The Keystone Innovation Zone provides tax credits to qualifying companies

Businesses operating in Central Pennsylvania can take advantage of the Keystone Innovation Zone (KIZ) tax credit program to support their growth. Through this program, businesses can either offset their tax burden or sell their tax credits to increase their cash flow. Companies across the region participate in KIZ to reinvest in themselves and expand their operations.

“We’ve been using it for years,” says Brian Krow, Founder & CEO of Krow Media. “It’s one of the best programs we’ve been a part of and has helped us grow year-over-year.”

Krow admits that learning about the tax system isn’t always the best part of being a business owner, but the benefits of KIZ are worth it. If your business is ready to grow, consider participating in the KIZ tax credit program. 

KIZ is Designed to Support Entrepreneurs

KIZ helps for-profit businesses that are younger than eight years old grow within Pennsylvania. It creates an incentive for business owners to stay in their communities and eventually become job creators.

“Many entrepreneurs are college students or recent graduates,” says Tara Santore, Program Manager for the Pennsylvania Department of Community and Economic Development. “KIZ gives them a reason to stay in the region and put down roots here.”

Eligible businesses must fall within the designated categories created by the State of Pennsylvania, which include:

• Advanced Manufacturing/Diversified Manufacturing (AM/DM)
• Energy
• Robotics and technology
• Life sciences

Santore explains that companies need to be developing their own intellectual property to qualify for KIZ, but that doesn’t mean they need to be patenting products. She uses the example of a brewery developing a special process to make its beer potentially qualifying for KIZ because they are creating products in a unique way.

One of the most important eligibility requirements for this program is that the business must operate within the geographic boundaries of KIZ for at least two years to qualify. They cannot set up a remote office in the KIZ or move into the region and immediately apply. The goal is for the company to have a tangible presence in the region.

Santore explains that companies applying for KIZ tax credits should have their Employer Identification Number (EIN), which lists their company’s “birthday” or incorporation date. They can also demonstrate their presence in KIZ through the past two years of tax returns.     

Krow Used KIZ to Invest in Equipment

Krow first encountered KIZ while participating in the startup incubator program at Bucknell University. His experience with the program has been so positive that Krow frequently meets with other business owners to discuss it and has been a leader at Bucknell in navigating these tax credits.

“At one point, Bucknell called us the poster child for KIZ,” he says. “I was skeptical at the beginning, but KIZ has helped us grow our business for six years now.”

Here is how the process works: businesses claim up to $100,000 in tax credits based on their gross sales. They can either enjoy a lower tax burden or sell the tax credits for an infusion of cash. Each year, Krow sold his tax credits and used the money to invest in his business. Specifically, he bought cameras, video equipment, and other technology to keep his digital marketing business modern.

“You have to stay on top of trends in the tech industry,” says Krow. “There wasn’t a benefit to us to sit on our tax credits. We sold them to stay ahead of the curve so our business could grow.”

Krow met with his local KIZ coordinator, who visited his office and gave him a certificate of eligibility. His presence in Central Pennsylvania, along with his tax returns and proof of revenue, made applying for the tax credits easier. 

KIZ Creates a Hub for Entrepreneurs

The goal of KIZ is to help new companies stabilize and grow. Nationally, 18% of businesses fail in their first year and 50% fail after five years. By investing in entrepreneurs, the Commonwealth of Pennsylvania can increase the chances that new owners succeed and expand their companies into thriving enterprises.  

“Companies that qualify for these tax credits get to work alongside other entrepreneurs facing the same issues,” says Santore.

DRIVE also fosters entrepreneurial growth by managing the BizHub, an office building with over a dozen tenants. It shares business resources and helps companies find grants, financing options, and programs like KIZ.

“We do everything we can to support entrepreneurs in Central Pennsylvania,” says Jennifer Wakeman, Executive Director of DRIVE. “KIZ is just one program to increase the cash flow of new companies so they can invest in their futures.”

KIZ supports entrepreneurs and also keeps them in Central Pennsylvania. Companies are incentivized to stay in the region, further growing the local economy. 

DRIVE Works With Entrepreneurs to Understand KIZ   

Many small business owners dislike navigating the tax system. One survey by the Public Private Strategies Institute found that 37% of business owners feel anxiety and confusion when paying their taxes. Even though 76% of the 90,000 entrepreneurs surveyed had a college degree, most weren’t taught how to prepare taxes in school.

This is where the team at DRIVE comes in. Wakeman and her staff help business owners learn how to navigate KIZ and get the most from the program.

“Tax credits tend to throw people off,” says Krow. “But the process for us has been amazing. Working with Jennifer at DRIVE and meeting with people at the state level made it easier to understand and apply the KIZ program to our organization.”

The Commonwealth of Pennsylvania has a pool of $15 million in tax credits available for KIZ companies, so there is plenty of space for businesses in Central Pennsylvania to participate. 

Discuss KIZ Tax Credits With DRIVE

Central Pennsylvania entrepreneurs have a trusted partner that can make it easier to participate in KIZ. Use this map to discover if your business falls in an Innovation Zone and then reach out to the DRIVE team to start the certification process. This could be a great year to get started with the KIZ program.

Contact us today and let’s talk about where you want your business to grow.