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03/07/2021 10:53 AM
Pennsylvania State Senate
https://www.legis.state.pa.us/cfdocs/Legis/CSM/showMemoPublic.cfm?chamber=S&SPick=20210&cosponId=33914
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Senate of Pennsylvania
Session of 2021 - 2022 Regular Session

MEMORANDUM

Posted: January 5, 2021 02:18 PM
From: Senator Scott E. Hutchinson and Sen. John DiSanto, Sen. Judy Ward
To: All Senate members
Subject: Reintroduction of Small Business Reform Package
 
Shortly, we plan to reintroduce Senate Bills 201 (DiSanto), 202 (J. Ward), and 203 (Hutchinson) to help small businesses:
  • SB 201: like kind exchanges (DiSanto)
  • SB 202: Net Operating Loss (Judy Ward)
  • SB 203: 179 expense deduction (Hutchinson)
We believe a key to improving our economy is the success of small businesses that create 65% of Pennsylvania jobs. Removing unfair tax obstacles for small businesses allows them to compete effectively, which helps grow more jobs for current and future generations.



Document #1

Description: This legislation, relating to like-kind exchanges, would mirror Pennsylvania law to federal, removing a disadvantage Pennsylvania small businesses face when competing with those in other states.
 
Under Federal tax law, a “like-kind” exchange under Internal Revenue Code Section 1031 allows for tax-deferral when property is exchanged for similar property.  This long-standing Federal provision facilitates efficient investment in the job-creating assets businesses need to remain competitive.  Every state but Pennsylvania provides for a similar deferral on the state level (current Pennsylvania tax law contains no such provision).
 
If you have any questions regarding this piece of legislation, please contact Jonathan Humma in Senator DiSanto’s office at 717-787-6801 or jhumma@pasen.gov.

 
 

Document #2

Description: This legislation, relating to Net Operating Loss deductions, would allow a small business to use the Net Operating Loss deduction.
 
Since small businesses don’t have access to the capital larger companies have, their ability to use such tax strategies helps them have greater control over their financial positions.  For example, if an owner sells some personal items to help the business make payroll, that owner can take the business loss against his or her tax bill created by selling the personal items.
 
The Tax Reform Code of 1971 allows corporate taxpayers to deduct Pennsylvania losses from one year from Pennsylvania Income in subsequent years.  However, there have been several changes in the carry forward period for Net Operating Losses and limitations on the amount of Net Operating Loss that can be used in a given tax period.
  
If you have any questions regarding this piece of legislation, please contact Eric Pauley in Senator Ward’s office at 787-5490 or epauley@pasen.gov.
 

Document #3

Description: This legislation, relating 179 expense deductions, would bring PA’s 179 tax law more in line with the Federal Internal Revenue Code.  
 
As a result of the Tax Cuts and Jobs Act, the Federal limit for Section 179 expenses was raised to $1,000,000 annually from the $500,000 it had been preciously.  However, for personal income tax purposes (S Corporations, partnerships, and individuals), Pennsylvania law limits the amount of Section 179 deduction to $25,000.
 
This has created an inequity for small businesses in Pennsylvania.  Pennsylvania C corporations are allowed a 179 deduction that small businesses are not.
 
This increase in the deduction is not a tax credit, but simply allows a tax deduction earlier in the useful life of depreciable assets.  The proposed increase in limits is an incentive to encourage businesses to buy equipment and to invest, which promotes economic development in Pennsylvania.
 
If you have any questions regarding this piece of legislation, please contact Nathan Akers in my office at 787-9684 or nakers@pasen.gov.
 
Please join us in supporting these important pieces of legislation.