McGuire Sponsel Blog

On December 15, 2018, the Pennsylvania Department of Revenue issued letters to the taxpayers that applied for the tax year 2017 Pennsylvania research and development (R&D) credit informing them of the credit amounts they were awarded. These R&D credits can either be utilized on the 2018 tax return, carried forward 15 years, or sold to a third party, making it a valuable incentive even for those without tax liability. Pennsylvania’s R&D Credit has an annual cap on the amount of total credits that can be granted for a given tax year. The maximum amount of credits that could be awarded for the 2017 tax year was $55 million, of which $11 million was reserved for small businesses (those with assets of $5 million or less during the beginning or end of 2017). If the credit claims exceed the cap for the year, the awarded credits are prorated. In 2018, taxpayers were awarded approximately 38% of what they claimed. This is a decrease from previous years, as companies typically received approximately 50% of what they claimed. This could signify that more companies are claiming the PA R&D credit, companies are claiming larger credits, or a combination of the two. The implementation of the new online application process that debuted for the 2017 tax year filings could have had an impact as well. The full statistics regarding the tax year 2017 PA R&D credit will be released by the Pennsylvania Department of Revenue in March 2019.