Seeking to expand semiconductor and technology manufacturing, along with biomedical manufacturing and research, Pennsylvania lawmakers have advanced legislation that would make state tax credits easier to attain. 
House Bill 500 would allow previously approved tax credits to be tapped for projects that invest at least $100 million and create at least 100 jobs. Those thresholds are lower than what’s currently required.
The legislation passed the state House on May 14 and is pending in the state Senate.
Don Cunningham, President & CEO of Lehigh Valley Economic Development Corporation (LVEDC), testified in support of the legislation at a House Finance Committee hearing on May 1.
The changes have been a legislative priority of LVEDC for the last three years, with LVEDC working closely with Lehigh Valley Rep. Steve Samuelson, who is Chair of the House Finance Committee.
“We're trying to attract development to make Pennsylvania a leader in economic development,” Samuelson said at the committee hearing.
The Lehigh Valley has a rich legacy of technological innovation, and semiconductor, technology, and life sciences companies are being targeted for growth by LVEDC and its partners. Recent awards to two Lehigh Valley tech companies under the federal CHIPS and Science Act have accelerated investment locally.
“Our coalition, as probably the leading area of Pennsylvania with an existing cluster of semiconductor companies, we strongly support the language change to make the semiconductor tax credit portion of the act more flexible and scaled down to incentivize smaller projects,” Cunningham testified.
He highlighted Lehigh Valley’s legacy of technological innovation, starting with the first mass production of transistors at Western Electric in Allentown in 1951. The legacy continues today with about 30 companies, including Intel, Broadcom, Infinera (now part of Nokia), and Coherent producing technology relied on by Meta, AWS, Netflix, and the U.S. Department of Defense.
“Lehigh Valley was actually the Silicon Valley before there was a Silicon Valley, and it remains a growing part of our economy, including early stage companies like Aayuna and iDeal Semiconductor,” Cunningham said.
In January, Coherent reached a tentative agreement for up to $79 million in CHIPS funding. The expansion would create 320 new manufacturing jobs in Palmer Township and could more than double the output of epitaxial wafers per year.
Also in January, Infinera finalized a $93 million CHIPS award for construction of two new facilities – an advanced testing and packaging facility in Bethlehem and a new fab in California. Combined, they are expected to create 500 manufacturing jobs and increase Infinera’s domestic manufacturing capacity by an estimated factor of 10.
The tax credits for semiconductor and biomed manufacturers were approved under legislation in 2022 that authorized $10 million a year for five years, with the goal of attracting large manufacturing operations. The legislation requires investment of $200 million and the creation of 800 jobs to qualify.
The funding has not been tapped and lawmakers, including Rep. Samuelson, are rethinking those requirements. They say the criteria should be loosened, to make more companies and projects eligible, including early-stage companies.
The bill would set aside $2 million for early-stage businesses, those that have less than $10 million in revenue and have invested at least $3 million in research and development over the past three years. The early-stage semiconductor tax credit is an idea proposed and championed by LVEDC.
Projects would qualify for tax credits at a rate of 2.5% of investment.
The CHIPS and Science Act of 2022 – with its focus on reshoring critical semiconductor manufacturing to the United States – has spurred interest and accelerated investment in this sector of the U.S. economy, including in the Lehigh Valley.
House Bill 500 was introduced by Rep. John Inglis III. It is a broad bill, with the semiconductor and biomedical manufacturing tax credits only one part. The legislation is a central piece of Gov. Josh Shapiro’s “Lightning Plan” to create energy jobs, attract investment in power plants and energy infrastructure, and reduce electricity bills.