Dan DeBone: Supporting pro-growth tax reform

In 2022, our state Legislature achieved a significant milestone by successfully passing legislation to reduce Pennsylvania’s corporate net income (CNI) tax rate. This reduction is a remarkable achievement, as it lowered our state’s CNI rate from the highest flat rate in the country, 9.99%, to 8.99% as of Jan. 1, 2023. Furthermore, this new legislation includes automatic, annual .50 percentage point reductions, ultimately aiming to reach a 4.99% rate by 2031. We extend our kudos to state officials for their bipartisan efforts in making this possible.

Nevertheless, there is a growing desire to expedite the reduction of the CNI rate to 7.99%, and to introduce other essential tax code amendments within the recently approved House Bill 1219. These proposed changes have the potential to further enhance Pennsylvania’s competitiveness and support our local businesses.

One noteworthy aspect of HB 1219 is its focus on addressing net operating losses (NOL) for business start-ups. Currently, Pennsylvania is one of only two states that limit NOL deductions below the federal limit of 80% of income. HB 1219 aims to gradually increase the current 40% cap on NOL deductions until it reaches 80% in 2027. This reform is designed to promote future growth, provide stability for businesses as they make long-term investment and hiring decisions, and make our state more attractive to entrepreneurs. By allowing businesses to offset their tax liability for losses incurred in previous years, this reform ensures a fair tax system.

However, we must also acknowledge the concerns surrounding one particular amendment in HB 1219 — combined reporting, which requires a business with locations in other states to combine profits from all subsidiaries into one report. While we understand the need for effective tools to prevent corporate tax avoidance and generate essential revenue, the introduction of combined reporting raises significant concerns. This change could potentially make Pennsylvania less competitive, add complexity for employers, create revenue volatility, favor certain taxpayers over others, and lead to additional litigation and administrative costs.

The Westmoreland County Chamber of Commerce, in collaboration with the Pennsylvania Chamber, has been diligently working with lawmakers from both sides of the aisle to strike a balance between preventing corporate tax avoidance and ensuring a business-friendly environment. Our goal is to enact reforms that generate approximately $300 million annually while maintaining the competitiveness of our state. We believe that this can be achieved without the inclusion of combined reporting.

We urge our business community to closely follow the developments surrounding this legislation and engage with your elected representatives to express your priorities regarding these tax reforms. Your voices matter, and your involvement is crucial as we navigate the potential impacts of these changes on our local business community.

Dan DeBone is president/CEO of the Westmoreland County Chamber of Commerce.