PA One Step Closer to Corporate Tax Rate Reduction
Pennsylvania currently assesses a 9.99% tax rate on corporate net income (CNI) of C-corporations, the 2 nd highest state corporate tax rate in the country. (New Jersey is the only other state assessing at a higher rate – 11.5%). Last week, amid budget discussions, the Pennsylvania Senate passed two bills to decrease Pennsylvania’s CNI tax rate over the next several years.
Senate Bill 771, sponsored by Senator Ryan Aument (R- Lancaster), would gradually reduce the PA CNI tax from its current rate of 9.99%, to 8.99% in 2022, 7.99% in 2023 and 6.99% in 2024. Then, if certain revenue projections are met or exceeded for 2024, the rate could further drop to 5.99% in 2025.
Senate Bill 447, sponsored by Senator Michele Brooks (R-Mercer), would reduce the CNI tax from its current rate by a half a percentage point every year over the next six years until it reaches 6.99%.
Supporters of reducing the CNI tax believe a rate cut would attract more businesses, create jobs and raise wages in Pennsylvania as well as increase real estate values. Since corporate net income is taxed twice, once as corporate net income and again as individual income once profits are distributed as dividends to shareholders, the burden of these taxes falls on corporations, shareholders, employees, and consumers alike.
Both bills, which passed the Senate by a 31-19 count, now go to the Pennsylvania House for consideration. Governor Tom Wolf has supported proposals to reduce the CNI but has not indicated whether he would sign either bill should it come to his desk.
At Louis Plung & Company, we will keep you updated on the latest developments. You can also reach out to us at [email protected].