GOVERNMENT RELATIONS
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Improving Business Climate
To promote a competitive business climate for southwestern Pennsylvania’s technology companies, the Council seeks to:
Increase Pennsylvania’s R&D Tax Credit
Since 2003, when Pennsylvania enacted legislation that allowed small businesses to sell unused R&D tax credits to other Pennsylvania taxpayers, demand for R&D tax credits has skyrocketed. In 2007, the state received qualified applications for more than $95 million in credits, despite facing a $40 million statutory cap on the program.
As background on the state’s R&D tax credit, this program is modeled on similar incentives provided by the federal government and many other states that are intended to incentivize private sector investments in high-risk R&D activities.
Importantly, Pennsylvania’s program does not reward companies for merely investing in R&D activities. To be eligible for the 10 percent tax credit, or in the case of small businesses, a 20 percent tax credit, firms must demonstrate increased R&D expenditures over their historical levels. Even with this restriction, demand for R&D tax credits as been quite strong historically.
Small business participation in the program has accelerated dramatically in recent years, primarily as a result of the tax transfer program, but also as a result of legislation that increased the credit for small businesses from 10 to 20 percent.
Though the $40 million pool is significantly oversubscribed, small businesses continue to receive 100 percent of their qualified applications due to the creation of an $8 million priority set-aside for small firms. Now small firms must share the remaining $32 million on a proportional basis, which results in most of those applicants receiving just 37 percent of their qualified requests.
Legislation to Increase R&D Tax Credits
In attempt to further stimulate Pennsylvania’s manufacturing and technology sectors, Representative David Levdansky (Chariman of the House Finance Committee) has introduced H.B. 2250 to accomplish the following objectives:
- Provide for an incremental increase in the overall pool of credits from $40 million to $75 million.
- Increase the small business set-aside program from $8 million to $10 million.
- Eliminate provisions in the tax transfer program that require recipients to hold credits for at least one year before selling them to other taxpayers.
Go Government. For more information about the Council’s Government Relations initiatives, or if you have a specific issue that you would like to see the Council address, please contact Brian Kennedy, Vice President, Government & External Relations at 412.918.4297.