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House of Representatives
Session of 2013 - 2014 Regular Session


Posted: January 18, 2013 03:34 PM
From: Representative Dave Reed
To: All House members
Subject: Proposed Legislation - Closing the Delaware Loophole and Reforming Pennsylvania’s Business Tax Structure

In the near future I will reintroduce a measure from last session that offers a comprehensive business tax reform plan that closes the Delaware Loophole and improves the state’s business climate.

Like House Bill 2150 from last session, which passed the House with bipartisan support, the proposal will implement an expense add-back provision to close the Delaware Loophole. This would require multi-state corporations operating in Pennsylvania to “add back” specific transactions to their Pennsylvania taxable income to ensure they are not being made solely for the purpose of reducing in-state tax liabilities. Similar expense add-back measures have already been implemented in 23 other states.

The revenue captured through closing the loophole will be used to support the type of business tax reforms needed to make Pennsylvania more competitive for job creators. Specifically, the bill will reduce the CNI tax to 6.99 percent over six years and phase out the cap on NOLs over nine years.

A report issued last year by the Tax Foundation and KPMG, “Location Matters,” places Pennsylvania 50th – dead last – in state tax costs on businesses. Unfortunately, this report only confirms what many of us already know: Pennsylvania’s business tax burden is hampering our state’s job growth.

This legislation offers a targeted and precise approach to addressing the Delaware Loophole while implementing necessary business tax reforms to help Pennsylvania better compete in today’s economy.

PREVIOUS COSPONSORS: Aument, Baker, Benninghoff, Boback, Caltagirone, Christiana, Clymer, Cutler, Daley P., Davidson, Delozier, Dunbar, Evans, Everett, Fleck, Gergely, Gibbons, Gingrich, Grove, Haluska, Harhart, Harper, Harris C., Helm, Hennessey, Hess, Keller M., Killion, Knowles, Major, Mahoney, Marsico, Micozzie, Millard, Mirabito, Moul, Oberlander, O’Neill, Payne, Petri, Pickett, Quinn, Reese, Rock, Saylor, Simmons, Smith, S., Stephens, Stevenson, Swanger, Tallman, Vereb, and Watson.

Introduced as HB440