Pennsylvania Tax Cuts

Pennsylvania (PA) enacted H.B. 1342, which includes corporate and personal tax changes. The bill reduces the corporate net income tax (CNIT) rate over nine years from 9.99 percent to 4.99 percent. The rates for these years are:

• 9.99 percent for tax years from January 1, 1995, to December 31, 2022
• 8.99 percent for tax years from January 1, 2023, to December 31, 2023
• 8.49 percent for tax years from January 1, 2024, to December 31, 2024
• 7.99 percent for tax years from January 1, 2025, to December 31, 2025
• 7.49 percent for tax years from January 1, 2026, to December 31, 2026
• 6.99 percent for tax years from January 1, 2027, to December 31, 2027
• 6.49 percent for tax years from January 1, 2028, to December 31, 2028
• 5.99 percent for tax years from January 1, 2029, to December 31, 2029
• 5.49 percent for tax years from January 1, 2030, to December 31, 2030
• 4.99 percent for tax years from January 1, 2031, and after

The bill also implements market-based sourcing for sales of intangible property and establishes economic nexus for purposes of the CNIT for sales of intangible property.

All companies with activities and income tax filings in PA will need to consider the impact of these rate and sourcing changes on any deferred tax assets and/or liabilities associated with PA sourced items.

H.B. 1342 was enacted on July 8, 2022, and any annual or quarterly filing that includes that date must revalue PA deferred tax assets and liabilities based on the impacts of the bill. The sliding scale of rate reduction will need to be considered in this analysis. A projected reversal of the PA deferred tax assets and liabilities would be required in order to apply the appropriate rate to each deferred tax reversal.

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