Legislator to reintroduce bill to fix Delaware loophole
State Rep. Dave Reed, R-Indiana County, is planning to reintroduce a bill from last session that could close the so-called Delaware loophole and reduce Pennsylvania's corporate net income tax to 6.99 percent from 9.99 percent over six years.
A co-sponsorship memorandum was circulated last week.
Last year, Reed was the lead sponsor of House Bill 2150, which passed the House. The proposal called for the implementation of an “expense add-back provision” to close the loophole, which allows businesses headquartered in other states to avoid paying Pennsylvania’s corporate net income tax on their commonwealth operations.
“This would require multistate corporations operating in Pennsylvania to ‘add back’ specific transactions to their Pennsylvania taxable income to ensure they are not being made solely for the purpose of reducing instate tax liabilities,” Reed says in the memo. “Similar expense add-back measures have already been implemented in 23 other states.”
Democrats largely opposed the Reed plan last session. They were calling for a Delaware loophole fix that would adopt combined reporting.
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.