On July 8, after years of attempted tax cuts, the Pennsylvania legislature finally adopted a change to Pennsylvania’s corporate net income tax (CNIT) and adopted other provisions targeted at reaching out-of-state companies doing business in the Keystone State. See H.B. 1342. This article will discuss the top three corporate tax takeaways from the new bill.

CNIT Reduction

Pennsylvania has long been criticized for its growth-inhibiting high tax rate of 9.99%. Pennsylvania’s CNIT rate has consistently ranked it at the very top among the states with the highest corporate income tax rates nationwide. The new bill lowers the CNIT rate incrementally, until it bottoms out at 4.99% in 2031. Upon being fully phased-in, Pennsylvania’s CNIT rate will rank among the lowest nationwide. The lower CNIT rate could make it more attractive to businesses looking to relocate, given that all of its neighboring states have significantly higher tax rates. This should also help Philadelphia as it hopes to attract more businesses. Philadelphia has been impacted by its own high business income & receipts tax rate, the effect of which has only been exacerbated by the high CNIT rate.

Economic Nexus