kiz_tax_credit_application_presentation_2015

THE KIZ & R&D TAX CREDIT PROGRAMS WHAT’S IN IT FOR ME!

Spring 2015

TECHNOLOGY-BASED ECONOMIC DEVELOPMENT

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The Four Pillars of Technology-based Economic Development

TECHNOLOGY AND INNOVATION OFFICETECHNOLOGY AND INNOVATION OFFICE

Industry Clusters

TECHNOLOGY AND INNOVATION OFFICE

Technology-based Economic Development Tools Along the Continuum


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• What is the KIZ Program and Its Benefits?

• What are the KIZ and R&D Tax Credits?

• Who’s Eligible?

• Why Should Your Company Apply?

• How Much is Available to Your Company?

Overview


KIZ Program Goals

• The KIZ program aids entrepreneurs, newly formed startup companies, and mature companies in identifying and capitalizing on new ideas and opportunities.

• The program does this by gathering and aligning the combined resources of educational institutions, private businesses, business support organizations, commercial lending institutions, venture capital networks (including angel investors), and foundations (KIZ partners)

• Each KIZ has developed a unique mix of these partnerships and programs to support innovation and entrepreneurship in their zones.

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Keystone Innovation Zone• Over 90 institutions of higher education are directly involved in

the KIZ program.

• Pennsylvania has invested $14 million in the KIZ program which has leveraged $956 million in outside funding.

• This funding has helped to create close to 4,300 jobs and retain another 12,700 positions by providing support to nearly 9,100 businesses.

• At least 865 new companies have been borne out of the KIZ program.


• Assistance provided to new company startups

• Provides KIZ companies with the possibility to access local internships for college students

• Increases the number of filings for patents, licenses, trademarks, and trade secrets in the region

• Provides low cost incubator space

• Access to incubation type services including help in developing a business plan, marketing plan, project planning, and patent filing

• Increase the number of new jobs and companies created by the transfer of technology and research to the private sector

Benefits to KIZ Companies


• Increase investments made in technology research

• Create partnerships with university faculty and research facilities

• Annual Transferable KIZ Tax Credits

• Preferential consideration for DCED Programs

• Access to Regional Universities’ R&D Teams

• Site Selection Assistance

• Business Planning

Benefits (continued)


• Networking Opportunities

• Entrepreneurship Development Assistance

• Intellectual Property Rights Assistance

• Grant Writing Assistance

• Access to KIZ Sponsored training and seminars

• Access to financing options and investment opportunities

• Partnership opportunities with university faculty and research facilities

Benefits (continued)


Benefits (continued)The sale of the KIZ tax credits provides young Pennsylvania companies with new working capital that was available to meet critical needs.

Examples of these needs include capital expenditures, expansion of their workforce, operational expenses, and even to make companies more attractive to venture investment.

Does Your Company Need to

Upgrade its Equipment?

Facility Expansion Projects?


• Since the program began:– Over 1,400 KIZ tax credit applications approved totaling

nearly $103.8 million in credits being awarded.

– DCED has approved nearly 1,330 sales/assignment applications resulting in excess of $81 million in KIZ tax credits transferred.

– KIZ companies have benefited greatly from nearly $73.8 million (an average of 91 cents on the dollar) in new capital created from the sales/assignments of their KIZ tax credits

• Last year over $17.0 million in tax credits were awarded to Pennsylvania KIZ companies.

KIZ Tax Credit Program


• You are eligible for KIZ Tax Credit if you are a company who:

1) Has been in operation for less than eight years,

2) Is located within the boundaries of a DCED approved KIZ,

3) Operates within one or more of the targeted industry sectors of a particular KIZ and have worked with the KIZ Coordinator.


• A KIZ company may claim a tax credit equal to 50% of the increase in their gross revenue in the immediately preceding taxable year attributable to activities in the KIZ, over the company’s gross revenue attributed to activities in the KIZ in the second preceding taxable year.

• A tax credit for a KIZ company shall not exceed $100,000 annually.


The R&D Tax Credit

The R&D tax credit is designed to encourage taxpayers to increase their R&D expenditures in PA to enhance economic growth.

The DOR is authorized to award up to $55 million in R&D tax credits annually.

The legislation provides that 20% of the R&D tax credit annually must go to small businesses first.

To receive the R&D tax credit a company needs to enter their Qualified Research on Form REV-545.


Qualifying research expenses include: in-house research expenses, and contract research expenses.

Pa’s R&D tax credit is for the increase in research-related expenses over the previous year’s expenses.

To qualify for the PA R&D tax credit, the company must have established a base year with the federal tax credit program.


Unused R&D tax credits may be passed through to the company’s shareholders or sold to another entity.

TECHNOLOGY AND INNOVATION OFFICETECHNOLOGY AND INNOVATION OFFICE

Change to the Guidelines

• A new Check Box will be added to KIZ Coordinator’s Certificate page of the Electronic Single Application

• By checking this box, I certify that I am authorized to submit this Application by virtue of my status as one of the following: 1) a fulltime employee of the Company; 2) the Certified Public Accountant of the Company; or 3) the KIZ Coordinator for the Company.


• Ineligible Gross Revenues– Rent Collected– Sale of Tax Credits

• Eligible/Ineligible Compensation for the Payroll Factor

• Eligible/Ineligible Property for the Payroll Factor


• Eligible Compensation

– The following constitutes compensation if it appears on the owner’s personal or the company’s federal tax returns

• net profits of the company paid to the company’s owner included as part of the owner’s

• compensation paid to company’s officers receive

• guaranteed payments or dividends given to the company’s partners receive

• the cost of labor (provided the workers are directly employed by the company)


• Eligible Compensation (continued)

– Compensation does not include any individual not employed directly by the KIZ Company including (but not limited to):

• Contracted employees (i.e., employees of a third party entity contracted to perform work at the KIZ company)

• Management fees paid to another company – even if the company is parent/sister company

• Independent sales people, etc.

• Consultants


• Document RequirementsThe following documents must accompany the

application:– Signed tax forms that were filed for the Base and

Comparable tax years (or verification of electronic filing)

• PA Income Tax• Front pages and signature pages (if different from the

front page) of Federal Income Tax forms• Pages of tax forms indicated on the Excel worksheets

– Other documents identified on the worksheets• Financial statements• W2s/W3s


Reporting Requirements

The KIZ Company must have submitted their online semi-annual KIZ reports in accordance with the KIZ guidelines

Please plan ahead!

Application is through DCED’s Electronic Single Application


Single Application HighlightsOne-time User Account

A Program Finder provides a list of programs:

• based on eligibility and/or the use of funds

• short program description

• links to the program’s fact sheet and guidelines

• provides program requirements upfront

Instant confirmation of submitted applications


• Deadline Requirements

– Applications must be submitted on or before September 15th

– Each application will be reviewed as submitted.• Applications that are deficient or missing required

information or documentation will be determined to be ineligible.

– All state and federal filed tax returns must be submitted with this application.

• Extensions will not be taken into consideration in the review of the KIZ Tax Credit application.

– No time extensions will be granted.


• Remains a paper Application - not an online application

• Requires a company official to sign that the company has filed its taxes prior to submitting the sales application

• Only the verification forms of filed taxes are required –complete tax return no longer needed.

• DCED will except the sales applications from January 1st

through October 15th of each year.

Tax Credit Sales Application


You Need to Be Committed to Getting Your KIZ Tax Credit Submitted On Time!

I’m Going to Give You the Right Tools for Success!

Don’t Be Scared or Overwhelmed By the Process!


Required KIZ Tax Credit WorksheetsFour Tabs

– Gross Revenues– Comparable Taxable Year (payroll and property factors

figures)– Base Taxable Year (payroll and property factors figures)– Calculation Sheet

Automatically calculates the payroll and property factors, and the estimated award amounts

Must be submitted with the application


Gross Revenue Tab


Gross Revenue Tab – 3 Messages


Taxable Year Tabs – Payroll & Property Factors

• You must fill in the document name, line #, and page #, prior to entering the amount !


Taxable Year Tabs – 2 Messages

Or,


The Good News Is That The Worksheet Does The Math For You!


Part AGross Revenues of the company for the Comparable Tax Year attributable to targeted industry activities within the KIZ.

Enter the Comparable Tax Year 2013Property Factor

Property within KIZ (from line A)$0

Property within PA (from line C) $0 = 0.00% (Line 1)

Payroll Factor

Payroll within KIZ (from line B)$0

Payroll within PA (from line D) $0 = 0.00% (Line 2)

Total (Line 1 + Line 2) 0.00% (Line 3)

KIZ Apportionment

(From Line 3) 0.00% 2 = 0.00% (Line 4)

Pennsylvania Gross Revenues

in target industry in Comparable Year $0.00 (Line 5)

Comparable Year’s Gross Revenues

attributable to the KIZ (Line 5 x Line 4) $0.00 (Line 6)

Calculation TabThe Good News Is That The Worksheet Does The Math For You!


Eligibility Message


Calculation TabPart C

Comparable Tax Year 2013 (Line 13)

Base Tax Year 2012 (Line 14)

Comparable Tax Year

Gross Revenues of the company attributable to target industry activities in the KIZ for the year in Line 6 $0.00 (Line 15)

Base Tax Year

Gross Revenues of the company attributable to target industry activities in the KIZ for the year in Line 12 $0.00 (Line 16)

Increase in Gross Revenues (Line 16 – Line 17) $0.00 (Line 17)

50% of amount on Line 17 $0.00 (Line 18)

Amount of KIZ Tax Credit for which the Company is applying $0.00 (Line 19)

Note: If the total for all qualified applications received by DCED exceeds the annual allocation, the amount awarded will be reduced from the amount listed on this application.


Single Application Highlights

One-time User Account

A Program Finder provides a list of programs:

• Based on eligibility and/or the use of funds

• Short program description

• Links to the program’s fact sheet and guidelines

• Provides program requirements upfront

Instant confirmation of submitted applications


How to access the Single Application Login Page

Go to www.NewPA.com – click on “Single Application” OR click on “Single Application for Assistance”


New Registration for PA PowerPort Login

Required fields denoted with ♦

E-mail address can only be registered once

User Name must be unique

Password is case sensitive

minimum of 8 characters

must include uppercase letter, lowercase letter, number and symbol


Single Application Information Section

This is the User Account information.


Account Information Required

Information provided determines programs displayed•Stores User Account information

• Information used to pre-populate Applicant Information on the Single Application for Assistance

• Information can be updated

•How are you applying? Must be completed prior to starting an application.

•Errors display at top of page


Account Information Required

Taxpayer ID• Federal Employer Identification

Number (FEIN) of the applicant

• Social Security Number (SSN) of Owner for Sole Proprietorship

• PA Box Number not allowed

Information can be updated


Logging into the Single Application for Assistancefor Existing Users

Existing Users - Login with user name and password

Forgotten Password –Re-directs user to the PA PowerPort website


Logging into the Single Application for Assistancefor New Users

• New Users – Register to create a new PA PowerPort Login Account


PA PowerPort Login Account

IMPORTANT NOTE: You must return to the Single Application website to complete an application.

Forgot Password• Automatically

generated password e-mailed

Update PA Login Account

• Update Account Information

• Change Password

PA PowerPort website is: https://www.login.state.pa.us/login/.


Begin a New ApplicationNew Application:

Project Name 60 characters or less

Do you need help selecting your program?

• Yes – Directs you to the Program Finder (default setting)• No – Allows you to type the program name or acronym

Click Create a New Application button

KIZ Tax Credit

No


Tax

Program Name Search

Enter the program name or acronym to search

Search button will display results

Apply

Additional Program Information:• Fact Sheet• Guidelines

Specific Program Search


You mustupload your

signed KIZ Coordinator's Certificate first

in order to access the KIZ

Tax Credit Program’s

Application!


Applicant Information

• Use Account Information button pre-fills information previously entered into the User Settings.

• NAIC Code – Drop down menu appears with appropriate choices based upon Entity Type selected.

Single Application – Applicant


No

KIZ Tax Credit

Single Application – Project Overview

How to Apply for Multiple Funding Sources for the Same Project

Answer “No” to the question regarding Multiple Funding Sources.


Select County and Municipality

Select Legislators

Multiple Legislators can be selected.

Single Application – Project Site


Divided into 4 specific questions

Minimum and maximum character counts for each question

45 minute session time-out (saving after each question resets time)

Special characters can be used (ex. * & %)

Single Application – Narrative

We plan to receive Keystone Innovation Zone (KIZ) Tax Credits to be used to offset various tax liabilities that may be owed by our company.


Single Application – Budget

Select “Other” at the bottom of this spreadsheet

Funding Sources

Does not apply to KIZ Tax Credit program

Spreadsheet

Enter KIZ tax credit and the amount


Enter text indicating why you are seeking a KIZ Tax Credit

Select Budget Justification

Basis of Cost –

Budget Narrative –


Single Application – Addenda

Addenda for the KIZ program is required and includes:

• KIZ Tax Credit Excel Worksheet

• Tax Documents• Other supporting

documents


Notification of incomplete sections of the application will be displayed.All required information/errors must be satisfied to obtain the Submit Application button.

Single Application – Certification/Incomplete


Edit an Incomplete Application

Incomplete Applications:

•Edit button opens the application to allow completion or updates to be made in the application prior to submission.

•Review your application prior to submission .

•Once the application is submitted to DCED it will be reviewed as is by the program office.

Applications cannot be modified or updated once they are submitted to DCED.


Once the required info and/or errors have been satisfied the Submit Application button is displayed.

Single Application – Certification/Submission


12 – digit Single Application ID number

Single Application – Certification/Confirmation

Instant Confirmation

Option to print the signature page and/or the entire application


Contact Me With Program Related Issues, At:

Colton S. Weber(717) 214-5422

[email protected]

For Electronic Single Application assistance, contact:

Customer Service Center1-800-379-7448