Pennsylvania Governor-Elect Tom Corbett’s Tax Reform Initiatives | AccountingWEB

Pennsylvania Governor-Elect Tom Corbett’s Tax Reform Initiatives

The recent election not only brought changes to Washington but also to Pennsylvania. Our new governor-elect is a republican (the prior administration was democrat) and has stated many positions during the election. Well what can we expect when he takes office?

A great article was recently written by Jason Skrinak, one of our tax principals.  Jason is a member of the State and Local Tax Committee and Legislative Committee of the Pennsylvania Institute of Certified Public Accountants (PICPA). As such Jason has great insight into what is happen in Harrisburg. His article was recently published on our McKonomics blog, but here is a repost of the entire article.
The 2010 Pennsylvania gubernatorial election results may bring new tax reforms to Pennsylvania businesses once governor-elect Tom Corbett takes office in January 2011. Corbett's economic plan for revitalizing Pennsylvania's economy focuses on innovation, improved job creation, and an educated workforce. Tax reform is a focus of Corbett's intentions for improving the business climate and creating jobs in Pennsylvania. Tax reform will certainly be a highly-debated issue in the coming months, with the Pennsylvania budget deficits growing into the billions of dollars because of decreased state tax revenues, unfunded state pensions, and Federal stimulus money running out. In addition, Corbett plans to revitalize Pennsylvania's economy through a blended tax reform program that assists small and large job creators with the following proposed reforms:
Finish Phase-Out of the Capital Stock/Foreign Franchise Tax - The Capital Stock and Foreign Franchise Tax is imposed on the assets of incorporated entities, including S-Corps and LLC's. The tax is imposed on both Pennsylvania entities and non-Pennsylvania entities that conduct business in Pennsylvania. The tax is scheduled to phase-out by 2014 and Corbett intends to maintain the full phase-out schedule.
Reduce the Corporate Net Income Tax - This tax is currently levied on corporations doing business in Pennsylvania at the flat rate of 9.99%. This rate is the second highest rate in the nation only to Iowa. Corbett would like to reduce the Corporate Net Income Tax to 6.99% over a six year span.
Remove the Net Operating Loss Cap and Initiate Tradable NOL Program - Currently, a cap on Net Operating Losses (NOL) exists in the greater of $3 million or 20% of taxable income. Corbett desires to remove the cap altogether as most states no longer have an NOL cap. He would also like to implement a Tradable Net Operating Loss program that would allow companies to sell their Net Operating Losses to companies that are profitable.
Adopt Single Sales Factor Corporate Net Income Apportionment - A single sales factor apportionment allocates corporate net income to Pennsylvania based solely upon sales. This has been the trend in Pennsylvania and many other states in recent years, as states are moving toward a more heavily weighted sales factor. The plan is to encourage investment in payroll and assets in Pennsylvania without increasing apportionment. Corbett intends to have the single sales factor in use by the beginning of 2014.
Enhance Pennsylvania's Research and Development Tax Incentives - Corbett intends to restore the research and development tax credit to previous levels making the credit more targeted to Pennsylvania research and development, although he does not provide specific detail on how he will accomplish this.
Natural Gas Severance Tax - Corbett has stated on several occasions that he does not favor a severance tax on natural gas extracted from the Marcellus Shale in Western Pennsylvania. In fact, he has stated that he does not favor any new taxes. With the General Assembly unable to reach a compromise last month concerning the method of taxation on natural gas extraction, it is likely that no tax will be enacted in time for Governor Rendell's original January 1, 2011 deadline.
Increased Scrutiny for Related Party Transactions - Corbett would like to statutorily empower the Pennsylvania Secretary of Revenue to investigate related party transactions that seek to shield taxable income through inappropriate royalty and interest payments to out-of-state passive investment corporations. It is uncertain at this point to determine what effect this increased scrutiny may have on companies that implore the use of intangible holding companies incorporated in Delaware.
Governor-elect Corbett's tax reform proposals would certainly have a significant impact on the business climate in Pennsylvania, but of course he will need to garner the support of the Pennsylvania General Assembly to be able to implement his proposals. However, with an almost certain budget shortfall looming, it will be difficult for him to cut spending enough to cover the budget shortfall without also increasing tax revenues.
If you have any questions regarding the contents of this article, please feel free to contact Jason Skrinak, Principal with McKonly & Asbury. As a member of the State and Local Tax Committee and Legislative Committee of the Pennsylvania Institute of Certified Public Accountants (PICPA), Jason continues to evaluate proposed tax legislation and work with the legislators in determining the best course of action. As such, he greatly welcomes any thoughts, suggestions, or concerns that you might have with any future proposed Pennsylvania tax legislation.

This blog

by Scott Heintzelman - Scott is a CPA, CMA and CFE living in Pennsylvania. Scott is a partner serving on the executive team at McKonly & Asbury LLP, a regional accounting firm with multiple offices in the Mid-Atlantic. The firm has been an IPA ALL-STAR as well as winning Best Places to Work in Pennsylvania for numerous years.

More from this blog

Bloggers crew

Steve Knowles has spent 25 years in business and practice in the UK, but he also worked in the states and the years haven't dulled his way of seeing an alternative view to everyone else, and every day is a new adventure.


Joel M. Ungar, CPA is a lifelong resident of the Detroit area and a graduate of The University of Michigan. He is a principal with Silberstein Ungar, PLLC, a Top 15 auditor of SEC public reporting companies.


Allan Boress, CPA, with over 25 years as a practitioner and consultant to the accounting profession. Mr. Boress is the author of 12 published books in 6 different languages, including a best-seller, The "I-Hate-Selling" Book.


Larry Perry, CPA, CPA Firm Support Services, LLC, is the author of accounting and auditing manuals, author and presenter of live staff training seminars, and author of webcast and self-study CPE programs. He blogs about small audits, reviews, and compilations.

Sandra Wiley, COO and Shareholder, is ranked by Accounting Today as one of the 100 Most Influential People in Accounting as a result of her prominent role as an industry expert on HR and training as well as influence as a management and planning consultant. She is also a founding member of The CPA Consultant's Alliance. Sandra is a certified Kolbe™ trainer who advises firms on building balanced teams, managing employee conflict and hiring staff.

Maria Calabrese, CIR, Human Resources manager for Fazio, Mannuzza, Roche, Tankel, LaPilusa, LLC in Cranford, New Jersey, Maria's topics revolve around the world of: Mentoring, Performance management, and The "Y Generation," a.k.a. "The whY generation".


William Brighenti is a CPA, Certified QuickBooks ProAdvisor, and Certified [Business] Valuation Analyst, operating an accounting, tax, and QuickBooks consulting firm in Hartford, Connecticut, Accountants CPA Hartford.


Ken Garen, CPA, is the co-founder and President of Universal Business Computing Company (, a software development firm of high-volume, high-productivity accounting and payroll technology.


Eva Rosenberg, MBA, EA, is the publisher of, and author of the weekly syndicated Ask TaxMama column. She provides answers to tax questions from taxpayers and tax professionals worldwide.


Amy Vetter, CPA, CITP is the CPA Programs Leader for Intacct Corporation responsible for leading the CPA/BPO Partners nationally.

Brian Strahle is the owner of LEVERAGE SALT, LLC where he provides state and local tax technical services to accounting firms, law firms and tax research organizations across the United States. He also writes a weekly column in Tax Analysts State tax Notes entitled, "The SALT Effect." For more info, visit his website:
Scott H. Cytron, ABC, is president of Cytron and Company, known for helping companies and organizations improve their bottom line through a hybrid of strategic public relations, communications, marketing programs and top-notch client service. An accredited consultant, Scott works with companies, organizations and individuals in professional services (accounting, finance, medical, legal, engineering), high-tech and B2B/B2C product/service sales.

Rita Keller is a nationally known CPA firm management consultant, speaker, author, mentor and blogger. She has over 30 years hands-on experience in CPA firm management, marketing, technology and administrative operations.

Stacy Kildal is the mom of two fantastic kids, an Advanced Certified QuickBooks ProAdvisor, Certified Enterprise Solutions ProAdvisor, Sleeter Group Certified Consultant, a nationally recognized member of the Intuit Trainer and Writer Network, and co-host of RadioFree QuickBooks.
Michael Alter's blog specializes in providing practical advice to those who seek greater profitability and practice management tactics that enhance deeper client relationships.

Sally Glick, CMO, Principal, Marketer of the Year in 2003 and AAM Hall of Famer in 2007, leads a lively discussion of the constantly expanding roles of marketing and the professional marketers that drive this initiative in accounting firms of all sizes.


The IMA Young Professionals Blog features the insights of IMA’s Young Professionals Committee. Committee members share advice and experiences on careers, continuing education, work/life balance, and other issues affecting young accounting and finance professionals.


FEI Financial Reporting Blog provides highlights from SEC, PCAOB, FASB, IASB, and other regulatory news, including reporting under Sarbanes-Oxley Sect 404. It is written by Edith Orenstein, Director of Technical Policy Analysis at FEI.


Sue Anderson has 30 years of experience in continuing education for accountants. Currently she is the program director for online CPE provider CPE Link.


Jim Fahey is COO of Apple Growth Partners, a regional CPA firm in Ohio. His focus is on the effective and efficient use of technology within the firm by all team members.

Caleb Newquist is the Editor-in-Chief of Sift Media US, overseeing content for both AccountingWEB and Going Concern.

Leita Hart-Fanta, CPA, CGFM, and CGAP is the author of "The Yellow Book Interpreted" and owner of a website devoted to training for governmental auditors.


AccountingWEB is more than just a U.S. team of journalists and financial and technology experts - we have an international side, too! Members of our British team who publish share their ideas, insights, and perspectives from across the pond.