Monday, February 8, 2016

Pa. tax reform does little for business: report

A revenue bill, not a jobs bill

Pa. tax reform does little for business: report


Pennsylvania's newly-approved business tax reform law (read H-451/S-52 here) includes a few tax breaks, but mostly seems designed to raise more revenue for state government, not make the slow-growing state more attractive to employers, according to this report by tax lawyers at Philadelphia corporate law firm Ballard Spahr.

Among other reforms, the state:
- Extended the Capital Stock Franchise Tax, which was supposed to end next year, to at least 2015
- Extended Philadelphia's 1% sales tax surcharge, which was supposed to end this year, to at least 2017
- Tightened the "Delaware Loophole" that used to make it easy for companies like Comcast to avoid Pennsylvania income taxes by charging their subsidiaries franchise or intellectual-property fees through Delaware investment subsidiaries
- Extended Philadelphia's realty transfer tax to include more buyers and sellers
- Made it tougher for partnerships and S-corporations to avoid state taxes through payments to related businesses
- Eliminated state credit for foreign taxes
- Extended the bank share tax to cover more financial companies
- Ended a call center tax credit

It also:
- Ended the state inheritance tax on small businesses when ownership is transferred between members of a family
- Added a new tax deduction for start-up expenses
- Added tax deductons for "intangible" oil and gas drilling and development expenses
- Added a tax exemption for retail sale or rental of aircrafts and aircraft part services

Past efforts to "close the Delaware loophole" were linked to proposals to cut Pennsylvania's top corporate tax rate of nearly 10%, and with schemes to consolidate tax liabilities among related companies. But neither of those reforms passed; which means Pennsylvania has now made it tougher for businesses to discount losses at some operations from gains at others: "It's as if (the state) is saying, 'Heads I win, tails you lose,'" says Wendi Kotzen, tax partner at Ballard.

An end to family small-business inheritance taxes is welcome; but the survival of Pennsylvania's unusual capital-stock tax makes the state an outlier, she added. Compared to other states, "costs in Pennsylvania will be higher." 

Business taxpayers would prefer lower rates and fewer exemptions -- "some kind of wholesale reform that is both fair to taxpayers and raises money sufficient to operate the Commonwealth," Kotzen added. But that would require, among other things, improved state computer systems -- which is a difficult thing to get through the cash-strapped General Assembly, she concluded.

We encourage respectful comments but reserve the right to delete anything that doesn't contribute to an engaging dialogue.
Help us moderate this thread by flagging comments that violate our guidelines.

Comment policy: comments are intended to be civil, friendly conversations. Please treat other participants with respect and in a way that you would want to be treated. You are responsible for what you say. And please, stay on topic. If you see an objectionable post, please report it to us using the "Report Abuse" option.

Please note that comments are monitored by staff. We reserve the right at all times to remove any information or materials that are unlawful, threatening, abusive, libelous, defamatory, obscene, vulgar, pornographic, profane, indecent or otherwise objectionable. Personal attacks, especially on other participants, are not permitted. We reserve the right to permanently block any user who violates these terms and conditions.

Additionally comments that are long, have multiple paragraph breaks, include code, or include hyperlinks may not be posted.

Read 0 comments
comments powered by Disqus
About this blog

PhillyDeals posts interviews, drafts and updates that Joseph N. DiStefano writes alongside his Sunday and Monday columns and ongoing articles about Philadelphia-area business.

DiStefano studied economics, history and a little engineering at Penn. He taught writing and research at St. Joe’s. He has written for the Inquirer since 1989, except when he left a few times to work at Bloomberg and elsewhere. He wrote the book Comcasted, and raised six kids with his wife, who is a saint.

Reach Joseph N. at, 215.854.5194, @PhillyJoeD. Read his blog posts at and his Inquirer columns at Bloomberg posts his items at NH BLG_PHILLYDEAL.

Reach Joseph N. at or 215 854 5194.

Joseph N. DiStefano
Also on
letter icon Newsletter