Would provide $96 million in relief for FY 2008-09, $246 million by 2010-11
“These bills are intended to provide tax relief across various segments of Pennsylvania’s economy,” Senator Corman said. “I am encouraged that the Governor has expressed his willingness to consider these proposals as part of Pennsylvania’s 2008-09 budget. Therefore, it is imperative that the Senate and House quickly act to put these measures in place for enactment. It is essential that the Commonwealth take steps to protect jobs and provide economic relief for lower-income working Pennsylvanians.”
The bills approved by the Senate include:
Senate Bill 1385, sponsored by Senator Jake Corman (R-34), would expand the cap on the Net Operating Loss provision of the Corporate Net Income Tax to $5 million or 20 percent of taxable income. The NOL cap is currently set at $3 million or 12.5 percent of taxable income. If enacted, the effective date of the increase would be January 1, 2009.
The NOL expansion is projected to save Pennsylvania employers $21.5 million in Fiscal Year 2008-09, $68.4 million in Fiscal Year 2009-10, and $78.2 million in Fiscal Year 2010-11.
Senate Bill 1386, sponsored by Senator Bob Regola (R-39), would increase the eligibility limits for special tax forgiveness for low-income Pennsylvanians. The bill would increase claimant income eligibility limits by a total of $2,000 over three years and the dependent allowance by $500 over the same period.
Currently, a family of four with a combined income of less than $32,000 pays no state income tax. Under SB 1386, families earning $37,000 or less would be exempt. That increase is projected to provide $74.6 million annually in savings to low-income working Pennsylvanians.
Senate Bill 1387, sponsored by Senator Pat Vance (R-31), would double the amount that small businesses may deduct as Section 179 expenses on their income tax filings. Section 179 of the federal Internal Revenue Code provides for the deduction of all or part of the costs of machinery and equipment used for business purposes.
SB 1387 would increase the maximum annual deduction to $50,000, which is projected to provide $6.6 million in savings to Pennsylvania’s small businesses.
Senate Bill 1388, sponsored by Senator John Eichelberger (R-30), would amend Pennsylvania’s Corporate Net Income Tax to expand the sales factor to 85 percent. Most corporations that conduct business in more than one state are required to use a three-factor apportionment in order to apportion their business income among the states where they have activity.
The three-factor apportionment formula consists of property, payroll and sales factors. As things stand, Pennsylvania companies continue to be penalized by increased taxes when they hire new employees or make capital investments in the Commonwealth. Currently, the sales factor accounts for 70 percent of the apportionment formula, and the property and payroll factors each account for 15 percent.
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