Pennsylvania Statutes Title 72 P.S. Taxation and Fiscal Affairs § 216. Research and experimental expenditures and qualified production property

(a) Notwithstanding section 401(3)1(a) of the act of March 4, 1971 (P.L. 6, No. 2),  1 known as the “Tax Reform Code of 1971,” taxable income as defined by section 401(3) of the “Tax Reform Code of 1971,” shall include:

(b) Notwithstanding section 401(3)1(a) of the “Tax Reform Code of 1971,” if research and experimental expenditures were included in taxable income in accordance with subsection (a), an additional deduction for research and experimental expenditures shall be allowed from taxable income, as defined by section 401(3) of the “Tax Reform Code of 1971,” until the total amount deductible under sections 174 and 59(e) of the Internal Revenue Code of 1986 (26 U.S.C. §§ 174 and 59(e)) for the tax year has been claimed.  The additional deduction shall be equal to twenty per cent of the remaining unamortized qualified research and experimental expenditures allowable under sections 174 and 59(e) of the Internal Revenue Code of 1986 (26 U.S.C. §§ 174 and 59(e)).  In no event shall the total of the additional deductions under this subsection be more than the remaining unamortized qualified research and experimental expenditures allowable under sections 174 and 59(e) of the Internal Revenue Code of 1986 (26 U.S.C. §§ 174 and 59(e)).

(c) Notwithstanding section 401(3)1(a) of the “Tax Reform Code of 1971,” taxable income, as defined by section 401(3) of the “Tax Reform Code of 1971,” shall include:

(d) Notwithstanding section 401(3)1(a) of the “Tax Reform Code of 1971,” if research and experimental expenditures were included in taxable income in accordance with subsection (c), an additional deduction for research and experimental expenditures shall be allowed from taxable income, as defined by section 401(3) of the “Tax Reform Code of 1971,” until the total amount deductible under section 174A of the Internal Revenue Code of 1986 (26 U.S.C. § 174A) for the tax year has been claimed.  The additional deduction shall be equal to twenty per cent of the qualified research and experimental expenditures allowable under section 174A of the Internal Revenue Code of 1986 (26 U.S.C. § 174A).  In no event shall the total of the additional deductions under this subsection be more than the qualified research and experimental expenditures allowable under section 174A of the Internal Revenue Code of 1986 (26 U.S.C. § 174A).

(e) Notwithstanding section 401(3)1(a) of the “Tax Reform Code of 1971,” taxable income, as defined by section 401(3) of the “Tax Reform Code of 1971,” shall include the amount of any deduction claimed and allowable under section 481 of the Internal Revenue Code of 1986 (26 U.S.C. § 481) which relates to research and experimental expenditures originally made by the taxpayer in tax years beginning after December 31, 2021, and before tax years beginning after December 31, 2024.

(f) Notwithstanding section 401(3)1(a) of the “Tax Reform Code of 1971,” if amounts related to a change in the taxpayer's method of accounting for purposes of section 481 of the Internal Revenue Code of 1986 (26 U.S.C. § 481) were included in taxable income in accordance with subsection (e), an additional deduction shall be allowed from taxable income, as defined by section 401(3) of the “Tax Reform Code of 1971,” until the total amount originally amortizable under section 174 of the Internal Revenue Code of 1986 (26 U.S.C. § 174) for the tax year has been claimed.  The additional deduction shall be equal to twenty per cent of the remaining unamortized qualified research and experimental expenditures originally subject to amortization under section 174 of the Internal Revenue Code of 1986 (26 U.S.C. § 174).  In no event shall the total of the additional deductions under this subsection be more than the remaining unamortized qualified research and experimental expenditures originally allowable under section 174 of the Internal Revenue Code of 1986 (26 U.S.C. § 174).

(g) Notwithstanding section 401(3)1(a) of the “Tax Reform Code of 1971,” taxable income, as defined by section 401(3) of the “Tax Reform Code of 1971,” shall include the amount of the deduction for depreciation of qualified production property claimed and allowable under section 168(n) of the Internal Revenue Code of 1986 (26 U.S.C. § 168(n)).

(h) Notwithstanding section 401(3)1(a) of the “Tax Reform Code of 1971,” if a deduction for depreciation of qualified production property was included in taxable income in accordance with subsection (g), an additional deduction for depreciation of the qualified production property shall be allowed from taxable income, as defined by section 401(3) of the “Tax Reform Code of 1971,” until the total amount included as taxable income under subsection (g) has been claimed.  The additional deduction shall be equal to the depreciation on the qualified production property for the taxable year as determined in accordance with sections 167 and 168 of the Internal Revenue Code of 1986 (26 U.S.C. §§ 167 and 168), except that section 168(n) of the Internal Revenue Code of 1986 (26 U.S.C. § 168(n)) shall not apply.

(i) For qualified production property which is sold or otherwise disposed of during a taxable year by a taxpayer and for which depreciation was included as taxable income under subsection (g), an additional deduction shall be allowed from taxable income, as defined by section 401(3) of the “Tax Reform Code of 1971,” to the extent the amount of depreciation claimed under section 168(n) of the Internal Revenue Code of 1986 (26 U.S.C. § 168(n)) on the qualified production property has not been recovered through the additional deductions provided by subsection (h).