PRINTER'S NO. 362
THE GENERAL ASSEMBLY OF PENNSYLVANIA
SENATE BILL
No.
368
Session of
2021
INTRODUCED BY BARTOLOTTA, J. WARD, ARGALL, PHILLIPS-HILL,
MENSCH, AUMENT, MASTRIANO, REGAN AND STEFANO, MARCH 10, 2021
REFERRED TO FINANCE, MARCH 10, 2021
AN ACT
Amending the act of March 4, 1971 (P.L.6, No.2), entitled "An
act relating to tax reform and State taxation by codifying
and enumerating certain subjects of taxation and imposing
taxes thereon; providing procedures for the payment,
collection, administration and enforcement thereof; providing
for tax credits in certain cases; conferring powers and
imposing duties upon the Department of Revenue, certain
employers, fiduciaries, individuals, persons, corporations
and other entities; prescribing crimes, offenses and
penalties," in personal income tax, providing for small
businesses.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. The act of March 4, 1971 (P.L.6, No.2), known as
the Tax Reform Code of 1971, is amended by adding a section to
read:
Section 304.3. Small Businesses.--(a) There shall be
allowed as a deduction from income for the taxable year an
amount equal to the net operating loss of a small business.
(b) In the case of any net operating loss arising in a
taxable year beginning after December 31, 2017, and before
January 1, 2022, the following shall apply:
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(1) The loss shall be a net operating loss carryback to each
of the five taxable years preceding the taxable year of such
loss.
(2) Any unused amounts shall be carried forward to each
succeeding taxable year.
(c) The entire amount of the net operating loss for any
taxable year shall be carried to the earliest of the taxable
years to which, by reason of subsection (b), the loss may be
carried. The portion of the loss which shall be carried to each
of the other taxable years shall be the excess, if any, of the
amount of the loss over the sum of the taxable income for each
of the prior taxable years to which the loss may be carried. A
net loss for a taxable year may only be carried over from 2021
and thereafter for twenty taxable years. The following shall
apply:
(1) The portion of the loss which shall be carried to each
of the other taxable years shall be the excess, if any, of the
amount of the loss over the sum of the taxable income for each
of the prior taxable years to which the loss may be carried.
(2) Upon the cessation of operation of a small business, any
carryover loss may be carried forward by the taxpayer against
subsequent taxable income for twenty taxable years.
(d) The amount deductible on account of losses from sales or
exchanges of assets used in a trade or business shall not exceed
the amount includable on account of gains from sales or
exchanges of assets used in trade or business.
(e) The deductions allowable by this subsection which are
not attributable to a taxpayer's trade or business shall be
allowed only to the extent of the amount of the income not
derived from the trade or business. For purposes of this
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subsection, any gain or loss from the sale or other
disposition of:
(1) property, used in the trade or business, of a character
which is subject to the allowance for depreciation provided in
section 167 of the Internal Revenue Code of 1986 (Public Law 99-
514, 26 U.S.C. ยง 167) ; or
(2) real property, used in the trade or business, shall be
treated as attributable to the trade or business.
(f) As used in this section, the following words and phrases
shall have the meanings given to them in this subsection unless
the context clearly indicates otherwise:
" Net gain" means the sum of the gain for such year from each
class of compensation, net profits, gains, dividends, interest
or income enumerated under section 303.
" Net loss" means the sum of the loss for such year from each
class of compensation, net profits, gains, dividends, interest
or income enumerated under this section.
" Net operating loss" means the excess of the sum of the net
loss over the sum of the net gain for such year.
" Net operating loss carryback" means a net operating loss
that applies to a prior year's tax return.
" Net operating loss carryover" means the net operating loss
properly reported on an original or amended tax return that
applies the current year's net operating loss to future years'
net income.
" Small business" means an interest in an operating trade or
business entity, the principal purpose of which is not the
management of investments or income producing assets owned by
the entity which has employed an average of less than fifty (50)
full-time equivalent employes, or a net book value of assets
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totaling less than five million dollars ($5,000,000) as of
December 31 of the taxable year in which the net operating loss
arose, and which has less than ten proprietors, partners or
shareholders.
" Taxable income" means a taxpayer's net income minus the net
operating loss deduction for the taxable year.
Section 2. This act shall take effect immediately.
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