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State program

Pennsylvania Research and Development Tax Credit

A competitively allocated and freely sellable credit with a dedicated small business set-aside.

Run a mock audit for PennsylvaniaOfficial source (opens in a new tab)
  • Offset only
  • Pre-approval required
  • Transferable

Last reviewed October 2026

Program overview

Pennsylvania runs an annual application cycle with a statewide allocation, a portion of which is reserved for small businesses with assets under a statutory threshold. Small businesses receive a higher credit rate. The defining feature is transferability: approved credits that a company cannot use may be sold on the open market to other Pennsylvania taxpayers, and an active broker market exists, so credits typically convert to cash at a modest discount. Applications are due by 1 December each year.

Eligibility

Businesses that incurred qualified research expenses in Pennsylvania and are compliant with state tax filing obligations, applying through the Department of Revenue's annual cycle.

Benefits

Non-refundable but freely sellable credit against Pennsylvania corporate net income and personal income tax.

Caps, deadlines and forms

Caps and limits

  • Pennsylvania runs an annual application cycle with a statewide allocation, a portion of which is reserved for small businesses with assets under a statutory threshold.

Deadlines

  • Applications are due by 1 December each year.

Forms

Filing forms are listed by the revenue authority: official source (opens in a new tab).

Pennsylvania IDR questions

What an examiner is likely to ask about this credit. S1–S7 apply to every state claim; the rest come from this program's own rules.

  1. S1Confirm the research was physically performed within Pennsylvania.
  2. S2Provide the Pennsylvania qualified research expense calculation and base amount.
  3. S3Reconcile Pennsylvania expenses to the federal Form 6765.
  4. S4Show how wages and supplies were apportioned between Pennsylvania and other locations.
  5. S5Provide the Pennsylvania return and credit schedule for each year claimed.
  6. S6Show the carryforward schedule for unused Pennsylvania credits.
  7. S7Confirm the entity claiming the credit is the entity subject to Pennsylvania tax.
  8. PA-1Provide the pre-approval, certification or application filed for the Pennsylvania credit, with its filing date.
  9. PA-2Document any Pennsylvania credits transferred or sold, with the approval and the buyer.

Draft questions for illustration, reviewed by a specialist before any engagement.

Common weak spots

  • Expenses for research performed outside Pennsylvania included in the Pennsylvania claim.
  • Missing or late pre-approval: the application or certification was not in place when required.
  • Caps and proration not modelled, so the expected benefit is overstated.
  • Credit transfers not documented with the required approval.
  • Base amount computed from incomplete historical records.

See how your claim holds up

The mock audit drafts these questions for your own claim and scores the evidence behind each answer.

Run a mock audit for Pennsylvania

Information on this page is general in nature, not tax advice. Program details change frequently; always confirm current rules with the relevant revenue authority or engage a specialist before acting. Last reviewed October 2026.

Find out what your research actually qualifies for

A scoping conversation takes thirty minutes and costs nothing. You leave with a view on eligibility, likely credit range and the documentation you would need.

Free R&D mock audit: completely free. Book a call or email hello@creditarmor.ai for a login.

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