-state activities in an effort to expand Pennsylvania’s gaming industry.
​
Eligibility
-
Eligibility for a Video Game Production Tax Credit is restricted to video game production companies subject to Pennsylvania taxes.
-
Contractors or subcontractors of a Video Game production company are not eligible to apply for tax credits under the Program.
-
A video game that contains obscene material or performances, or a game designed primarily for private, political, industrial, corporate or institutional purposes is not eligible for a tax credit.
-
Pennsylvania production expenses must comprise at least 60% of the video game’s total production expenses.
Funding
-
Up to $1 million in tax credits are available each fiscal year.
-
An applicant can apply for a tax credit equal to 25% of the qualifying expenses incurred each year in the first 4 years of production, and 10% of qualifying expenses incurred in each year after.
-
Credits may be pro-rated if applications exceed available credits.
-
Credits may be used or carry forward for three years, be passed through to shareholders, or be sold/assigned.
Work Opportunity
The Work Opportunity Tax Credit (WOTC) is a Federal tax credit available to employers for hiring individuals from certain targeted groups who have consistently faced significant barriers to employment. WOTC joins other workforce programs that incentivize workplace diversity and facilitate access to good jobs for American workers.
​
Eligibility
-
The Protecting Americans from Tax Hikes Act of 2015 (the PATH Act) retroactively allows eligible employers to claim the Work Opportunity Tax Credit (WOTC) for all targeted group employee categories that were in effect prior to the enactment of the PATH Act, if the individual began or begins work for the employer before December 31, 2025. For tax-exempt employers, the PATH Act retroactively allows them to claim the WOTC for qualified veterans who begin work for the employer before December 31, 2025. The PATH Act also added a new targeted group category to include qualified long-term unemployment recipients. All claims must be made timely, within 28 days of hire.
-
Targeted Categories include:
• Qualified Veteran
• Qualified Title IV-A recipient
• Ex-Felon
• Designated Community Resident
• Vocational Rehabilitation Referral
• Summer Youth Employee
• Supplemental Nutrition Assistance Program (SNAP) Recipient
• Supplement Security Income (SSI) Recipient
• Long-Term Family Assistance Recipient
• Qualified Long-Term Unemployment Recipient
• Must maintain employment for 9 months to claim credit
Funding:
-
Credit ranges from $2,400-$9,600 for employers hiring qualified veterans and other categories including Long-term unemployed, SNAP recipients, Ex-felon’s, SSI recipients and more.
-
The credit is limited to the amount of the business income tax liability or social security tax owed. The credit will not affect the employer’s Social Security tax liability reported on the organization’s employment tax return.
