As part of his FY 2013-2014 budget proposal, Governor Corbett proposed several changes to the commonwealth’s business tax structure, including the continued phase out of the capital stock and franchise tax (CSFT) and a 10-year phased-in reduction of the corporate net income tax (CNI).
The budget proposal would continue the phase out of the CSFT, eliminating it totally in January 2014. Pennsylvania is currently the only state in the nation that taxes both business income and business assets. The proposal will also reduce the CNI from 9.99 percent to 6.99 percent over a 10-year period beginning in 2015. Also among the governor’s CNI proposals is one estimated to generate increased revenues of $7 million by changing the sourcing of sales of services to the location of the customer.
The cap on net operating loss carry forward would be raised from $3 million, or 20 percent of income, to $5 million, or 30 percent of income, beginning with an increase from $3 million to $4 million in tax year 2014.
Other tax reforms proposed in the governor’s budget include:
- like-kind exchanges and start-up business deductions, which would permit new businesses to deduct up to $5,000 of start-up costs from taxable income;
- repeal of the corporate loans tax; and
- simplifying the tax code and repealing nuisance taxes.