OUR THOUGHTS ON:

Pennsylvania's Proposed Budget for Fiscal Year 2010-2011

State and Local Tax

By Jack Stewart

This week Pennsylvania Governor Ed Rendell released his proposed budget for fiscal year 2010-2011. The proposed budget would include the following changes to Pennsylvania’s tax structure:

  • A decrease in the state sales tax rate from 6% to 4%.
  • The elimination of 74 sales tax exemptions, including services such as professional (legal, accounting, engineering), consulting, computer, transportation and repairs to real property.
  • The elimination of the vendor sales tax discount for timely remitted sales tax returns.
  • The creation of a severance tax on natural gas drilling of 5% of value plus 4.7 cents per 1,000 cubic feet of gas produced.
  • A mandatory combined reporting requirement for corporate income tax.
  • A reduction of the corporate net income tax rate from 9.99% to 8.99%.
  • The elimination of the cap on net operating loss carry-forwards. Currently, the cap is the greater of 20% of the taxable income or $3 million.
  • A shift in the sales factor from 90% to a single sales factor of 100%.

The proposed changes are designed to generate additional tax revenues to offset future budget gaps resulting from expiring federal stimulus funds and Pennsylvania’s increasing pension contribution cost.

Schneider Downs provides accounting, tax, wealth management and business advisory services through innovative thought leaders who deliver the expertise to meet the individual needs of each client. Our offices are located in Pittsburgh, PA, and Columbus, OH.

This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax-related matter.

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