Instructions For Form Pa-20s/pa-65 - Schedule Oc - Other Credits

owner, tax year, tax type and owner’s tax

the commissions paid that reduce the

Passing Through Tax Credit

amount of net proceeds received by

to Entity Owners

identification number. See the Example.

the taxpayer.

Prior to passing tax credits through to

PA DEPARTMENT OF REVENUE

entity owners, some tax credits must

BUREAU OF CORPORATION TAXES

The taxpayer reports the date of the

first be applied to the entity’s corporate

PO BOX 280701

award of the restricted tax credit as the

tax liability, if any, for the year in which

HARRISBURG PA 17128-0701

acquisition date and the date sold as

the tax credit is granted. If the entity

the date the sale was consummated.

has a tax liability for the tax year in

The statement must be signed by an

The gross proceeds the taxpayer re-

which the credit is approved for use the

authorized representative of the entity,

ceives from the sale of the restricted

tax credit must first be applied to that

and should be submitted before owners

tax credit less any commissions paid

tax liability. Review the specific infor-

file their individual tax returns.

are included as the sales price of the

mation for each tax credit to determine

Some tax credit programs provide a

tax credit sold.

if the tax credit must first be applied to

claim form, located on the reverse side

corporate liability.

Purchaser of a Restricted

of the award letter. Credit awardees

If an entity does not use all approved tax

Tax Credit

should use the claim form to indicate

credits, it may elect in writing to pass

A taxpayer who purchases a restricted

the tax accounts to which the tax credit

through all or a portion of the tax credit

should be applied.

tax credit at a cost to him or her of less

to owners, in proportion to the share of

than the full value of the tax credit must

There are two exceptions to the

the entity’s distributive income to which

also report a gain on the sale, exchange

process outlined above for passing

the owner is entitled. In most cases the

or disposition of property for Pennsylva-

through tax credit:

tax credit may be applied up to the full

nia personal income tax purposes.

amount of owners’ tax liabilities, minus

● To pass through an Educational Im-

any other nonrefundable credits that are

The taxpayer purchasing the restricted

provement Tax Credit, the taxpayer

applied first. See the information regard-

tax credit reports the transaction as a

must complete and submit form

ing specific tax credits to review existing

sale of intangible property for Pennsyl-

REV-1123, Educational Improve-

restrictions or limitations.

vania personal income tax purposes PA-

ment Tax Credit Election Form.

20S/PA-65 Schedule D. Unlike the sale

An owner of a pass through entity to

● To pass through a Keystone Inno-

of a restricted tax credit, the purchaser

which a tax credit is transferred must

vation Zone tax credit, visit the

records as his or her cost basis, the full

immediately claim the tax credit in the

Department of Community and

purchase price of the tax credit (com-

tax year in which the transfer is made.

Economic Development’s (DCED)

plete sales price of all such tax credits

The owner may not carry forward, carry

website at

back, obtain a refund of, sell, assign or

purchased plus any commissions paid

call DCED Customer Service at

pass through the tax credit again.

by the purchaser). The taxpayer records

1-800-379-748.

the purchase date as the date acquired

Married couples with joint ownership in

and records the tax year end date (usu-

For general information pertaining to all

pass through entities must be sepa-

ally December 31) for the tax year to

restricted tax credits as well as specific

rately listed on the entities’ pass

which the tax credit is applied as the

details regarding each tax credit indi-

through of credit request in order for

date the restricted tax credit was sold.

vidually – including each tax credit’s

credit to be applied to each individual’s

carry-forward and pass through rules,

tax number.

The sales price of the tax credit is the

applications and guidelines – review the

full value of the tax credit permitted or

Example. Husband and wife Jim and

description in these instructions and

allowed to be applied to the tax return

Jane jointly own a 50 percent interest

Chapter 17 of the Pennsylvania Per-

in a partnership, and their son John

of the taxpayer. By recording only the

sonal Income Tax Guide.

owns the other 50 percent. All income

amount of tax credit allowed or permit-

is distributed according to the owner-

ted as the sales price and the full pur-

TAX CREDITS

ship percentages. The request to pass

chase price of the tax credit as the

through a credit must separately list

basis, restricted tax credits purchased

EMPLOYMENT INCENTIVE

Jim’s and Jane’s tax numbers, each re-

and not able to be used due to any tax

PAYMENTS (EIP) TAX CREDIT

ceiving 25 percent of the credit, and

limitations imposed under the law per-

This tax credit expired Dec. 31, 2009.

John receiving the remaining 50 per-

mitting the use of a purchased tax

Although no new tax credits are being

cent under his tax number. This method

credit require no pro-ration of tax credit

issued, carry forward of unused tax

must be followed even though Jim and

cost and no separate reporting of the

credits is allowed.

Jane receive a separate RK-1 or NRK-1

loss on unused tax credits.

from the partnership.

The Pennsylvania Department of Labor

A taxpayer who sells tax credits and/or

and Industry (L&I) administers the

To pass through tax credits to owners,

offsets their tax liability with purchased

award of this tax credit. Eligibility is

an entity must submit a request on en-

or assigned tax credits, does not need

based on the hiring of eligible public

tity letterhead to the Department of Rev-

to send documentation of sale or as-

welfare recipients and/or individuals re-

enue at the following address listing the

signment with their PA-20S/PA-65 In-

ceiving or who have received rehabili-

total amount of credit to be distributed

formation

Return.

However,

the

tation

services

through

state

to the entity owner(s), the name and ad-

department reserves the right to re-

dress of each owner, amount of tax

rehabilitation service program or the

quest this documentation if needed.

credit to be passed through to each

Veterans’ Administration. The taxpayer

Instructions For Form Pa-20s/pa-65 - Schedule Oc - Other Credits - 2013 Page 2

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