Pennsylvania R&D Tax Credit

PA R&D Tax Credit

Supports Pennsylvania firms through tax credits for qualifying innovation expenses, lowering effective innovation costs.

Eligibility · United States · US-PA

Pennsylvania's Research and Development Tax Credit, created under Act 7 of 1997 and codified as Article XVII-B of the Tax Reform Code of 1971, encourages businesses and individuals to increase qualified research spending within the Commonwealth. The credit is available to any taxpayer subject to Pennsylvania Corporate Net Income Tax or Personal Income Tax who has incurred qualified R&D expenses in Pennsylvania across at least two consecutive years. Applications are filed annually through the Department of Revenue's online portal, myPATH. The filing window opens August 1 and closes December 1 each year, giving applicants a four-month period to submit.

Applicants must be in full compliance with all Pennsylvania state tax reporting and payment obligations at the time of application — non-compliant filers are automatically disqualified. The Department of Revenue may request supplementary documentation or conduct an on-site audit; failure to respond within the prescribed time results in denial. A distinctive feature of the program is its secondary-market liquidity mechanism: companies that have been awarded a credit but lack sufficient Pennsylvania tax liability may sell the credit to another PA-taxable buyer through DCED's eTides assignment portal, a formal approval process that is itself subject to compliance review. The sale of a credit is a taxable transaction reportable to the IRS.

Per-applicant award amounts and the statewide program cap are not published on the public-facing application page; applicants seeking those figures should reference the R&D Tax Credit Transfer Guidelines and myPATH instructional materials. Companies preparing to apply should document their Pennsylvania R&D expenditure history for the two most recent years, confirm state-tax compliance, log in to myPATH to verify account status, and decide in advance whether they intend to use or sell the credit — as the sale approval requires a separate follow-on process with the Department of Revenue.