For Immediate Release
November 15, 2006

Pennsylvania Amends Taxes Affecting Corporate Net Income, Personal Income, and Capital Stock/Franchise Taxes

Pennsylvania Amends Taxes Affecting Corporate Net Income, Personal Income, and Capital Stock/Franchise Taxes

Pennsylvania Amends Taxes Affecting Corporate Net Income, Personal Income, and Capital Stock/Franchise Taxes

Legislation has been passed that makes changes to the corporate net income tax apportionment formula, increases the net operating loss (“NOL”) cap, and amends the research and development (“R&D”) credit that may be taken against corporate net income, personal income, and capital stock/franchise taxes.

Beginning with taxable years after 2006, a 70% sales factor, 15% property factor, and 15% payroll factor will be used to apportion business income for the PA corporate net income tax. The current formula is 60/20/20.

Also for taxable years beginning after 2006, the NOL cap will be $3,000,000 or 12.5% of taxable income, whichever is greater. Currently, the cap is $2,000,000.

R&D credits awarded after June 30, 2006 will be extended to 2015 for corporate net income, personal income, and capital stock/franchise taxes. The credit was due to expire this year. The cap on the total amount of R&D credits has been increased to $40 million, up from $30 million, in any fiscal year.

Also applicable for credits awarded after June 30, 2006, small businesses are allowed an R&D credit equal to 20% of the excess of their total PA qualified R&D expense for the taxable year over their PA base amount.

If you would like additional information on this topic or have any questions, please contact the taxdesk@thesaltgroup.com

 

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