KIZ Tax Credits are used to offset certain state tax liabilities and significantly contribute to the ability of young KIZ companies to transition throughout the stages of growth.
Am I eligible for a KIZ Tax Credit?
You are eligible for KIZ Tax Credit if you are a company who:
has been in operation for less than eight years,
is located within the boundaries of a DCED approved KIZ,
operates within one or more of the targeted industry sectors of a particular KIZ and have worked with the KIZ Coordinator.
Targeted Industry Sectors:
Advanced Manufacturing and Materials
Agriculture and Food Processing
Communications & Information Technology
Clean Technology, including energy conversation and environmental sustainability
Energy and Environmental Technologies
Homeland Security Healthcare
Plastics, Wood manufacturing
How are the KIZ Tax Credits determined?
A KIZ company may claim a tax credit equal to 50% of the increase in their gross revenue in the immediately preceding taxable year attributable to activities in the KIZ, over the company’s gross revenue attributed to activities in the KIZ in the second preceding taxable year. A tax credit for a KIZ company shall not exceed $100,000 annually.
(Second Year Revenue – First Year Revenue) X 50% = Tax Credit*
*Please note that other factors may affect the total of tax credits awarded.
What is the timeline for the KIZ Tax Credits?
September 15th: All tax credit applications must be postmarked.
September 16th – December 14th: DCED determines if all conditions have been met. (During this time, an application may be amended by the applicant).
December 15th: Award letters are sent to KIZ companies and Tax Credit applications are forwarded to the Dept. of Revenue for tax credits to be credited to applicant’s account.
What will I need to fill out a KIZ Tax Credit application?
Submit your two prior year’s PA tax return and the first page of your two prior year’s federal return.
Have a Certified Public Accountant (CPA) fill out parts A, B, C of Sec. III (Apportionment) and sign the application.
Obtain the signature of your KIZ coordinator before submitting the application to DCED.
Re-check application for accuracy (Tax IDs, Address, etc.) and submit the application by the deadline.
I received my Tax Credit award letter, now what?
Tax Credits must be applied against your company’s own tax liability the taxable year in which the tax credits are approved. If your company’s tax liability is LESS than the amount of the KIZ Tax Credit, you may do one of the following:
Carry forward the unused portion of a tax credit up to 5 years;
Pass unused tax credits to a shareholder up to their percentage of the partnership they are entitled to;
Apply for DCED approval to sell all or a portion of the remaining tax credits to an identified buyer (Appendix C of the KIZ Tax Credit Guidelines).
NOTE: Your company may not carry back or obtain a refund of an unused KIZ Tax Credit.
Will I have to pay taxes on the sale of the tax credits?