Numerous states offer tax credit and incentive programs in an attempt to lure out-of-state businesses interested in expanding or relocating operations to their state. One such state, Pennsylvania, offers several tax incentives and job credits that are designed to support and encourage business growth, job creation, and investment in the manufacturing industry.
“... we will continue to compete aggressively for great projects [...] as we send the clear message to the world that Pennsylvania is open for business.”
TAX credits & incentives
Manufacturers in Pennsylvania create approximately $113B in gross domestic product per year and almost 10% of all private sector jobs, making Pennsylvania the 6th largest manufacturing industry in the U.S. by employment.
To incentivize manufacturers to do business in Pennsylvania, the state offers a Manufacturing Tax Credit Program, which provides tax credits to taxpayers who increase their annual taxable payroll by $1M through the creation of new full-time jobs. The tax credit is 5% of the increase in annual taxable payroll.
Under the Qualified Manufacturing Innovation and Reinvestment Deduction, qualified businesses can deduct 5% of their private capital investment from their corporate net income tax liability if they invest more than $100M in the creation of new or refurbished manufacturing capacity associated with a new location or expansion project.
The Pennsylvania Economic Development for a Growing Economy (known as PA EDGE) is designed to attract new investments from businesses resulting in economic growth and job creation. This credit is allowed for up to 20% of a taxpayer’s qualified liabilities, including corporate net income tax, bank and trust companies shares tax, title insurance companies shares tax, insurance premiums tax, gross receipts tax, mutual thrift institutions tax, and personal income tax for owners of pass-through entities.
Further, there is a Research & Development Tax Credit available for manufacturers engaged in qualified research and development activities. Eligible businesses can claim a credit against certain research expenses.
resource credits
There are also tax credits available for businesses using resources such as natural gas and coal. Any business in Pennsylvania that buys natural gas containing ethane to use as a material for making certain chemicals could qualify Pennsylvania Resource Manufacturing Tax Credit. The credit equals five cents for every gallon of ethane purchased (which is about $2.10 for each barrel of ethane) and use in making ethylene.
The Coal Refuse Energy and Reclamation Tax Credit gives tax breaks to qualified plants that create electricity by using coal refuse to generate power. Qualifying facilities manage acid gases to control emissions and use the ash produced to restore sites affected by mining.
innovation zone credits
Certain designated zones in Pennsylvania, known as Keystone Innovation Zones, offer various tax credits and incentives to businesses, including those in the manufacturing sector. The Keystone Innovation Zone Tax Credit Program provides tax credits to for-profit companies less than eight years old in areas including Erie, Crawford, Warren, Mercer, Clarion counties, among others.
Similarly, the Keystone Special Development Zone offers credits for businesses that are established within or relocate to abandoned or deteriorated commercial and industrial sites, known as Keystone Special Development Zones. The credit available is $2,100 per job.
Infrastructure & Facilities
The Infrastructure and Facilities Improvement Program is a grant program providing grants to certain issuers of debt in order to assist with payment of debt service. Grants range from $200,000 a year for 10 years to $1 million per year for 20 years.
Opportunities
Pennsylvania has demonstrated a dedicated interest in supporting and developing manufacturing businesses in the state through tax incentives, job credits, and even a designated Manufacturing Week. Such incentives are in addition to certain tax exemptions that are already available to existing Pennsylvania manufacturers.
If you’d like to learn more about how to apply for credits, how to maximize potential tax benefits, or your eligibility for tax exemptions, schedule a free consultation with us.