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Pa. House could vote on Delaware loophole bill

By , - Last modified: April 30, 2012 at 10:28 AM

The state House as early as Wednesday could vote on a final proposal aimed at closing the so-called Delaware tax loophole.

House Bill 2150 is on the voting calendar for second consideration Tuesday and third and final consideration Wednesday, according to House Republicans. Earlier this month, the bill cleared the House Finance Committee.

The bill was proposed by Indiana County Republican Rep. Dave Reed. Rep. Eugene DePasquale of York County is the lead Democratic sponsor.

HB 2150 would add an "expense add-back provision" to prevent corporations from reducing or avoiding taxes, beginning in 2013.

It also would:

• Reduce the corporate net income tax to 6.9 percent over a six-year period, beginning in 2014.

• Phase out the cap on carrying forward net operating losses in a subsequent tax year.

• Shift the tax apportionment system to a single-sales factor.

Meanwhile, an opposing loophole bill — HB 1396 — remains in the House Finance Committee.

Luzerne County Democratic Rep. Phyllis Mundy's proposal, which was introduced a year ago, would close the Delaware loophole by adopting combined reporting and lower the corporate net income tax rate to 7.4 percent from 9.99 percent over three years.

Combined reporting means that corporations and their subsidiaries would be required to jointly file one tax report and pay taxes according to the amount of business activity conducted in Pennsylvania.

Democrats, including former Gov. Ed Rendell, have pushed for this approach in the past. Republicans and business leaders opposed it because they felt it would have resulted in higher taxes for many companies.

Pennsylvania would join 23 other states that have enacted legislation to close the loophole, Mundy said. The commonwealth loses an estimated $500 million annually, she said.

More than 70 percent of multistate corporations doing business in Pennsylvania paid nothing in corporate net income taxes in 2007, while another 10 percent paid $1,000 or less, according to the state Department of Revenue.

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Jason Scott

Jason Scott

Jason Scott covers state government, real estate and construction, media and marketing, and Dauphin County. Have a tip or question for him? Email him at Follow him on Twitter, @JScottJournal. Circle Jason Scott on .

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