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of the Commonwealth of Pennsylvania

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    Overview

    Act 7 of 1997 created the Pennsylvania Research & Development (R&D) tax credit. The R&D tax credit provision became Article XVII-B of the Tax Reform Code of 1971 (TRC).  The intent of the R&D tax credit is to encourage taxpayers to increase R&D expenditures within the Commonwealth in order to enhance economic growth.

    This tax credit is available to businesses and individuals performing qualified research in Pennsylvania to encourage businesses in the Commonwealth to conduct research.

    This tax credit is available to businesses and individuals performing qualified research in Pennsylvania, to encourage businesses in the commonwealth to conduct research.

    To qualify for the R&D tax credit, the entity must be:

    • Subject to Corporate Net Income Tax or Personal Income Tax;
    • Have research expenses incurred for qualified research and development conducted within Pennsylvania;
    • Have had at least two years for R&D expenditure;
    • In compliance with tax laws and regulations of the Commonwealth of Pennsylvania as determined by the department.

    Applicants applying for the R&D tax credit must agree to the following terms and conditions:

    • Applicants deemed non-compliant for state tax clearance purposes will not receive a tax credit.
    • Applicants are required to be in compliance with all state tax reporting and payment requirements before participating in this program.
    • The department can require additional information to verify and approve the application as well as the subsequent sale of credit.
    • Department requests for additional information will be made via mail and can involve an onsite audit. Failure to provide a timely response will result in the denial of the application.
    • The mailing address provided can be used to request additional information. If the address is not the physical address where records can be made available for review, you must provide the physical address.

    To apply for the Research & Development tax credit visit myPATH​, the Department of Revenue’s online filing system. This is a logged-in function so you will need to create a myPATH account. More information about the application and how to apply can be found at Research & Development Tax Credit Program – How to A​pply.

    The application period opens August 1.  All applications must be submitted by December 1.​

    To watch a video tutorial on How to Submit a Research and Development Tax Credit​ or other myPATH​ features, go to myPATH Video Tutorials.

    The R&D tax credit may be sold. Applicants must be compliant with all state tax reporting and payment requirements before approval of sale is granted.

    Upon receiving a request for approval to sell a credit, the department may require additional information and conduct an onsite review a​t the physical address for records provided with the application. Failure to promptly respond to such request for information will result in the denial of the request.

    The sale of a credit is a taxable transaction for income tax purposes and the department provides information on taxable transactions to the IRS.

    The department will correspond to obtain additional information when information is incomplete or other inconsistencies are noted.