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04/23/2024 01:25 AM
Pennsylvania House of Representatives
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House of Representatives
Session of 2021 - 2022 Regular Session


Posted: April 7, 2021 09:54 AM
From: Representative Mike Jones
To: All House members
Subject: Elimination of Net Loss Deduction Limitation
In the near future, I plan to introduce legislation that will remove the limitation on the amount that a taxpayer may deduct as a result of incurring a net operating loss from a previous taxable year.
In general terms, a net loss (commonly referred to as a “Net Operating Loss” or “NOL”) occurs when the expenses of a taxpayer exceed the total revenue that is generated from the operations of their business venture over a taxable year. Under current Pennsylvania law, taxpayers subject to our Corporate Net Income Tax (“CNIT”), the rate of which trails only Iowa (12%) and New Jersey (10.5%), may carryover over the full amount of a loss suffered in a taxable year and apply an amount of the loss as a deduction against the taxable income that is generated in an ensuring taxable year. However, the amount that may be applied as a deduction is limited to 40% of the taxpayer’s taxable income, a limitation that only one other state in the country (New Hampshire), imposes.  Similarly, there is benefit in aligning our state tax law with federal law, which also allows the deduction to be applied against 100% of taxable income.
To remove this current competitive disadvantage and help foster a more friendly, welcoming environment for businesses to relocate to and operate within, my legislation will enable taxpayers subject to CNIT to utilize a NOL as a deduction for up to 100% of the taxable income of the taxpayer in the taxable year in which the deduction is applied.
As the Commonwealth looks to rebound from the economic impacts of the global health pandemic, it is imperative that we have the right framework in place to enable economic growth and prosperity. This measure is one of those pillars that will aid the long-term health of our businesses, our hardworking residents and economy.  I respectfully ask you to join me as a co-sponsor of this important legislation.

Introduced as HB1265