| abstract | - Nearly $145 million in tax relief will be provided over the next two years by increasing the net operating loss carry-forward cap and changing the formula used to calculate Pennsylvania's Corporate Net Income (CNI) tax. An additional $20 million in tax relief will be provided during the same time period through enhancements to the current research and development tax credit. The net operating loss carry-forward allows companies to use past business losses to offset future tax liabilities. Under Turzai's bill, the amount of losses a company can carry forward will increase from $2 million to the greater of $3 million or 12.5 percent of the company's taxable income. This means a company showing $100 million profit can use prior losses of up to $12.5 million to offset that profit in a taxable year. Net operating loss carry-forward provisions are important to corporate employers that experience cyclical downturns, like those in manufacturing, and to tech companies, which almost always experience losses in their early years. Turzai's bill also moves Pennsylvania closer to a single-sales factor for computing the state CNI tax. The current CNI formula taxes businesses on three factors: in-state payroll at 20 percent, in-state property assets at 20 percent, and in-state sales at 60 percent. Taxing property and payroll penalizes companies that have located in Pennsylvania. Under Turzai's bill, the sales factor will increase to 70 percent and the other two factors will be lowered to 15 percent each beginning Jan. 1. Finally, the bill increases the maximum amount of available research and development tax credits from $30 million to $40 million. Many of the tax relief measures in this bill were first introduced in the Keystone Manufacturing Initiative (KMI). The KMI is a package of legislation promoting job growth by reducing the tax and regulatory burden on Pennsylvania employers. "This legislation is a good first step toward making Pennsylvania more competitive for employers, thereby promoting job growth," Turzai said. "We need to do more, but we're heading in the right direction.
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