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Keystone Innovation Zone (KIZ) Tax Credit Program for “Young” Businesses in Pennsylvania

Keystone Innovation Zone (KIZ) Tax Credit is a component of Keystone Innovation Zone (KIZ) Program. Established in 2003, it creates designated geographic zones to foster innovation and create entrepreneurial opportunities by aligning the combined resources of educational institutions and the private sector.

To be eligible to participate in the KIZ Tax Credit Program, the applicant must meet the following criteria:

  1. Must be an entity subject to Personal Income Tax (Article III or Corporate Net Income Tax (Article IV)
  2. Must be a for-profit business entity located within the geographic boundaries of a particular KIZ
  3. Must be in operation less than 8 years
  4. Must be operating within one of the KIZ target industry sectors
  5. Must be in state tax compliance with the laws and regulations of the Commonwealth as determined by the Department of Revenue
  6. Meet any other requirements specified by the Department of Community & Economic Development

The pool for KIZ credit is $15 million, limited to $100,000 annually per KIZ company, which contributes to young KIZ companies to transit through the growth stages. A KIZ company may claim a tax credit equal to 50% of the increase in that KIZ Company’s gross revenue. Since the credit can carry over for four years and be sold to other entities, it is crucial to young companies that have little or no tax liability.

The KIZ credit aims to help new businesses in the growth stage, mainly the healthcare/life science industry, nanotechnology, advanced manufacturing & plastic industry, information technology/new media industry, homeland security and back office/finance industry. Because the program has relatively strict requirements and request specific industry sectors, the limitations on total available credits is not much affected by the excess of application. Most young corporations can get the credit as long as they have more profits than prior years.

For more detailed information, please see Keystone Innovation Zone (KIZ) Tax Credit Program Guidelines here:

https://dced.pa.gov/download/kiz-tax-credit-guidelines/?wpdmdl=76233

Yan (Isabella) Ma, CPA

yma@stephanoslack.com

610-687-1600

December 4, 2018