Giving Pennsylvania an EDGE with Credits and Incentives

Last month Pennsylvania Governor Tom Wolf signed House Bill 1059 which includes, among other provisions, the Pennsylvania Economic Development for a Growing Economy (PA Edge): a program that provides roughly $2 billion in tax incentives to businesses in targeted industries.

The legislation also:

• Raises the annual credit cap on the existing Local Resource Manufacturing Tax Credit (LRMTC), which incentivizes companies to use dry natural gas to produce petrochemicals or fertilizer, from $26.6 million per year to $56.6 million.
• Requires taxpayers to ensure construction work is performed according to the Steel Products Procurement Act in order to qualify for the LRMTC.

PA EDGE PROGRAM

What is PA Edge?

The program establishes three non-refundable but transferrable tax credits:

1. Milk Processing Tax Credit;
2. Regional Clean Hydrogen Hub Tax Credit; and
3. Semiconductor Manufacturing, Biomedical Manufacturing and Research Tax Credit.

Who is eligible and how much are the credits worth?

Businesses within each qualifying industry must invest significant capital in PA by constructing a new facility and creating a specific number of jobs. In addition, qualified businesses must adhere to certain minimum wage standards and make a good-faith effort to recruit local workers during the construction project. Taxpayers also need to be in good standing for all applicable Pennsylvania taxes.

Qualified taxpayers looking to obtain a PA EDGE credit must submit an application to the Pennsylvania Department of Revenue (DOR) no later than March 1 for qualified purchases and/or activities from the prior calendar year.

Milk Processing Tax Credit

This program credits qualified taxpayers $0.05 per gallon of milk purchased and produced from sources exclusively in Pennsylvania and processed at the new facility.

To qualify, a taxpayer must (among other things):

• Invest $500 million or more to build the milk processing facility in Pennsylvania; and
• Create at least 1,200 full-time, permanent jobs.

A qualified taxpayer’s total credits cannot exceed 25% of their capital investment to construct the qualified facility and place it into service.

Regional Clean Hydrogen Hub Tax Credit

This program incentivizes the construction of clean hydrogen hubs approved by the U.S. Department of Energy. The hubs must be constructed according to the definition outlined in the infrastructure bill that was signed into law in November 2021.

Qualified taxpayers are allowed a credit for one or more of the following:

• $0.81 per kilogram of clean hydrogen purchased from a regional clean hydrogen hub within Pennsylvania and used in manufacturing at their new facility.
• $0.47 per unit of natural gas, purchased and used in the manufacturing of hydrogen at the project facility.

To qualify, a taxpayer must (among other things):

• Invest $500 million or more to build a project facility that is part of a regional clean hydrogen hub in Pennsylvania; and
• Create at least 1,200 full-time, permanent jobs.

A qualified taxpayer’s total credits cannot exceed 50% of their capital investment to construct the qualified facility and place it into service.

Semiconductor Manufacturing, Biomedical Manufacturing and Research Tax Credit

This program allocates $100 million (up to $20 million annually over five years) for biomedical and semiconductor manufacturing facilities.

The annual credit allowed per qualified taxpayer is limited to $20 million per year. Of that, $10 million is allocated for semiconductor manufacturing and $10 million is allocated for biomedical manufacturing or biomedical research.

Qualified taxpayers can claim a credit for:

• No more than 2.5% of their capital investment; and
• Pennsylvania income tax withheld from employees, up to $20,000 per employee, for each job created at the facility.

To qualify, a taxpayer must:

• Invest $200 million or more to build a new semiconductor manufacturing or biomedical manufacturing or research facility in Pennsylvania; and
• Create at least 800 permanent jobs.

A qualified taxpayer’s total credits cannot exceed 25% of their capital investment to construct the qualified facility and place it into service.

Count on Marcum

For additional information regarding the Pennsylvania Credits and Incentives opportunity and its potential benefits, contact Barry Halpern or your Marcum State and Local Credits and Incentives professional.