The KIZ Tax Credit program supports growing businesses by providing a tradable tax credit to KIZ companies that meet certain criteria.

If your company:

• Is less than eight years old;
• Develops life sciences technology (i.e. therapeutic, diagnostic, medical device, etc.);
• Is located within the geographic boundaries of the KIZ during the relevant tax years; and
• Received revenues (which may include income from product sales, licensing income, or grants received*),

Some important points:

1. Revenue received by an eligible KIZ Company (per definition above) between January 1, 2008 and December 31, 2008 is considered 2008 Revenue
2. Revenue recevied by an eligible KIZ company between January 1, 2007 and December 31, 2007 are considered 2007 Revenue
3. If your company moved into or out of the approved UC KIZ geography during 2007 or 2008, eligible revenues include those revenues earned while located in the KIZ. 
4. KIZ tax credits are tradable. In the past, market rates have ranged up to $0.90 per $1.00 tax credit.
5. In order to obtain your KIZ Tax Credit, you must complete and submit a Pennsylvania KIZ Tax Credit Application as well as The KIZ Coordinator's Certification of the Applicant KIZ Company which must first be signed by the KIZ Coordinator.  These completed documents must be submitted together to the Pennsylvania Department of Community and Economic Development no later than the September 15th following the end of the second year of qualified KIZ revenues. 

Tax Credit Formula

KIZ Tax Credit = (2008 Revenue – 2007 Revenue) * 0.50 up to a maximum of $100,000.

If your company has no tax liability, the tax credits may be carried forward against future liabilities, passed through to shareholders, or traded/sold at the going market rate. Thus, a KIZ company eligible for $100,000 tax credit could sell the tax credit for $90,000 cash (assuming market rate above).

Case Study

ABC Co. operates in a KIZ within the targeted industry segment for that KIZ. In 2007, ABC Co.’s gross revenue resulting from activities within the KIZ amounts to $40,000. In 2008, ABC Co.’s business grows, and their gross revenue from activities within the KIZ amounts to $60,000. In 2009, ABC Co. may apply for a KIZ tax credit of $10,000 (50% of the $20,000 increase in gross revenue from 2007 to 2008).

If in 2009, ABC Co.’s gross revenues grow to $500,000 from activities within the KIZ, the company would be eligible to apply for a maximum KIZ tax credit of $100,000 in 2010. Their increase from year 2008 to year 2009 is $440,000, but 50% of this increase ($220,000) exceeds the $100,000 maximum allowable tax credit.

UC KIZ can help you consolidate your tax credits with other KIZ companies and manage the tax credit trade. Call Kristen Fitch at (215) 966-6156 for more information.

* venture capital investment is not considered revenue for KIZ tax credit purposes.