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Pennsylvania Statutes Title 53 P.S. Municipal and Quasi-Municipal Corporations § 18200.513. Corporate net income tax

Current as of January 01, 2026 | Updated by Findlaw Staff

(a) Credits.--For tax years that begin on or after January 1 of the tax years following the date an economic development district is designated, a corporation which is a qualified business may claim a credit against the tax imposed by Article IV of the Tax Reform Code of 1971 for tax liability attributable to business activity conducted within the economic development district in the taxable year.  No credit may be claimed for activities conducted on the real property prior to designation of the real property as an economic development district.  The business activity must be conducted directly by the corporation in the economic development district in order for the corporation to claim the tax credit.

(b) Tax liability determinations.--A corporation's tax liability which is attributable to business activity conducted within an economic development district shall be determined by multiplying the corporation's taxable income which is attributable to business activity conducted within the economic development district by the rate of tax imposed under Article IV of the Tax Reform Code of 1971 for the taxable year and shall be computed, construed, administered and enforced in conformity with Article IV of the Tax Reform Code of 1971 in accordance with all of the following:

(1) If the entire business of the corporation in this Commonwealth is transacted wholly within the economic development district, the taxable income attributable to business activity within the economic development district shall consist of the Pennsylvania taxable income as determined under Article IV of the Tax Reform Code of 1971.

(2) If the entire business of the corporation in this Commonwealth is not transacted wholly within the economic development district, the taxable income of the corporation within the economic development district shall be determined upon the portion of the Pennsylvania taxable income of the corporation attributable to business activity conducted within the economic development district and apportioned in accordance with subsection (c).

(c) Income apportionment.--The taxable income of a corporation which is a qualified business shall be apportioned to the economic development district by multiplying the Pennsylvania taxable income by a fraction, the numerator of which is the property factor plus the payroll factor plus the sales factor and the denominator of which is three, in accordance with all of the following:

(1) The property factor is a fraction, the numerator of which is the average value of the corporation's real and tangible personal property owned or rented and used within the economic development district during the tax period and the denominator of which is the average value of all the corporation's real and tangible personal property owned or rented and used in this Commonwealth during the tax period but shall not include the security interest of the corporation as seller or lessor in personal property sold or leased under a conditional sale, bailment lease, chattel mortgage or other contract providing for the retention of a lien or title as security for the sales price of the property.

(2) The payroll factor is a fraction, the numerator of which is the total compensation paid by the corporation in the economic development district during the tax period by the corporation for compensation and the denominator of which is the total compensation paid by the corporation in this Commonwealth during the tax period.  Compensation is paid in the economic development district if:

(i) the employee's service is performed entirely within the economic development district;

(ii) the employee's service is performed both within and outside the economic development district, but the service performed outside the economic development district is incidental to the employee's service within the economic development district;  or

(iii) some of the employee's service is performed in the economic development district;  and the base of operations, or, if there is no base of operations the place from which the employee's service is directed or controlled, is located within the economic development district or the base of operations or the place from which the employee's service is directed or controlled is not in any location in which some part of the service is performed, but the employee's residence is in the economic development district.

(3) The sales factor is a fraction, the numerator of which is the total sales of the corporation in the economic development district during the tax period and the denominator of which is the total sales of the corporation in this Commonwealth during the tax period.  The following shall apply:

(i) Sales of tangible personal property are in the economic development district if the property is delivered or shipped to a purchaser within the economic development district regardless of the F.O.B. point or other conditions of the sale.

(ii) Sales other than sales of tangible personal property are in the economic development district if:

(A) the income-producing activity is performed within the economic development district;  or

(B) the income-producing activity is performed both within and outside the economic development district and a greater proportion of the income- producing activity is performed within the economic development district than in any other location, based on costs of performance.

(d) Computation.--A corporation shall compute its Commonwealth taxable income in conformity with Article IV of the Tax Reform Code of 1971 with no adjustments or subtractions for economic development district taxable income.

(e) Limitation on amount of credit.--The credit allowed under subsection (a) shall not exceed the tax liability of the corporation under Article IV of the Tax Reform Code of 1971 for the tax year.

(f) Section not applicable to certain businesses.--Any portion of the corporation's taxable income which is attributable to the operation of a railroad, truck, bus or airline company, pipeline or natural gas company, water transportation company, a corporation which qualifies as a regulated investment company under Article IV of the Tax Reform Code of 1971 or as a holding company as defined in Article VI of the Tax Reform Code of 1971 shall not be used to calculate a credit under this section.

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Cite this article: FindLaw.com - Pennsylvania Statutes Title 53 P.S. Municipal and Quasi-Municipal Corporations § 18200.513. Corporate net income tax - last updated January 01, 2026 | https://codes.findlaw.com/pa/title-53-ps-municipal-and-quasimunicipal-corporations/pa-st-sect-53-18200-513/

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