SB 792 — An Act amending the act of March 4, 1971 (P.L.6, No.2), known as the Tax Reform Code of 1971, in research and development tax credit, further providing for definitions, for credit for research and development expenses and for limitation on credits.

PRIOR PRINTER'S NO.

903 PRINTER'STHE NO.GENERAL ASSEMBLY OF PENNSYLVANIA SENATE BILL Session of No.

1803792 THE2025 GENERALINTRODUCED ASSEMBLYBY OFFARRY, PENNSYLVANIASANTARSIERO, SENATEHAYWOOD, BILLHUGHES, SessionCOSTA, PENNYCUICK AND PISCIOTTANO, JUNE 6, 2025 REFERRED TO INSTITUTIONAL SUSTAINABILITY AND INNOVATION, JUNE 6, 2025 AN ACT Amending the act of No.March 4, 1971 (P.L.6, No.2), entitled "An act relating to tax reform and State taxation by codifying and enumerating certain subjects of taxation and imposing taxes thereon;

792providing 2025procedures INTRODUCEDfor BY FARRY, SANTARSIERO, HAYWOOD, HUGHES, COSTA, PENNYCUICK, PISCIOTTANO, MILLER, COLLETT, LAUGHLIN AND ROBINSON, JUNE 6, 2025 SENATOR FARRY, INSTITUTIONAL SUSTAINABILITY AND INNOVATION, AS AMENDED, JUNE 9, 2026 AN ACT Amending the actpayment, ofcollection, Marchadministration 4, 1971 (P.L.6, No.2), entitled "An act relating to tax reform and Stateenforcement taxationthereof; by codifying taxes thereon;

providing procedures for the payment,osing collection, administration and enforcement thereof;

conferring powers and imposing duties upon the Department of Revenue, certain employers, fiduciaries, individuals, persons, corporations penalties," in research and otherdevelopment entities;tax credit, further providing for limitation on credits.

prescribing crimes, offenses and penalties," in research and development tax credit, further providing FOR DEFINITIONS, FOR CREDIT FOR RESEARCH AND <-- DEVELOPMENT EXPENSES AND for limitation on credits.

Section 1709-B(a) of the act of March 4, 1971 <-- (P.L.6, No.2), known as the Tax Reform Code of 1971, is amended to read:

SECTION 1.

THE DEFINITIONS OF "PENNSYLVANIA BASE AMOUNT" AND <-- "SMALL BUSINESS" IN SECTION 1702-B OF THE ACT OF MARCH 4, 1971 (P.L.6, NO.2), KNOWN AS THE TAX REFORM CODE OF 1971, ARE AMENDED TO READ:

SECTION 1702-B.

DEFINITIONS.--THE FOLLOWING WORDS AND PHRASES, WHEN USED IN THIS ARTICLE, SHALL HAVE THE MEANINGS GIVEN TO THEM IN THIS SECTION, EXCEPT WHERE THE CONTEXT CLEARLY INDICATES A DIFFERENT MEANING:

* * * "PENNSYLVANIA BASE AMOUNT." [BASE AMOUNT AS DEFINED IN SECTION 41(C) OF THE INTERNAL REVENUE CODE OF 1986 (PUBLIC LAW 99-514, 26 U.S.C.

§ 41(C)), EXCEPT THAT REFERENCES TO "QUALIFIED RESEARCH EXPENSE" SHALL MEAN "PENNSYLVANIA QUALIFIED RESEARCH AND DEVELOPMENT EXPENSE" AND REFERENCES TO "QUALIFIED RESEARCH" SHALL MEAN "PENNSYLVANIA QUALIFIED RESEARCH AND DEVELOPMENT." REFERENCES TO "FIXED BASE PERCENTAGE" SHALL MEAN THE PERCENTAGE WHICH THE PENNSYLVANIA QUALIFIED RESEARCH AND DEVELOPMENT EXPENSE FOR THE FOUR TAXABLE YEARS IMMEDIATELY PRECEDING THE TAXABLE YEAR IN WHICH THE EXPENSE IS INCURRED IS TO THE GROSS RECEIPTS FOR SUCH YEARS.

THE FIXED BASE PERCENTAGE FOR A TAXPAYER WHO HAS FEWER THAN FOUR BUT AT LEAST ONE TAXABLE YEAR SHALL BE DETERMINED IN THE SAME MANNER USING THE NUMBER OF IMMEDIATELY PRECEDING TAXABLE YEARS TO ARRIVE AT THE PERCENTAGE.] THE TERM SHALL MEAN FIFTY PER CENT OF THE AVERAGE PENNSYLVANIA QUALIFIED RESEARCH AND DEVELOPMENT EXPENSES FOR THE THREE TAXABLE YEARS PRECEDING THE TAXABLE YEAR FOR WHICH THE CREDIT IS BEING DETERMINED.

* * * "SMALL BUSINESS." A FOR-PROFIT CORPORATION, LIMITED LIABILITY COMPANY, PARTNERSHIP OR PROPRIETORSHIP WITH NET BOOK VALUE OF ASSETS TOTALING, AT THE BEGINNING OR END OF THE TAXABLE YEAR FOR WHICH PENNSYLVANIA QUALIFIED RESEARCH AND DEVELOPMENT EXPENSE IS INCURRED, AS REPORTED ON THE BALANCE SHEET, LESS THAN [FIVE MILLION DOLLARS ($5,000,000)] TEN MILLION DOLLARS ($10,000,000).

20250SB0792PN1803 - 2 - * * * SECTION 2.

SECTIONS 1703-B(B) AND (C) AND 1709-B(A) OF THE ACT ARE AMENDED TO READ:

SECTION 1703-B.

CREDIT FOR RESEARCH AND DEVELOPMENT EXPENSES.--* * * (B) THE FOLLOWING APPLY:

(1) EXCEPT AS PROVIDED IN PARAGRAPH (2), A TAXPAYER THAT IS QUALIFIED UNDER SUBSECTION (A) SHALL RECEIVE A RESEARCH AND DEVELOPMENT TAX CREDIT FOR THE TAXABLE YEAR IN THE AMOUNT OF [TEN] FOURTEEN PER CENT OF THE EXCESS OF THE TAXPAYER'S TOTAL PENNSYLVANIA QUALIFIED RESEARCH AND DEVELOPMENT EXPENSE FOR THE TAXABLE YEAR OVER THE TAXPAYER'S PENNSYLVANIA BASE AMOUNT.

(2) A TAXPAYER THAT IS A SMALL BUSINESS AND IS QUALIFIED UNDER SUBSECTION (A) SHALL RECEIVE A RESEARCH AND DEVELOPMENT TAX CREDIT FOR THE TAXABLE YEAR IN THE AMOUNT OF [TWENTY] TWENTY-FIVE PER CENT OF THE EXCESS OF THE TAXPAYER'S TOTAL PENNSYLVANIA QUALIFIED RESEARCH AND DEVELOPMENT EXPENSE FOR THE TAXABLE YEAR OVER THE TAXPAYER'S PENNSYLVANIA BASE AMOUNT.

(C) [BY MAY 1 OF THE SECOND CALENDAR YEAR FOLLOWING THE CLOSE OF THE TAXABLE YEAR DURING WHICH THE PENNSYLVANIA QUALIFIED RESEARCH AND DEVELOPMENT EXPENSE WAS INCURRED, THE DEPARTMENT SHALL NOTIFY THE TAXPAYER OF THE AMOUNT OF THE TAXPAYER'S RESEARCH AND DEVELOPMENT TAX CREDIT APPROVED BY THE DEPARTMENT.] IF THE TAXPAYER HAS NO PENNSYLVANIA QUALIFIED RESEARCH AND DEVELOPMENT EXPENSES IN ANY ONE OF THE THREE TAXABLE YEARS PRECEDING THE TAXABLE YEAR FOR WHICH THE CREDIT IS BEING DETERMINED, THE CREDIT SHALL BE SIX PER CENT OF THE PENNSYLVANIA QUALIFIED RESEARCH AND DEVELOPMENT EXPENSES FOR THE TAXABLE YEAR FOR WHICH THE CREDIT IS BEING DETERMINED.

Limitation on Credits.--(a) The total 20250SB0792PN1803 - 3 - amount of credits approved by the department shall not exceed [sixty] one hundred twenty million dollars [($60,000,000)] ($120,000,000) in any fiscal year.

* * * Section 22. 3.

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