Businesses Locating in Expanding Keystone Innovation Zone May Qualify for Tax Credit

Businesses Locating in Expanding Keystone Innovation Zone May Qualify for Tax Credit

Summary
Philadelphia Mayor Jim Kenney recently announced a significant expansion of the University City Keystone Innovation Zone which is intended to attract new businesses into Center City Philadelphia. Now may be the time to explore whether your business qualifies for the Keystone Innovation Zone (“KIZ”) tax credit.

What is a Keystone Innovation Zone?
KIZs are specially designated by the Pennsylvania Legislature. Targeted industries that operate within these zones are eligible for Pennsylvania tax credits as long as they meet specified qualifications.

What is the Keystone Innovation Zone Tax Credit?
The KIZ tax credit allows a qualifying company to claim a corporate net income tax or personal income tax (for partnerships, LLCs, and S-corporations) credit of up to 50 percent of the company’s increase in gross revenues attributable to its activities in a KIZ in a given year, over the company’s gross revenues in the second preceding taxable year attributable to activities in the KIZ. KIZ credits are limited to $100,000 annually. Unused KIZ credits can be carried forward into future tax years, transferred, or sold. Companies apply for KIZ credit annually, and remain eligible for KIZ credit as long as revenue growth increases over the prior year.

Is my company qualified for a KIZ credit?
In order to qualify for KIZ credit, a company must: 1) be located within a KIZ; 2) be a for-profit business in operation for fewer than 8 years; and 3) operate within the life sciences or technology industry. Certain additional requirements must be met in order to qualify for the KIZ credit.

Where is the University City Keystone Innovation Zone?
The expansion of the University City KIZ includes much of the commercial corridor of Center City Philadelphia. The map below illustrates in green which areas fall into the KIZ:


City of Philadelphia Department of Commerce

If you are interested in learning more about whether your business qualifies for the KIZ credit, please contact the authors or the attorney at the firm with whom you are regularly in contact.

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