The Pennsylvania Senate Finance Committee advanced two business tax reform bills on Tuesday after new data showed signs of economic growth.
The bills, supported by state Sens. Ryan Aument (R-36), Tracy Pennycuick (R-24), Greg Rothman (R-34) and Judy Ward (R-30), would impact the state’s Corporate Net Income (CNI) tax and regulations regarding Net Operating Loss (NOL), officials said.
Senate Bill 345 sponsored by Aument and Rothman would accelerate the reduction of the CNI tax to 7.99 percent, and then reduce it an additional point every January until it falls to 4.99 percent. Legislators say reducing the CNI leads to better job opportunities, higher workers’ wages and improved communities.
Legislation to reduce the state’s CNI tax was passed last year as part of the state budget. Reductions would occur over a nine-year period, with the first one-point drop from 9.99 percent to 8.99 percent taking effect in January of this year.
New data from the Independent Fiscal Office (IFO) showed the state’s revenue collections from the CNI tax grew in January, February, March and April of this year when compared to the same time frame last year.
“While we applaud the historic change made in last year’s budget, we believe Pennsylvania should not have to wait nearly a decade to experience the full benefits of the lower rate,” the senators said. “All the data we have since we cut the rate in January shows that reducing rates increases revenue for the state and makes Pennsylvania more economically competitive and ensures it is an attractive place to live and work. Passing this bill will improve the economy and help working families much faster. Why should we wait?”
The second bill, Senate Bill 346, sponsored by Rothman, Aument and Pennycuick, will increase the NOL gradually from 40 percent to 80 percent over four years. Legislators say the change would bring the state in line with federal limitations, as well as limitations in other states. Pennsylvania is one of only two states that cap NOLs below the federal limit of 80 percent.
“The current limit puts Pennsylvania at a huge disadvantage compared to nearly every other state in the country, turning away new businesses that might otherwise choose to locate here. For Pennsylvania to compete nationally and attract new businesses, we must address this anti-growth policy,” the senators said.
The bills will next be considered by the full Senate.
The business community came out in support of the two bills. In a May 9 letter from the Pennsylvania Chamber of Business and Industry, as well as local chambers, business groups, and employer associations across the state, businesses urged legislators to support legislation that makes the state more business tax competitive.
“Last session, lawmakers came together in a bipartisan fashion to advance significant tax reform, including reducing the state’s extraordinarily high corporate rate and improvements for small businesses,” the organizations wrote in a letter to Gov. Josh Shapiro and members of the General Assembly. “These measures will make our state more competitive, incentivize investment and job growth and allow for additional economic opportunities … We are in perpetual competition to cultivate and showcase an attractive business climate, and urge your ongoing support for pro-growth tax policy initiatives that will make the Commonwealth more competitive.”
The letter also called for building on small-business tax reforms, such as removing the accelerated sales tax prepayment requirement, providing for full bonus depreciation, and allowing small businesses the ability to carry forward net operating losses as well.
The organizations that signed the letter included the Energy Association of Pennsylvania, Marcellus Shale Coalition, National Federation of Independent Business, Pennsylvania Builders Association, Pennsylvania Manufacturers’ Association, Life Sciences Pennsylvania, and the Pennsylvania Restaurant and Lodging Association, among many others.