PA Tax Legislation Introduced in Harrisburg to Help Small Businesses with Losses 

Date: September 02, 2020

State office is supporting this bill

On September 1, Governor Wolf signed the second extension of his 90-day disaster declaration related to the COVID-19 crisis. As small businesses continue to struggle with closures and lost revenue, NFIB is supporting an out-of-the-box solution that could help these businesses now and in future tax years. SB SB 1278, sponsored by Senators Camera Bartolotta (R-46) and Judy Ward (R-30) would update state tax laws to broaden the ability of small business owners to get tax benefits from their business losses.

First, the bill would permit small businesses to take net losses against other sources of income. For example, if a business owner manages revenue losses by selling personal property to make payroll, she would be able to deduct her business loss against the tax bill from selling the personal property.

The bill would also permit small businesses to take Net Operating Losses against income in future tax years up to 20 years, in line with the deadline for corporate taxpayers. This change would give small businesses the option to benefit from the same tax strategies as their larger competitors. (Note that another bill currently under consideration, HB 2420, in the state House would permit corporate taxpayers to carry over losses indefinitely. Should this bill be enacted, NFIB would request SB 1278 be amended to remove the 20-year time limit for small businesses as well.)

Third, the bill would temporarily allow small businesses to “carryback” losses to previous tax years. Businesses that suffered net operating losses in 2018, 2019, or 2020 could apply for a tentative tax refund if they were profitable in any of the five years prior. This provision is modeled after the federal CARES Act, which temporarily reintroduced net operating loss carrybacks at the federal level.

NFIB supports moving this legislation forward as an additional means to help suffering small businesses manage and recover from the current crisis. An amendment to the tax code, SB 1278 does not require that an additional state program be created, only that help can be directed to some of the small businesses that need it most through beneficial tax strategies.

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