Printer-friendly edition

PA Tax Law Changes - Part 2!
~ A Note from the Tax Director at Case | Sabatini ~

On July 12, 2006, Governor Edward G. Rendell signed another state tax bill (House Bill 859). More important aspects of the new law are set forth below. Among other things, the new law affects the Pennsylvania corporate net income tax apportionment formula and increases the net operating loss limit.

Apportionment Formula
For taxable years beginning after 2006, all business income will be apportioned for Pennsylvania corporate net income tax purposes by using a formula with a 70% sales factor, 15% property factor, and 15% payroll factor. The current formula has a 60% sales factor, 20% property factor, and 20% payroll factor.

NOL Cap Increase
For taxable years beginning after 2006, the NOL cap will be $3 million or 12.5% of taxable income, whichever is greater. The NOL cap is currently $2 million.

Research and Development Credit
Applicable for credits awarded after June 30, 2006, the research and development credit against corporate net income tax, personal income tax, and capital stock/franchise tax is extended to 2015. The credit was previously scheduled to expire in 2006. The cap on the total amount of research and development credits is increased from $30 million to $40 million in any fiscal year, and $8 million of that total is allocated exclusively for small businesses. Also applicable for credits awarded after June 30, 2006, a small business is allowed a research and development credit equal to 20% of the excess of the taxpayer's total Pennsylvania qualified research and development expense for the taxable year over the taxpayer's Pennsylvania base amount.

(See also our story on last week's Senate Bill 300.)

For additional guidance, or if you would like to discuss how this will affect your tax planning, please contact our firm at (412) 881-4411.  If you do not have a contact at Case | Sabatini, simply ask for Jim Dee and he'll make sure to put you in touch with the CPA whose background most closely matches your needs.

Visit Case | Sabatini's Home Page.

Disclaimer: To ensure compliance with requirements imposed by the Internal Revenue Service, we inform you that any tax advice contained in this communication (including any attachments) was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding any penalties that may be imposed, or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein.

  
© 2006 Case | Sabatini.