2016 PA Schedule OC - Other Credits (PA-20S/PA-65 OC) · 3 Pennsylvania Department of Revenue 2016 Instructions for PA-20S/PA-65 Schedule OC Other Credits PA-20S/PA-65 Schedule OC

You must submit the certificate or notification that approved each credit you are claiming.

1 PA Employment Incentive Payments Tax Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

2 PA Job Creation Tax Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

3 PA Research and Development Tax Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

4 PA Film Production Tax Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

5 Out-of-State Credits – S Corporation Only . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

6 PA Organ and Bone Marrow Donor Tax Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

7 PA Keystone Innovation Zone (KIZ) Tax Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

8 PA Resource Enhancement and Protection (REAP) Tax Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

9 PA Neighborhood Assistance Program (NAP) Tax Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

10 PA Educational Improvement Tax Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

11 PA Keystone Special Development Zone Tax Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

12 PA Opportunity Scholarship Tax Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

13 PA Historic Preservation Incentive Tax Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

14 PA Community-Based Services Tax Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

15 Coal Refuse Energy and Reclamation Tax Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

16 Other restricted credits not listed above. Enter type: 16

17 Total PA Other Credits. Add Lines 1 through 16 and enter total here . . . . . . . . . . . . . . . . . . . . . 17

2016PA SCHEDULE OCOther CreditsPA-20S/PA-65 OC (08-16) (FI) OFFICIAL USE ONLY

FEIN

Name as shown on the PA-20S/PA-65 Information Return

1608310056

16083100561608310056

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Pennsylvania Department of Revenue 2016Instructions for PA-20S/PA-65 Schedule OC

Other CreditsPA-20S/PA-65 Schedule OC (08-16)

Coal Refuse Energy and Reclamation Tax Credit: This new tax credit is designed to in-centivize eligible facilities that gener-ate electricity in the commonwealth touse coal refuse for power generation,control acid gasses for emission con-trol and use ash produced by the facil-ity to reclaim mining-affected sites.Credits may be awarded at a rate of $4per 2,000 pounds of qualified refusecapped at 22.2 percent of the availablebudget allocation per fiscal year. Theallocation is $7.5 million for the 2016-17 fiscal year and $10 million each fis-cal year thereafter.

Purpose of ScheduleA PA S corporation, partnership andlimited liability company filing as a part-nership or PA S corporation for federalincome tax purposes uses PA-20S/PA-65 Schedule OC to enter its share foreach tax credit received after applyingthe tax credit to the entity’s corporateliability, if any.

A tax credit passed through from an-other entity can only be applied to taxliability resulting from the RCT-101, PACorporate Tax Report. Do not report atax credit passed through from anotherentity on PA-20S/PA-65 Schedule OCwith the exception of EITC and OSTC.

REDUCTION IN EXPENSESPennsylvania does not allow the de-duction of certain expenses used toqualify for the Neighborhood Assis-tance Program and the EducationalImprovement Tax Credits. If the ex-penses were deducted in calculatingfederal-taxable income, the amountshould be reported as a reduction inexpenses on PA-20S/PA-65 ScheduleM, Part B, Section E, Line f. Do not

reduce Pennsylvania-taxable incomeby amounts paid to qualify for the tax credit. For additional information,see the specific section for these taxcredits.

TAX CREDITS CLAIMED ON SCHEDULE OCTax credits are often awarded to PA Scorporations or partnerships andpassed through to entity owners. How-ever, sometimes they are awarded toindividual or fiduciary taxpayers. ThePA S corporations and partnerships re-port tax credits on PA-20S/PA-65Schedule OC.

The individuals and entity owners re-port tax credits on PA-40 ScheduleOC. Different provisions apply to vari-ous situations, so please review thespecific information for each tax credit.

For each tax credit claimed, the entitymust submit with the PA-20S/PA-65Schedule OC the certificate or notifica-tion that approved each tax creditclaimed.

Following is some general informationregarding tax credits: ● The restricted tax credits on PA-

20S/PA-65 Schedule OC may bepassed through to thetaxpayer/owner and claimedagainst the tax liability for a tax-payer/owner without restriction asto the type or class of income in-cluded in determining the tax lia-bility of the taxpayer/owner.

● Restricted tax credits are nonre-fundable. If applicable, other non-refundable credits must be appliedto the account before restricted taxcredits.

● The request to pass through taxcredit to an entity owner is irrevo-cable. Therefore, the entity shouldnot pass through more than theowner can use in any single year.

● Tax credits passed through frompass through entities to other passthrough entities or to estates ortrusts may not be passed throughto owners or beneficiaries with theexception of EITC and OSTC.

● Tax credits passed from a QSSSor disregarded entity to its parent,cannot be further passed to theparent’s owners.

● If permitted by a specific credit’senabling statute, the portion of thetax credit that exceeds the tax lia-bility of the awardee of the taxcredit may be carried forward un-less the awardee elects to sell orassign the tax credit or pass itthrough to its owners.

● Special rules apply for taxpayersthat sell/assign restricted tax cred-its as well as the taxpayers whopurchase them or to whom taxcredits are assigned. The rulesapply to all taxpayers, whether ornot they are incorporated. For spe-cific information regarding theserules, review Corporation Tax Bulletin 2014-04 on the Depart-ment of Revenue’s website,www.revenue.pa.gov.

NOTE: Do not pass throughmore than is needed to entity

owners for this or any other restrictedtax credit and do not purchase or as-sign more than can be used of this taxcredit or any other restricted tax creditfor purchase or assignment.

SALEABLE OR ASSIGNABLE TAX CREDITSThe following programs offer saleablerestricted tax credits:

GENERAL INFORMATION

WHAT’S NEW

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Tax credits are often sold throughcredit brokers; however, a credit bro-ker is not a requirement of sale. Foradditional information about using pur-chased or assigned tax credits, seethe specific section for each tax credit.

PERSONAL INCOME TAX REPORTING REQUIREMENTS FOR SALE OF RESTRICTED TAX CREDITSSeller of a Restricted Tax CreditFor Pennsylvania personal income taxpurposes, the sales of restricted taxcredits are taxable as gains on thesale, exchange or disposition of prop-erty to the sellers or original awardeesof the restricted tax credits.

The taxpayer selling the restricted taxcredit reports the sale of the tax creditas a sale of intangible property forPennsylvania personal income tax pur-poses on PA-20S/PA-65 Schedule D.

The taxpayer’s cost basis in the re-stricted tax credit sold is usually $0 asthe tax credit is awarded based uponincome or expenses already includedin the current or a prior year’s tax re-turn(s) whereas no adjustment or re-duction in income or expenses isrequired to be made to obtain such taxcredit.

A reduction in the sales price may bereported if commissions are paid to anagent or broker for the sale of such re-stricted tax credits in the amount of thecommissions paid that reduce the

amount of net proceeds received bythe taxpayer.

The taxpayer reports the date of theaward of the restricted tax credit as theacquisition date and the date sold asthe date the sale was consummated.The gross proceeds the taxpayer re-ceives from the sale of the restrictedtax credit less any commissions paidare included as the sales price of thetax credit sold.

Purchaser of a Restricted Tax CreditA taxpayer who purchases a restrictedtax credit at a cost to him or her of lessthan the full value of the tax creditmust also report a gain or loss on thesale, exchange or disposition of prop-erty for Pennsylvania personal incometax purposes.

The taxpayer purchasing the restrictedtax credit reports the transaction as asale of intangible property for Pennsyl-vania personal income tax purposeson the PA-20S/PA-65 Schedule D. Un-like the sale of a restricted tax credit,the purchaser records as his or hercost basis, the full purchase price ofthe tax credit (complete sales price ofall such tax credits purchased plus anycommissions paid by the purchaser).The taxpayer records the purchasedate as the date acquired and recordsthe tax year end date (usually Decem-ber 31) for the tax year to which the taxcredit is applied as the date the re-stricted tax credit was sold.

The sales price of the tax credit is thefull value of the tax credit permitted orallowed to be applied to the tax returnof the taxpayer. The difference be-tween the sale price and the cost basisis the gain or loss on the transaction.By recording only the amount of taxcredit allowed or permitted as thesales price and the full purchase priceof the tax credit as the basis, restrictedtax credits purchased and not able tobe used due to any tax limitations im-posed under the law permitting the useof a purchased tax credit require noproration of tax credit cost and no sep-arate reporting of the loss on unusedtax credits.

A taxpayer who sells tax credits and/oroffsets their tax liability with purchased

or assigned tax credits, does not needto send documentation of sale or as-signment with their PA-20S/PA-65 In-formation Return. However, thedepartment reserves the right to re-quest this documentation if needed.

Passing Through Tax Credit to Entity OwnersPrior to passing tax credits through toentity owners, some tax credits mustfirst be applied to the entity’s corporatetax liability, if any, for the year in whichthe tax credit is granted. If the entityhas a tax liability for the tax year inwhich the credit is approved for usethe tax credit must first be applied tothat tax liability. Review the specific in-formation for each tax credit to deter-mine if the tax credit must first beapplied to corporate liability.

If an entity does not use all approvedtax credits, it may elect in writing topass through all or a portion of the taxcredit to owners, in proportion to theshare of the entity’s distributive incometo which the owner is entitled. In mostcases the tax credit may be applied upto the full amount of owners’ tax liabil-ities, minus any other nonrefundablecredits that are applied first. See theinformation regarding specific tax cred-its to review existing restrictions or lim-itations.

An owner of a pass through entity towhich a tax credit is transferred mustimmediately claim the tax credit in thetax year in which the transfer is made.The owner may not carry forward,carry back, obtain a refund of, sell, as-sign or pass through the tax creditagain.

Married couples with joint ownership inpass through entities must be sepa-rately listed on the entities’ passthrough of credit request in order forcredit to be applied to each individual’stax number.

NOTE: Exceptions to this ruleapply for the EITC and OSTC

tax credits.

Example. A taxpayer and spousejointly own a 50 percent interest in apartnership, and their son John ownsthe other 50 percent. All income is dis-tributed according to the ownership

Credit Sales Program Provision

Film Production TaxCredit Program Yes

Historic PreservationTax Credit Yes

Job Creation Tax AffiliateCredit Program entity only

Keystone InnovationZone Yes

Keystone SpecialDevelopmentZone Program

Yes

NeighborhoodAssistance Program Yes

Research andDevelopment Program Yes

Resource Enhancementand Protection Program Yes

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percentages. The request to passthrough a credit must separately listthe taxpayer and spouse’s tax num-bers, each receiving 25 percent of thecredit, and John receiving the remain-ing 50 percent under his tax number.This method must be followed eventhough the taxpayer and spouse donot receive a separate RK-1 or NRK-1from the partnership.

To pass through tax credits to owners,an entity must submit a request on en-tity letterhead to the Department ofRevenue at the following address list-ing the total amount of credit to be dis-tributed to the entity owner(s), thename and address of each owner,amount of tax credit to be passedthrough to each owner, tax year, taxtype and owner’s tax identificationnumber. PA DEPARTMENT OF REVENUE BUREAU OF CORPORATION TAXES PO BOX 280701 HARRISBURG PA 17128-0701The statement must be signed by anauthorized representative of the entity,and should be submitted before own-ers file their individual tax returns.

Some tax credit programs provide aclaim form, located on the reverse sideof the award letter. Credit awardeesshould use the claim form to indicatethe tax accounts to which the tax creditshould be applied.

There are two exceptions to theprocess outlined above for passingthrough tax credit: ● To pass through an Educational

Improvement Tax Credit or Oppor-tunity Scholarship Tax Credit, thetaxpayer must complete and sub-mit form REV-1123, EducationalImprovement Tax Credit ElectionForm.

● To pass through a Keystone Inno-vation Zone tax credit, visit the De-partment of Community andEconomic Development’s (DCED)website at www.newpa.com or call DCED Customer Service at 1-800-379-7448.

For general information pertaining toall restricted tax credits as well as

specific details regarding each taxcredit individually – including each taxcredit’s carry-forward and passthrough rules, applications and guide-lines – review the description in theseinstructions and Chapter 17 of thePennsylvania Personal Income TaxGuide.

For information on applying for pro-grams administered by the Departmentof Community and Economic Develop-ment (DCED), visit www.newpa.comor call the DCED Customer ServiceCenter at 1-800-379-7448. The follow-ing programs are administered byDCED: Job Creation, Film Production,Keystone Innovation Zone, Neighbor-hood Assistance, Educational Improve-ment, Keystone Special DevelopmentZone, Opportunity Scholarship, HistoricPreservation, and Community BasedServices tax credit program.

For information on applying for the Resource Enhancement and Protec-tion tax credit program, visit the Dept. of Agriculture’s website atwww.agriculture.pa.gov or call 717-787-8821.

For information on applying for programs administered by the Depart-ment of Revenue (Revenue), visitwww.revenue.pa.gov or call 717-787-1064. The following programsare administered by Revenue: PAOrgan and Bone Morrow Donor taxcredit program and PA Research andDevelopment tax credit program.

All tax questions, regarding utilizationof the credits claimed on the ScheduleOC should be directed to the Depart-ment of Revenue at 717-772-3896.

EMPLOYMENT INCENTIVEPAYMENTS (EIP) TAX CREDITThis tax credit expired Dec. 31, 2009.Although no new tax credits are beingissued, carry forward of unused taxcredits is allowed for 10 years.

Qualified businesses, including passthrough entities, can apply the carry

forward of unused tax credit againstthe following Pennsylvania state taxes: ● Corporate net income tax ● Bank shares tax ● Title insurance and trust company

shares tax ● Mutual thrift institutions tax ● Personal income tax

NOTE: This tax credit is not applicable against capital

stock/foreign franchise tax liabilities.

This tax credit is limited to 90 percentof a business’ total tax liability in anygiven year. Unused tax credits may beapplied to one or more of the immedi-ate ten succeeding years, as long astax credits do not exceed 90 percent ofthe tax liability in any year. An em-ployer claims the tax credit by submit-ting the certification received fromDepartment of Labor and Industry foreach employee hired and the PASchedule W with the appropriatePennsylvania tax return.

JOB CREATION TAX CREDITQualified businesses, including passthrough entities and individuals, canapply the tax credit against the follow-ing Pennsylvania state taxes: ● Capital stock/foreign franchise tax ● Corporate net income tax ● Bank shares tax ● Mutual thrift institutions tax ● Insurance gross premiums tax ● Utilities gross receipts tax ● Title insurance and trust company

shares tax ● Personal income tax

Guidelines for the JobCreation Tax Credit ● The entity decides if the tax credit

will be applied towards corporationtax and/or passed through to itspartners, shareholders or mem-bers.

● Credit must be claimed by the tax-payer within five years of the effec-tive date on the certificate issuedby DCED.

● Unused tax credits expire fiveyears from the date the entity

TAX CREDITS

PROGRAM CONTACT INFORMATION


submits a Job Creation Tax Credit cer-tificate to the Department of Rev-enue.

● Tax credits dated July 1, 2001, orlater can be assigned (in whole orpart) to an entity holding less thana majority of the voting commonstock of another related company,or in which both companies aresubsidiaries of a third company asdefined in IRC §1504 as an affili-ated entity.

● Tax credits may not be sold or as-signed to any other entities with norelationship or ownership ties tothe entity selling or assigning thecredit as defined in IRC §1504 asan unaffiliated entity.

● The tax credit can be used to off-set 100 percent of the entity’s taxliabilities or 100 percent of the en-tity owners’ tax liabilities if passedthrough.

● The amount of the tax creditpassed through to partners, share-holders or members is based onthe percentage of ownership in theentity receiving the tax credit.

● The tax credit cannot be appliedagainst any tax withheld by an em-ployer from an employee under Ar-ticle III of the Tax Reform Code.

An employer claims the tax credit orpasses it through to entity owners bysubmitting the claim form with the cer-tification received from DCED for eachjob created to: PA DEPARTMENT OF REVENUE BUREAU OF CORPORATION TAXES PO BOX 280701 HARRISBURG PA 17128-0701

If this certification form is not received,the tax credit will not be applied to anytax accounts. The tax credit must beclaimed by the taxpayer within 5 yearsof the effective date.

RESEARCH AND DEVELOPMENT(R&D) TAX CREDITQualified businesses, including passthrough entities and individuals canapply the tax credit against the follow-ing Pennsylvania state taxes: ● Capital stock/foreign franchise tax

● Corporate net income tax ● Personal income tax

Guidelines for the Researchand Development Tax Credit ● The tax credit must first be applied

to the entity’s corporate tax liability,if any, for the year in which the taxcredit is awarded before it can bepassed through to its partners,shareholders or members.

● The tax credit can be sold or as-signed. See Saleable or Assigna-ble Tax Credits.

● A purchased or assigned tax creditmay be applied to no more than 75percent of the tax liability of thepurchaser or assignee.

● The tax credit may not be carriedback and is not refundable.

● The amount of the tax creditpassed through to partners, share-holders and members is based onthe percentage of income distribu-tion from the entity receiving thetax credit.

● Buyer shall immediately claim thecredit in the taxable year in whichsale or assignment is made.

● As of Jan. 1, 2005, the R & D TaxCredit can be applied to 100 per-cent of the recipient’s liability.However, any R & D Tax Credit is-sued before 2005 may only be ap-plied to 50 percent of the taxliability. See Passing Through TaxCredit To Entity Owners.

● Any R & D tax credit issued before2006 could be passed through andthen carried over if not completelyused in the year the tax credit waspassed through. However, any R& D tax credit issued after Dec. 31,2005, that is passed through mustbe used in the year the credit ispassed through.


The entity may pass the tax creditthrough to entity owners by submittingthe claim form with the certification re-ceived from the Department of Rev-enue to:

PA DEPARTMENT OF REVENUE BUREAU OF CORPORATION TAXES PO BOX 280701 HARRISBURG PA 17128-0701FILM PRODUCTION TAX CREDITQualified businesses, including passthrough entities and individuals mayapply the tax credit against the follow-ing Pennsylvania state taxes: ● Capital stock/foreign franchise tax ● Corporate net income tax ● Bank shares tax ● Insurance gross premiums tax

(excluding surplus lines, unautho-rized, domestic/foreign marine)

● Personal income tax

Guidelines for the FilmProduction Tax Credit ● The tax credit must first be applied


● The tax credit may be applied to100 percent of the entity’s liability,or to 100 percent of the entity own-ers’ liabilities.


● A purchased or assigned tax creditmay be applied to no more than 50percent of the tax liability of thepurchaser or assignee. If the creditwas awarded after June 30, 2014and purchased in 2015, it cannotbe carried forward to 2016.

● The entity awarded the credit maycarry forward any unused taxcredits to no more than the threesucceeding taxable years.


● The amount of the tax creditpassed through to partners, share-holders or members is based onthe percentage of income distribu-tion from the entity receiving thetax credit. The partner, share-holder or member must use thetax credit in the year it is passed

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through. See Passing Through TaxCredit To Entity Owners.

● A taxpayer which claims a taxcredit and fails to incur the amountof qualified film production ex-penses agreed to in Act 52 of 2013§ 1703-D(c)(3) for a film in thattaxable year shall repay to thecommonwealth the amount of theFilm Production Tax Creditclaimed under this article for thefilm.


PA ORGAN AND BONE MARROWDONOR TAX CREDITQualified businesses, including passthrough entities can apply the carryforward of unused tax credit againstthe following Pennsylvania state taxes: ● Capital stock/foreign franchise tax ● Corporate net income tax ● Bank shares tax ● Mutual thrift institutions tax ● Title insurance and trust company

shares tax ● Insurance gross premiums tax

(excluding surplus lines, unautho-rized, domestic/foreign marine)

● Personal income tax.Guidelines for the PA Organ andBone Marrow Donor Tax Credit ● The entity decides if the tax credit


● The tax credit may be applied to100 percent of the entity’s liabilityor to 100 percent of the entity own-ers’ liabilities.

● The tax credit cannot be sold orassigned.

● The entity may carry forward anyunused tax credits for no morethan three succeeding taxableyears.


● The tax credit cannot be appliedagainst any tax withheld by an em-

ployer from an employee under Ar-ticle III of the Tax Reform Code.

KEYSTONE INNOVATION ZONE(KIZ) TAX CREDITQualified businesses, including passthrough entities and individuals withbusiness activity in a KIZ can applythis tax credit against the followingPennsylvania state taxes: ● Capital stock/foreign franchise tax ● Corporate net income tax ● Personal income taxGuidelines for the KeystoneInnovation Zone Tax Credit ● The tax credit must first be applied


● The tax credit may be applied to100 percent of the entity’s liabilityor to 100 percent of the entity own-ers’ liabilities.




● The entity may carry forward anyunused tax credits to no more thanthe four succeeding taxable years.The partner, shareholder or mem-ber must use the tax credit in theyear it is passed through.

● The amount of the tax creditpassed through to partners, share-holders or members is based onthe percentage of income distribu-tion from the entity receiving thetax credit. This tax credit cannotbe passed through using a claimform or a request to the Bureau ofCorporation Taxes. An applicationto pass through the tax credit mustbe sent to Department of Commu-nity and Economic Development.

RESOURCE ENHANCEMENT ANDPROTECTION (REAP) TAX CREDITQualified businesses, including passthrough entities and individuals can

apply the tax credit against the follow-ing Pennsylvania state taxes: ● Capital stock/foreign franchise tax ● Corporate net income tax ● Bank shares tax ● Mutual thrift institutions tax ● Title insurance and trust company

shares tax ● Insurance gross premiums tax ● Personal income taxFor projects to be eligible for the taxcredit, farms, farmers and sponsorsmust apply to the SCC. REAP taxcredits can be used by the applicantfor up to 15 years, and they are trans-ferable and can be sold or assigned toother taxpayers.Guidelines for the ResourceEnhancement and ProtectionTax Credit ● The tax credit must first be applied


● The tax credit may be applied to100 percent of the entity liability orto 100 percent of the entity own-ers’ liabilities.



● The entity may carry forward anyunused tax credits to no more thanthe 15 succeeding taxable years.


● The amount of the tax creditpassed through to partners, share-holders or members is based onthe percentage of income distribu-tion from the entity receiving thetax credit. The partner, share-holder or member must use thetax credit in the year it is passedthrough. See Passing Through TaxCredit To Entity Owners.

● The tax credit cannot be appliedagainst any tax withheld by an


employer from an employee under Ar-ticle III of the Tax Reform Code.

The entity claims the tax credit orpasses it through to entity owners bysubmitting the claim form with the cer-tification received from the Departmentof Revenue to: PA DEPARTMENT OF REVENUE BUREAU OF CORPORATION TAXES PO BOX 280701 HARRISBURG PA 17128-0701If this certification form is not received,the tax credit will not be applied to anytax accounts. The tax credit must beclaimed by the taxpayer within 15years of the effective date.

NEIGHBORHOOD ASSISTANCEPROGRAM (NAP) TAX CREDITQualified businesses, including passthrough entities and individuals canapply the tax credit against the follow-ing Pennsylvania state taxes: ● Capital stock/foreign franchise tax ● Corporate net income tax ● Bank shares tax ● Mutual thrift institutions tax ● Title insurance and trust company

shares tax ● Insurance gross premiums tax ● Personal income taxGuidelines for the NeighborhoodAssistance Program Tax Credit ● The tax credit must first be applied



● A purchased or assigned tax creditmay be applied to 100 percent ofthe tax liability of the purchaser orassignee.

● The entity may carry forward anyunused tax credits to no more thanthe five succeeding taxable years.


● The amount of the tax creditpassed through to partners,

shareholders or members isbased on the percentage of in-come distribution from the entityreceiving the tax credit. The part-ner, shareholder or member mustuse the tax credit in the year it ispassed through. See PassingThrough Tax Credit To Entity Own-ers.

● Pennsylvania does not allow thededuction of certain expensesused to qualify for the Neighbor-hood Assistance Program taxcredit. If the expenses were de-ducted in calculating federal-tax-able income, the amount shouldbe reported as a reduction in ex-penses on PA-20S/PA-65 Sched-ule M, Part B, Section E, Line f. Donot reduce Pennsylvania-taxableincome by amounts paid to qualifyfor the tax credit.


EDUCATIONAL IMPROVEMENTTAX CREDIT (EITC)Qualified businesses, including passthrough entities and individuals canapply the tax credit against the follow-ing Pennsylvania state taxes: ● Capital stock/foreign franchise tax ● Corporate net income tax ● Bank and trust company shares

tax ● Mutual thrift institutions tax ● Title insurance company shares

tax ● Insurance gross premiums tax (ex-

cluding unauthorized, domestic/foreign marine)

● Surplus lines tax ● Malt beverage tax ● Personal income taxGuidelines for the EducationalImprovement Tax Credit ● The entity decides if the tax credit



● Although any unused tax creditsmay not be carried forward, theentity may elect in writing prior tothe due date of the entity’s tax re-turn to pass through all or a portionof the tax credit to its owners in thetaxable year of the contribution orthe taxable year immediately fol-lowing the year of contributions.

● To make an irrevocable election topass through an Educational Improvement tax credit to part-ners, shareholders or members, abusiness should visit the Depart-ment of Revenue’s website atwww.revenue.pa.gov and com-plete REV-1123, Educational Im-provement Tax Credit ElectionForm. The entity must complete aseparate REV-1123 each year thetax credit is awarded and not usedin whole or in part.

● REV-1123 must be sent to theRevenue’s Bureau of CorporationTaxes by the tax return filing duedate (including extensions) of theentity. However, REV-1123 mustbe sent separately from the en-tity’s tax return.

● The amount of the tax creditpassed through to partners, share-holders or members is based onthe percentage of income distribu-tion from the entity receiving thetax credit.

● The tax credit may be applied to100 percent of the entity’s liabilityor 100 percent of the entity own-ers’ liabilities.

● Pennsylvania does not allow thededuction of certain expensesused to qualify for the EducationalImprovement Tax Credit. If the ex-penses were deducted in calculat-ing federal-taxable income, theamount should be reported as areduction in expenses on PA-20S/PA-65 Schedule M, Part B, Sec-tion E, Line f. Do not reduce Penn-sylvania-taxable income byamounts paid to qualify for the taxcredit.


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KEYSTONE SPECIALDEVELOPMENT ZONE TAX CREDITQualified businesses, including passthrough entities and individuals, canapply the tax credit against the follow-ing Pennsylvania state taxes: ● Capital stock/foreign franchise tax ● Corporate net income tax ● Bank shares tax ● Mutual thrift institutions tax ● Title insurance and trust company

shares tax ● Personal income tax

Guidelines for the Keystone Special Development Zone Tax Credit ● The tax credit can be earned for

ten years of a 15-year period be-ginning July 1, 2012 through June30, 2035.

● The entity decides if the tax creditwill be applied towards corporationtax and/or passed through to itspartners, members or sharehold-ers (owners).

● The tax credit may be carried for-ward, sold, or assigned however itis not refundable.

● Purchased or assigned tax creditsmay be applied to no more than 75percent of the tax liability of thepurchaser or assignee.

● The purchaser or assignee shallclaim the tax credit in the year inwhich the purchase or assignmentis made.

● The entity can pass through inwhole or part unused tax credits toits owners. The amount of the taxcredit passed through to owners isbased on the percentage of in-come distribution from the entityreceiving the tax credit. The ownermust use the tax credit in the yearit is passed through.

● The applicant/awardee cannot bean employer constructing the im-provements in the Keystone Spe-cial Development Zone.

● An employer may not claim bothKeystone Opportunity Zone andKeystone Special DevelopmentZone tax credit.

OPPORTUNITY SCHOLARSHIPTAX CREDITQualified businesses, including passthrough entities, may apply the creditagainst the following Pennsylvaniastate taxes: ● Capital stock/foreign franchise tax ● Corporate net income tax ● Bank and trust company shares

tax ● Mutual thrift institutions tax ● Title insurance company shares

tax ● Insurance gross premiums tax

(excluding unauthorized, domes-tic/foreign marine)

● Surplus lines tax ● Malt beverage tax ● Personal income tax

Guidelines for the OpportunityScholarship Tax Credit ● The entity decides if the tax credit



● Although any unused tax creditsmay not be carried forward, theentity may elect in writing prior tothe due date of the entity’s tax re-turn to pass through all or a portionof the tax credit to its owners in thetaxable year of the contribution orthe taxable year immediately fol-lowing the year of contributions.


● To make an irrevocable election to pass through an OpportunityScholarship tax credit to partners,shareholders or members, a business should visit the Depart-ment of Revenue’s website atwww.revenue.pa.gov and com-plete REV-1123, Educational Im-provement Tax Credit ElectionForm, which is also used for theEducational Improvement TaxCredit program. The entity must

complete a separate REV-1123each year the tax credit isawarded and not used in whole orin part.

● REV-1123 must be sent to theRevenue’s Bureau of CorporationTaxes by the tax return filing duedate (including extensions) of theentity. However, REV-1123 mustbe sent separately from the en-tity’s tax return.


● The tax credit may be applied to100 percent of the entity liability or100 percent of the entity owners’liabilities.

HISTORIC PRESERVATIONINCENTIVE TAX CREDITQualified taxpayers may apply thecredit against the following Pennsylva-nia state taxes: ● Capital stock/foreign franchise tax ● Corporate net income tax ● Bank shares tax ● Title insurance & trust company

shares tax ● Insurance premiums tax (exclud-

ing surplus lines, unauthorized,domestic/foreign marine)

● Mutual thrift tax ● Gross receipts tax ● Personal income tax

Guidelines for the HistoricPreservation Incentive Tax Credit ● The tax credit shall be applied

against the qualified entity’s liabil-ity for the current taxable year asof the date on which the tax creditwas issued before it can bepassed through to its partners,shareholders or members.


● A purchased or assigned tax creditmay be applied to 100 percent ofthe tax liability of the purchaser orassignee.


● The entity may carry forward anyunused tax credits to no more thanthe seven succeeding taxableyears.


● The amount of the tax creditpassed through to partners, share-holders or members is based onthe percentage of income distribu-tion from the entity receiving thetax credit. The partner, share-holder or member must use thetax credit in the year it is passedthrough. See Passing Through TaxCredit To Entity Owners.


COMMUNITY-BASED SERVICES TAX CREDITQualified businesses may apply thecredit against the following Pennsylva-nia state taxes: ● Capital stock/foreign franchise tax ● Corporate net income tax ● Bank shares tax ● Title insurance & trust company

shares tax ● Insurance premiums tax (exclud-

ing surplus lines, unauthorized,domestic/foreign marine)

● Mutual thrift institutions tax ● Personal income tax

Guidelines for the Community-Based Services Tax Credit ● The tax credit shall be applied

against the qualified entity’s liabil-ity for the current taxable year asof the date on which the credit wasissued.

● The tax credit cannot be sold orassigned or passed through.

● The tax credit may be applied to100 percent of the entity’s liability.

COAL REFUSE ENERGY AND RECLAMATION TAX CREDITQualified taxpayers, including passthrough entities can apply the taxcredit against the following Pennsylva-nia state taxes:

● Personal income tax ● Corporate net income tax ● Capital stock/foreign franchise tax ● Bank shares tax ● Title insurance & trust company

shares tax ● Insurance premiums tax ● Gross receipts tax ● Mutual thrift institutions tax Guidelines for the Coal Refuse Energy and Reclamation Tax Credit ● A qualified taxpayer may claim a

tax credit against the qualified taxliability of the qualified taxpayer.

● The entity decides if the tax creditwill be applied towards corporationtax and/or passed through to itspartners, shareholders or mem-bers,


● The tax credit may also be trans-ferred to an affiliate during a tax-able year for use if the credit isauthorized.

● The tax credit may be applied to100 percent of the entity’s liability,entity owners’ liability or affiliate li-ability.

● The tax credit can be sold or as-signed. See Saleable or Assigna-ble tax credits.

● A purchased or assigned tax creditmay be applied to no more than 75percent of the tax liability of thepurchaser or assignee in the tax-able year in which the purchase orassignment was made.

● The entity awarded the credit, maycarry forward any unused taxcredit to no more than the 15 suc-ceeding taxable years.

● The credit may not be carried backand is not refundable.

● The credit cannot be appliedagainst any tax withheld by an em-

ployer from an employee under Ar-ticle III of the Tax reform code.

The entity claims the tax credit orpasses through to entity owners/affili-ates by submitting the claim form withthe certification received from the De-partment of Community and EconomicDevelopment to:

PA DEPARTMENT OF REVENUEBUREAU OFCORPORATION TAXESPO BOX 280701HARRISBURG PA 17128-0701

If this certification form is not received,the tax credit will not be applied to anytax accounts. The tax credit must beclaimed by the taxpayer within 15years of the effective date.

Business NameEnter the complete name of the entityor business as shown on the PA-20S/PA-65 Information Return.

FEINEnter the nine-digit federal employeridentification number (FEIN) of the en-tity or business as shown on the PA-20S/PA-65 Information Return.

Employment IncentivePayments CreditAlthough no new tax credits are beingissued, the carry forward of unused taxcredits is allowed. Enter the amount ofany carry forward of unused tax credit.

Submit a completed PA Schedule Wwith all supporting documents.

Job Creation Tax CreditEnter the amount of tax credit that thePennsylvania Department of Commu-nity and Economic Development ap-proved.

Pennsylvania does not require a re-duction in expenses to calculate theJob Creation tax credit.

COMPLETING PA SCHEDULE OC

LINE INSTRUCTIONS

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11www.revenue.pa.gov

Research and DevelopmentTax CreditEnter the amount of tax credit from thePennsylvania Department of Revenue.

If the entity has a corporation tax liabil-ity for the tax year in which the Re-search & Development tax credit isapproved for use, the tax credit mustbe first applied to the corporation taxliability before it is passed through tothe entity’s owners.

Consequently, if the entity has a cor-poration tax liability, the amount ofcredit reported on Line 3 must be lessthe corporate tax liability.

Pennsylvania does not require a re-duction in expenses to calculate theResearch and Development tax credit.If the entity sells or assigns the Re-search and Development tax credit, itis reported as a gain on PA-20S/PA-65Schedule D.

Film Production Tax CreditEnter the amount of tax credit from thePennsylvania Department of Revenueor Pennsylvania Department of Com-munity and Economic Development.

If the entity has corporate tax liabilityfor the tax year in which the Film Pro-duction tax credit is approved for use,the tax credit must be first applied tothe corporate tax liability before it ispassed through to the entity’s owners.

Consequently, if the entity has a cor-poration tax liability, the amount ofcredit reported on Line 4 must be lessthe corporate tax liability.Pennsylvania does not require a re-duction in expenses to calculate theFilm Production tax credit. If the entitysells or assigns the Film Productiontax credit it is reported as a gain onPA-20S/PA-65 Schedule D.

Out-of-State Credits S Corporations OnlyCertain S corporations are not taxedas S corporations (taxed as a C corpo-ration) in other states. In such cases

an entity must account for taxes paidto other states in order to claim the cor-rect resident tax credit. Note a C cor-poration return must be submitted.

Only Pennsylvania residentshareholders can claim credit for

taxes paid to other states by the entity.

To calculate the amount of Pennsylva-nia resident credit, multiply the amountof income apportioned to the otherstate by the Pennsylvania personal in-come tax rate of 3.07 percent. Thecredit is the lesser of this calculatedamount or the actual amount of taxpaid to the other state.

The C corporation from another statethat is an S corporation for Pennsylva-nia reports on Line 5 the lesser of theamount of tax paid on the apportionedincome as compared to the tax rate ofPennsylvania.

The entity then distributes the amountreported on Line 5 according to own-ership percentage.

The amount of credit reported on Line5 is $1,500 because it is less than theamount of tax payable to Pennsylvania.

NOTE: Resident shareholders report this credit on their

PA-40 Personal Income Tax Return,as a resident credit on PA-40 Schedule G-L.

PA Organ and Bone Marrow DonorTax CreditEnter the amount of tax credit fromthe Pennsylvania Department of Rev-enue. Pennsylvania does not requirea reduction in expenses to calculatethe PA Organ and Bone MarrowDonor Tax Credit.

Keystone Innovation ZoneTax CreditEnter the amount of tax credit from thePennsylvania Department of Commu-nity and Economic Development.

If the entity has a corporation tax liabil-ity for the tax year in which the Key-stone Innovative Zone tax credit isapproved for use, the tax credit mustbe first applied to the corporation taxliability before it is passed through tothe entity’s owners.


Pennsylvania does not require a re-duction in expenses to calculate theKeystone Innovation Zone tax credit. Ifthe entity sells or assigns the KeystoneInnovation Zone tax credit it is reportedas a gain on PA-20S/PA-65 Schedule D.

Resource Enhancement andProtection Tax CreditEnter the amount of tax credit from thePennsylvania Department of Revenue.

If the entity has corporate tax liabilityfor the tax year in which the ResourceEnhancement and Protection taxcredit is approved for use, the taxcredit must be first applied to the cor-porate tax liability before it is passedthrough to the entity’s owners.

Consequently if the entity has corpo-ration tax liability, the amount of creditreported on Line 8 must be less thecorporate tax liability.

Pennsylvania does not require a re-duction in expenses to calculate theResource Enhancement and Protec-tion tax credit. If the entity sells or as-signs the Resource Enhancement andProtection tax credit it is reported as again on PA-20S/PA-65 Schedule D.

Neighborhood AssistanceProgram Tax CreditEnter the amount of tax credit from thePennsylvania Department of Commu-nity and Economic Development.

LINE 6

LINE 7

EXAMPLETotal incomefrom everywhere . $100,000PA-source income . . 25,000Other state’sincome . . . . . . . . . . . .75,000 x 2.00 percent (0.0200)

= $ 1,500

Other state’s incomeAlso taxedin Pennsylvania . . . . .75,000 x 3.07 percent (0.0307)

= $ 2,302Lesser of the two . . . $1,500

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If the entity has a corporation tax liabil-ity for the tax year in which the Neigh-borhood Assistance Program tax creditis approved for use, the tax credit mustbe first applied to the corporation taxliability before it is passed through tothe entity’s owners.


Pennsylvania does not allow a deduc-tion for contributions made to calculatethe Neighborhood Assistance ProgramTax Credit. If the expenses were de-ducted in calculating federal-taxableincome, the amount should be re-ported as a reduction in expenses onPA-20S/PA-65 Schedule M, Part B,Section E, Line f.

Do not reduce Pennsylvania-taxableincome by amounts paid to qualify forthe tax credit.

If the entity sells or assigns the Neigh-borhood Assistance Program TaxCredit it is reported as a gain on PA-20S/PA-65 Schedule D.

Educational ImprovementTax CreditEnter the amount of tax credit from thePennsylvania Department of Commu-nity and Economic Development.

Pennsylvania does not allow a deduc-tion for contributions made to calculatethe Educational Improvement taxcredit. If the expenses were deductedin calculating federal-taxable income,the amount should be reported as a re-duction in expenses on PA-20S/PA-65Schedule M, Part B, Section E, Line f.Do not reduce Pennsylvania-taxableincome by amounts paid to qualify forthe tax credit.

Keystone Special Development Zone Tax CreditEnter the amount of tax credit from thePennsylvania Department of Commu-nity and Economic Development.

Pennsylvania does not require a re-duction in expenses to calculate theKeystone Special Development Zonetax credit.

Opportunity ScholarshipTax CreditEnter the amount of tax credit from thePennsylvania Department of Commu-nity and Economic Development.

Historic Preservation Incentive TaxCreditEnter the amount of tax credit from thePennsylvania Department of Commu-nity and Economic Development.

Community-Based ServicesTax CreditEnter the amount of tax credit from thePennsylvania Department of Commu-nity and Economic Development.

Coal Refuse Energy and Reclamation Tax CreditEnter the amount of tax credit from thePennsylvania Department of Commu-nity and Economic Development.

Other Restricted Credits Not Listed AboveRestricted credits are tax credits whichare included in Pennsylvania legisla-tion and must be applied for with spe-cific Pennsylvania agencies. If arestricted credit is not shown on PA-20S/PA-65 Schedule OC, enter thetype of credit in the space providedand the amount of credit received fromthe awarding Pennsylvania govern-ment agency.

Total Pennsylvania Other CreditsAdd Lines 1 through 16. Enter the totalcredits here and on the PA-20S/PA-65Information Return, Part V, Line 13a.

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LINE 17

Documents

2016 PA Schedule OC - Other Credits (PA-20S/PA-65 OC) · 3 Pennsylvania Department of Revenue 2016 Instructions for PA-20S/PA-65 Schedule OC Other Credits PA-20S/PA-65 Schedule OC