Pennsylvania State Senator Daylin Leach (D-Delaware/Montgomery) of Pennsylvania’s 17th district has submitted to his state’s Senate Finance Committee a bill that would grant tax breaks to Pennsylvania based video game developers who spend 60% of their development costs within the state of Pennsylvania. In the bill (.cfm file), companies who qualify would receive a 25% tax credit for the first four years of a game’s development costs, and 10% for each year thereafter. If the entirety of the tax credit can’t be used one year, it can be carried over to the next taxable year. The credit cannot go in excess of $20m.
The bill is co-sponsored by Senators Christine Tartaglione, Larry Farnese (both D-Philadelphia), Wayne Fontana (D-Allegheny), Jay Costa (D-Allegheny), LeAnna Washington (D-Montgomery/Philadelphia), Jim Ferlo (D-Allegheny/Armstrong/Westmoreland), and Jim Brewster (D-Allegheny/Westmoreland). Though the Democratic Party is the minority party in the Pennsylvania Senate, the state’s Republican Governor, Tom Corbett, has stated support for tax breaks for software developers.
The bill will need to get out of the Senate Finance Committee, and past a full vote by the Senate and the General Assembly before reaching Gov. Corbett’s desk.
(h/t to Gamasutra for some of the facts in this article)
Analysis: This is definitely a good move by the state of Pennsylvania, who are likely looking at what just happened to Kaos and figuring that now would be a good time to either keep their current developers (among them Autodesk owned Wild Pockets and Pittsburgh based Schell Games) or draw in new ones. As the industry has grown, tax breaks have become a contentious point, with massive battles going on in the UK over them, and developers moving jobs and/or entire companies out of states that don’t have tax benefits to places – sometimes, across borders – that do, as we’ve seen with Kaos.
As the industry grows, the business of the industry will continue to grow as well, and companies in all industries need to be given incentive to stay where they are. We’ve seen in other industries that companies will put their workforce in third world countries if they can get away with it; it needs to be made highly undesirable to do that.