Governor, Senate shouldn't stall on depreciation bill: Our view
The state House made the right move last week in passing legislation to reverse an administrative decision that is limiting the ability of Pennsylvania businesses to take full advantage of federal tax reform.
The reform, signed into law last year, included a provision allowing businesses to deduct 100 percent depreciation for capital expenditures in the year they are made. Soon after, the Pennsylvania Department of Revenue determined that the deduction would need to be added back for purposes of state taxation. Businesses would not be able to take the deduction on their state returns until the equipment was sold or disposed of, which could be years down the road.
At the time, the move seemed like an over-reaction, sending a signal to businesses nationwide that Pennsylvania isn’t friendly to businesses. Time hasn’t weakened our view. Business and manufacturing trade groups have since made their concerns known, leading to the legislation that the House approved in a bipartisan vote of 183 to 4.
The measure has a long way to go before it gets to the desk of Gov. Tom Wolf, but when it does, we hope he signs it.
Wolf is sure to hear arguments in favor of a veto, should the legislation pass the Senate. Indeed, the revenue department’s decision was driven in part by budgetary concerns over lost tax revenue.
But the state had been allowing the 100 percent deduction since 2011, so surely officials have found ways to make up the difference. And we are sure they can continue to find more.
The governor also will hear arguments that any action on the depreciation issue should not be taken in a vacuum but should be considered in the larger context of the state budget.
Over the last few years, the state budget process has not been known to deliver timely results, to say the least. Businesses are making decisions now about what to buy and where to invest, so the sooner they know that state tax rules are working in their favor, the better. We encourage the state Senate to act soon, and for the governor to follow.