Legislation Quick Search
03/28/2024 07:42 AM
Pennsylvania House of Representatives
https://www.legis.state.pa.us/cfdocs/Legis/CSM/showMemoPublic.cfm?chamber=H&SPick=20150&cosponId=18376
Share:
Home / House Co-Sponsorship Memoranda

House Co-Sponsorship Memoranda

Subscribe to PaLegis Notifications
NEW!

Subscribe to receive notifications of new Co-Sponsorship Memos circulated

By Member | By Date | Keyword Search


House of Representatives
Session of 2015 - 2016 Regular Session

MEMORANDUM

Posted: May 15, 2015 01:04 PM
From: Representative Eli Evankovich and Rep. Bryan Barbin
To: All House members
Subject: Eliminating the Cap on the Net-Operating-Loss Carry Forward
 
No single tax policy discriminates against cyclical companies than Pennsylvania’s net operating loss (NOL) cap. Pennsylvania’s large manufacturers, especially steel manufacturers who have been crushed by the international recession and sharply rising illegal imports, are particularly impacted by PA’s NOL cap.
Consider the following example, which compares two companies that, over a 2 year period, have $60 million of income in PA for 2014 and 2015. Note that, under current law, the cyclical company pays two times more in CNIT taxes than the non-cyclical company, even though both made the same amount of income during that period.
Taxpayer with Cyclical Income:
2015 2016 Total
PA Taxable Income (Loss) $ (100) $ 160 $ 60
PA NOL Carryforward $ (100)
PA NOL Carryforward Limitation (30%) $ (48)
PA Taxable Income After Carryforward $ 112
PA Tax Rate - Current 9.99%
PA Tax Liability for Company with Cyclical Income $ 11.19 $ 11.99
Effective PA Income Tax Rate for Company with Cyclical Income 18.65%

Taxpayer with Steady Income:
2015 2016 Total
PA Taxable Income (Loss) $ 30 $ 30 $ 60
PA Tax Rate - Current 9.99% 9.99%
PA Tax Liability for Company with Steady Income $ 3.00 $ 3.00 $ 5.99
Effective PA Income Tax Rate for Company with Steady Income 9.99%

Much has been said about the merits of ensuring that companies “pay their fair share” of the CNIT. Regardless of your perspective on that issue, as the example above makes clear, cyclical companies impacted by the NOL cap are paying far more than their fair share.

As a result, and to ensure that Pennsylvania manufacturers are positioned to compete with their out-of-state competitors (none of which face a similar NOL penalty, except for NH), we urge you to join us in
co-sponsoring legislation that will eliminate the NOL cap over a 6 year period, commencing in the next fiscal year
. In FY 2016-17, our proposal would lift the cap to 50 percent of income, up from the current 30 percent cap, and by an additional 10 percent each year until the cap is completely lifted.



Introduced as HB1416