NFIB has learned that state budget negotiators are considering creating a new “business filing fee” to help balance the budget and get past the current budget impasse. It is our opinion that fee is, in truth, a Business Privilege Tax. The money would go directly into the state general fund. This is unprecedented tax policy that will negatively affect all our members, every business in the Commonwealth and the state’s economic growth. Below is a letter sent by NFIB/PA today to lawmakers today in response to this bad policy proposal. If you also want to write your lawmaker to say “Don’t tax me for filing taxes” click here.
TO: Honorable Members of the Pennsylvania General Assembly
FROM: Neal Lesher, Legislative Director, (717) 507-9240
DATE: December 4, 2015
RE: Proposed business filing fee
On behalf of the National Federation of Independent Business and our 14,000 small business members in Pennsylvania, I am writing to raise concerns we have over the proposed “business filing fee” that may be considered as part of the budget framework.
While few details exist, we understand that this would be a new annual tax paid by all business entities (C-Corps, S-Corps, LLCs, and Partnerships) when they file their tax returns. Not only do our members soundly reject the addition of a new tax on Pennsylvania’s entrepreneurs, but multiple questions and concerns have been raised as we have learned of this new concept that concern us as a matter of tax policy. They including the following points that we ask you to consider:
Many entrepreneurs elect to establish their business as a multiple entity structure for various reasons, including liability. For example, in a hypothetical “business” might look like the following:
- One entity is established to serve as the operating business;
- Another entity is established to hold valuable assets such as patents or other intellectual property;
- And a third entity is established to hold real estate need for operations.
The business in the example above may not be more profitable or have more income than another single-entity business, but would have a tax liability three times higher under this new tax.
In fact, this new tax would be paid by all business entities, whether they made a profit or not.
Many entrepreneurs are already paying significant professional licensure fees annually to be able to practice their trade.
We are not aware of any other state that places a tax on business entities, simply for existing. In conversations with national tax experts, we have been told this would be “highly unusual”.
NFIB has long advocated for simplifying the tax code. The addition of this new tax seems to be a step in the wrong direction.