Feb 13, 2017
From KPMG TaxWatch
On February 7, 2017, Pennsylvania Governor Wolf related his 2017-2018 Executive Budget. The budget includes an array of tax changes aimed at business taxpayers. On the corporate net income tax side, one of the proposed changes would address the ongoing litigation over the constitutionality of Pennsylvania’s flat dollar cap on NOLs. Recall, in the Nextel case, the commonwealth court held that Pennsylvania’s flat dollar NOL cap violated the uniformity clause of the Pennsylvania Constitution. In determining the appropriate remedy, the court allowed the taxpayer to apply an uncapped NOL for the closed tax year at issue.
The Governor’s budget would adopt a uniform NOL cap allowing the NOL to offset 30 percent of taxable income for 2018 and beyond. In addition, he proposes to adopt combined reporting (Pennsylvania is currently a separate filing state) and drop the current 9.99 percent corporate net income tax rate incrementally to 6.49 percent by 2022. On the sales and use tax side, the Governor proposes taxing specific services, such as custom computer programming, design and data processing, commercial storage, aircraft sales, use and repair, and airline catering. Finally, the budget would adopt a 6.5 percent severance tax and expand the insurance premiums tax base. Tax credits would also be reduced by $100 million. This would be accomplished by converting existing incentives into a block grant to focus on those credits that have demonstrated the greatest return in new business investment, educational access, and community development. Please contact Howard Sklaroff at 267-256-2891 with questions.
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The following information is not intended to be "written advice concerning one or more federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.
The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.