3706 - Keystone innovation zone tax credits.
§ 3706. Keystone innovation zone tax credits. (a) Tax credit.--A KIZ company may claim a tax credit equal to 50% of the increase in the KIZ company's gross revenues in the immediately preceding taxable year attributable to activities in the KIZ over the KIZ company's gross revenues in the second preceding taxable year attributable to its activities in the KIZ. A tax credit for a KIZ company shall not exceed $100,000 annually. For the purposes of the keystone innovation zone tax credit, the term "gross revenues" may include grants received by the KIZ company from any source whatsoever. (b) Application for tax credit.--A KIZ company may file an application for a tax credit with the department. An application under this subsection must be filed by September 15 of each year for the prior taxable year, beginning September 15, 2006. The application must be submitted on a form required by the department and must be accompanied by a certification from the KIZ coordinator that the KIZ company falls within a targeted industry segment identified in the strategic plan adopted by the KIZ partnership. The department shall review the application and, upon being satisfied that all requirements have been met, the department shall issue a tax credit certificate to the KIZ company. All certificates shall be awarded by December 15 of each year. (c) Limitation on tax credits.-- (1) The total amount of tax credits approved by the department shall not exceed $25,000,000 for any one taxable year. (2) If $25,000,000 of the tax credits are not approved for any one taxable year, the unused portion shall not be available for use in future taxable years. (3) If the total amount of tax credits applied for by all taxpayers for any one taxable year exceeds $25,000,000, then the tax credit to be received by each applicant shall be determined as follows: (i) Divide: (A) the eligible tax credit applied for by the applicant; by (B) the total of all eligible tax credits applied for by all applicants. (ii) Multiply: (A) the quotient under subparagraph (i); by (B) $25,000,000. (d) Application of tax credit and election.--A tax credit approved under this section must be first applied against the KIZ company's tax liability under Article III, IV or VI of the act of March 4, 1971 (P.L.6, No.2), known as the Tax Reform Code of 1971, for the taxable year during which the tax credit is approved. If the amount of tax liability owed by the KIZ company is less than the amount of the tax credit, the KIZ company may elect to carry forward the amount of the remaining tax credit for a period not to exceed four additional taxable years and to apply the credit against tax liability incurred during those tax years; or the KIZ company may elect to sell or assign a portion of the tax credit in accordance with the provisions of subsection (f). A KIZ company may not carry back or obtain a refund of an unused keystone innovation zone tax credit. (e) Pennsylvania S corporation shareholder pass-through.-- (1) If a Pennsylvania S corporation does not have an eligible tax liability against which the tax credit may be applied, a shareholder of the Pennsylvania S corporation is entitled to a tax credit equal to the product of: (i) the tax credit determined for the Pennsylvania S corporation for the taxable year; and (ii) the percentage of the Pennsylvania S corporation's distributive income to which the shareholder is entitled. (2) The credit provided under paragraph (1) is in addition to any tax credit to which a shareholder of the Pennsylvania S corporation is otherwise entitled. However, a Pennsylvania S corporation and a shareholder of the Pennsylvania S corporation may not claim a tax credit under this section for the same activity. (f) Sale or assignment of tax credit.-- (1) Upon application to and approval by the department, a KIZ company which has been awarded a tax credit may sell or assign, in whole or in part, the tax credit granted to the KIZ company. The application must be on the form required by the department and must include or demonstrate all of the following: (i) The applicant's name and address. (ii) A copy of the tax credit certificate previously issued by the department. (iii) A statement as to whether any part of the tax credit has been applied to tax liability of the applicant and the amount so applied. (iv) Any other information required by the department. (2) The department shall review the application and, upon being satisfied that all requirements have been met, the department may approve the application and shall notify the Department of Revenue. (g) Use of sold or assigned tax credit.--The purchaser or assignee of all or a portion of a keystone innovation zone tax credit under this section shall claim the credit in the taxable year in which the purchase or assignment is made. The purchaser or assignee of a tax credit may use the tax credit against any tax liability of the purchaser or assignee under Article III, IV, VI, VII, VIII, IX or XV of the Tax Reform Code of 1971. The amount of the tax credit used may not exceed 75% of the purchaser's or assignee's tax liability for the taxable year. The purchaser or assignee may not carry over, carry back, obtain a refund of or assign the keystone innovation zone tax credit. The purchaser or assignee shall notify the department and the Department of Revenue of the seller or assignor of the keystone innovation zone tax credit in compliance with procedures specified by the department. Effective Date. Section 6(2) of Act 12 of 2004 provided that section 3706 shall take effect July 1, 2004.