There are a plethora of credits and incentives available in the Northeast. This article will highlight some of the tax savings available in the State of Pennsylvania. Although it will focus on credits and incentives applicable to Pennsylvania, many of these tax savings are available in other states as well. We cannot adequately address multiple states within the confines of a single article. However, if your company could potentially benefit from a similar credit in a state outside of Pennsylvania, we encourage you to ask questions and/or research the availability of such credits in specific states.
New and updated tax laws have been passed in Pennsylvania, many of them favorable to the taxpayer. Before we highlight a few of the more popular credits, let’s first touch upon a significant tax change that could potentially affect a large number of companies, big and small.
Digital Downloads Taxable in Pennsylvania
Starting August 1, 2016, material downloaded from the Internet in the form of music, videos/movies, e-books, apps, games, ringtones, as well as updates/maintenance of these items, is taxable in Pennsylvania. This new tax will generate almost $47 million over this fiscal year. Taxpayers should review their situation to determine how much of an impact, from a sales tax perspective, this new tax will have on the bottom line.
Now let’s introduce tax savings that could help offset the additional taxes due on digital downloads.
Entertainment Production Tax Credit
This credit was formerly known as the Film Production Tax Credit. Along with being renamed, the scope of the credit has expanded and two new subsections were added. The first new credit is targeted at tour operators representing musicians and is titled the Concert Rehearsal and Tour Tax Credit. The second new credit, the Video Game Production Tax Credit, is aimed at video game production companies. Both credits, as well as the original Entertainment Production Tax Credit, are intended to attract further investment in Pennsylvania in the aforementioned categories. All three credits allow for a certain percentage of eligible expenses to be identified as credits.
Manufacturing and Investment Tax Credit
This new credit is directly related to new job creation. Eligible taxpayers who increase annual taxable payroll by a minimum of $1 million with the creation of new full-time jobs can earn a tax credit. This new tax credit is separate from the Tax Credit for New Jobs (formally known as the Job Creation Tax Credit). The Tax Credit for New Jobs updated its title as well as added an incentive for businesses to hire veterans by allowing a credit amount for each veteran hired. This credit applies to income/franchise taxes as well as some special industry taxes.
Computer Data Center Equipment Incentive Program
This incentive program is available for certain qualified data centers that meet the specific requirements outlined by Pennsylvania. These qualified data centers are eligible for a tax refund related to a variety of tangible personal property (equipment) used in the data center. This type of incentive is available in multiple states across the country from Arizona to Virginia and many states in between. An application must be filed with Pennsylvania by July 30, 2017 to determine eligibility for this credit.
Credit Opportunities Elsewhere
Although this article focuses on credits specifically available in Pennsylvania, keep in mind that many of the items discussed are available nationwide. Wipfli associates have the experience and resources to remain knowledgeable of real-time changes and updates in the Sales & Use Tax world so that we can provide accurate and timely advice to our clients. Please contact Wipfli if you would like further information on state credits that might be applicable to your company. Keep in mind that some of the potential tax savings could be significant depending on your company profile – call us today to learn more!