State Rep. Martina White (R-Philadelphia County) recently sent a memorandum to House members seeking co-sponsors for proposed legislation that would extend the ability of businesses operating in Philadelphia to carry-forward Net Operating Losses.
Net Operating Losses are when a company’s allowable deductions exceed its taxable income within a tax period. Losses can be carried forward to offset taxable income in future years through an Internal Revenue Service tax provision.
The tax provision provides a form of tax relief when a company loses money during a tax period. It is mainly intended for companies whose profits are cyclical and not in line with a standard tax year.
The proposed legislation would amend the First Class City Business Tax Reform Act and give necessary statutory authorization for Philadelphia City Council’s Bill No. 180909 to go into effect.
Current law authorizes the city to permit businesses to carry-forward net operating losses against their local Business Income and Receipts Tax for three years.
Bill No. 180909, passed in December, extends this ability to 20 years but requires the approval of the state’s General Assembly.
The statewide treatment of net operating losses also is 20 years.
White plans to introduce the bill soon.