SPOTLIGHT PROGRAMS

Keystone Opportunity Zone (KOZ): Businesses that are located in a KOZ are eligible for credits, waivers and broad-based exemptions on state and local taxes until the zone’s expiration date (zones have varying expiration dates). The effective tax burden for a company may be reduced to zero.  To qualify for the full range of KOZ benefits, existing businesses that relocate from a non-KOZ Pennsylvania location to a KOZ must increase full-time employment by 20% within the first full year of operation or make a capital investment equal to 10% of gross revenues from the previous fiscal year that were attributable to the business operation(s) that will be relocating to the KOZ.

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‍Redevelopment Assistance Capital Program (RACP): A discretionary program designed for competitive projects generating substantial economic impact. Obtaining the funds is complex as it requires itemization – i.e., projects seeking an award must be included in the Capital Budget Project Itemization Acts passed by the General Assembly and signed into law by the Governor. Projects must have a cost of over $1,000,000 and have 50% matching funds secured at the time of formal application.

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TAX CREDITS

Manufacturing Tax Credit (MTC): This program provides tax credits to taxpayers who increase their annual taxable payroll by $1,000,000 through the creation of new full-time jobs. Tax credit awards shall be equal to 5% of the taxpayers’ increase in annual taxable payroll, if increased by at least $1,000,000 above a pre-determined base year amount. Maximum credit may not exceed $4 million.‍

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Research and Development Tax Credit: Offers a non-refundable tax credit equal to 10% of a company’s R&D expenses over a base period. The tax credit can also be sold or assigned and may be carried forward for up to 15 years.

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‍PA EDGE Tax Credit: Passed at the end of 2022, the PA EDGE program provides a menu of industry-targeted tax credits to induce capital investment and job creation. The tax credits include:

Milk Processing

• Milk processing tax credit of $0.05 per gallon of milk produced in Pennsylvania for projects which invest of at least $500 million and create a minimum of 1,200 jobs. A qualified taxpayer’s total credits cannot exceed 25% of their capital investment to construct the qualified facility and place it into service.

Semiconductors & Biomedical MFG and R&D

A tax credit is available to new biomedical and semiconductor manufacturing facilities that invest at least $200 million and create 800 jobs. The tax credit is equivalent to:

• 2.5% of capital investment, and
• The PA employee income taxes generated by the project up to $20,000 per job

Hydrogen Hubs

Projects which are approved for a U.S. Department of Energy regional clean hydrogen hub which invest at least $500 million and create at least 1,200 jobs can qualify for a new tax credit equivalent to one or more of the following:‍

• $0.81 per kilogram of clean hydrogen purchased from a regional clean hydrogen hub
• $0.47 per unit of natural gas, purchased and used in the manufacturing of hydrogen

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Resource Manufacturing Tax Credit: Any manufacturer purchasing natural gas containing ethane as a petrochemical feedstock at a facility within the Commonwealth could be eligible for a PRM Tax Credit, equal to five cents per gallon ($2.10 per barrel) of ethane purchased and used in manufacturing ethylene. To be eligible, a company must make a capital investment of at least $1 billion and create the equivalent of at least 2,500 full-time jobs while constructing the manufacturing facility.

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‍Local Resource Manufacturing (LRM) Tax Credit Program: Provides a tax credit to a manufacturer purchasing dry natural gas for use in manufacturing petrochemicals or fertilizers at a facility in the Commonwealth.  The LRM Tax Credit will be equal to 47 cents per unit of dry natural gas purchased and used in manufacturing petrochemicals or fertilizers as long as the company makes a capital investment of at least $400 million and creates the equivalent of at least 800 full-time jobs during the construction phase and ongoing operation of the facility.‍

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Qualified Manufacturing Innovation & Reinvestment Deduction: For manufacturers that invest $100M or less, the maximum deduction over ten tax years will be equal to 37.5% of the private capital investment utilized in the creation of new or refurbished manufacturing capacity. The maximum deduction allowed in any single tax year will be 7.5%. For manufacturers that invest more than $100M, the maximum deduction over ten tax years will be equal to 25% of the private capital investment utilized in the creation of new or refurbished manufacturing capacity. The maximum deduction allowed in any single tax year will be 5%. A business cannot use the deduction to reduce its tax liability by more than 50% of their Corporate Net Income tax liability. The deduction is non-transferable. Any unused portion in a tax year shall expire at the end of the corresponding tax year.

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TAX EXEMPTIONS/ABATEMENTS

Local Economic Revitalization Tax Assistance (LERTA): This program allows local taxing authorities to provide real property tax exemptions for projects that involve new construction or result in improvements made to industrial, commercial, or other business property.  The exemptions apply to the assessed value of new construction and the assessed value of improvements made to an existing building. Eligible projects must be located in an area designated as a Local Economic Revitalization Assistance zone.  To receive the 10-year exemption, approval is required from all local taxing authorities, including the school district.

In addition to LERTA, Pennsylvania permits local taxing jurisdictions to use tax increment financing (TIF) to spur redevelopment projects in blighted areas.  ‍

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Blighted Property Tax Incentive:  Local taxing authorities have the option to designate deteriorated areas within their communities and offer tax abatements to developers and property owners who are approved to rebuild or improve the blighted property. Properties must fulfill specific requirements, such as being a “blighted property,” correcting all code violations, conforming to zoning requirements and increasing the property value by at least twenty-five percent. The new program specifies that properties already receiving certain types of tax exemptions or reductions are not eligible for the tax abatement.

The tax abatement applies to new taxes created as a result of the developer or property owner’s investment. The tax abatement term is up to ten years with the abatement percentages decreasing by 10%.

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DIRECT FINANCIAL ASSISTANCE                      

Pennsylvania First Program (PA First): The program offers upfront grants, loans or loan guarantees for large-scale competitive “targeted industry” projects that involve significant job growth and capital investment. Program funds may be used to offset costs associated with building improvements, capital expenditures, environmental assessments, and land acquisition.  In addition to businesses, applicants for PA First funds may also include municipalities, redevelopment authorities, and local development districts.  The maximum amount of assistance is capped at $5,000 per job.‍

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Pennsylvania Industrial Development Authority (PIDA) Loan: Businesses that commit to creating or retaining jobs may qualify for low-interest loans to help finance eligible project expenditures including Land and Building Costs as well as Machinery and Equipment Costs.  Loans are dependent on use of funds and the county in which the project will be located. The largest loan amounts are reserved for land acquisition and have a maximum in certain scenarios of $2.25 million or 75% of total eligible land costs.

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‍Industrial Sites Reuse Program (ISRP): Provides grants and low-interest loan financing to perform environmental site assessment and remediation work at former industrial sites. The maximum grant or loan for any assessment project cannot exceed 75% of the total cost of the assessment, or $200,000, whichever is less, in a single fiscal year. The maximum amount to be awarded for any remediation project cannot exceed 75% of the total cost of remediation, or $1 million for grant recipients, whichever is less, in a single fiscal year. Remediation loans may exceed $1 million based on the substantiated need for low-interest financing to maintain the validity of the remediation project.

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‍Computer Data Center Equipment Incentive Program: The program provides a tax refund for sales and use tax paid on qualified computer data center equipment utilized within a facility certified by the Department of Revenue for participation in the program.

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Last Updated: April 2023