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House of Representatives
Session of 2021 - 2022 Regular Session


Posted: September 7, 2021 02:01 PM
From: Representative Joshua D. Kail
To: All House members
Subject: Increasing the Corporate Net Loss Deduction Limitation
In the near future, I plan to introduce legislation that will make Pennsylvania more attractive for business growth and investment by aligning the treatment of net losses incurred by corporations with federal law – an invaluable step toward Pennsylvania’s rebound from the economic impacts of the global health pandemic. 
As many of you know, Pennsylvania allows taxpayers who are subject to Corporate Net Income Tax (CNIT) to “carry-forward” a net loss, commonly referred to as an “NOL”, and apply it as a deduction against taxable income in subsequent taxable years. Current law imposes a limitation that the deduction may not offset more than 40% of taxable income for the subsequent taxable year, differing significantly from the federal treatment of NOL’s under which a taxpayer is enabled to apply a net loss as a deduction against up to 80% of taxable income – and up to 100% of taxable income, dependent upon the taxable year in which the net loss was incurred and the taxable year in which the deduction is taken (100% for NOL’s incurred prior to 2018 or incurred in 2018-2020, if taken in those years).

While economic uncertainty abounds as the nation continues to navigate the unprecedented challenges that have arisen due to the global health pandemic, it is critical that the Commonwealth develop and implement policies to make Pennsylvania a favorable place for businesses to locate, invest, and grow. My legislation would help achieve this goal by incrementally increasing the limitation for the net loss deduction by 10% annually until the limitation reaches 80% of taxable income for taxable years beginning after December 31, 2024.

I respectfully ask you to join me as a co-sponsor of this important legislation that will undoubtedly contribute to the long-term economic growth and stability across Pennsylvania.

Introduced as HB1960