House Passes Several Tax Reform Bills to Help Small Businesses

From PA Chamber of Business & Industry

The state House passed three PA Chamber-backed measures last week that would bring clarity to the state’s tax structure, improve competition and help level the playing field for small businesses.

House Bill 331, which passed by a nearly unanimous vote, aims to allow for “like-kind” exchange of tax deferrals when a property is exchanged with a similar property. This would put the Commonwealth in line with every other state, removing a disadvantage that Pennsylvania’s small businesses face when competing with businesses across state lines.

The House also passed H.B. 333, which would increase deductible amounts for qualifying small business equipment purchases. This move would bring Pennsylvania in line with the federal Internal Revenue Code, and with 33 other states that currently allow businesses to deduct the full purchase price of $1 million per year. To put that in context, under current law, businesses in Pennsylvania may only claim $25,000 for these purposes.  “Pennsylvania is unique in being the only state that allows for full Section 179 expensing for  larger businesses while not allowing small businesses to do the same,” PA Chamber Government Affairs Vice President Sam Denisco said in a memo to House lawmakers prior to the vote. “As we have all seen subsequent to the enactment of federal tax reform, employers are investing back into their companies, rewarding their employees, and hiring more workers. By coming into line with federal law, small businesses will have more resources and flexibility to grow and the PA Chamber asks for your support.”

Another important tax reform bill that House lawmakers passed unanimously last week was H.B. 994, which aims to bring clarity to the Gross Receipts Tax statute regarding wireless services.  Under current law, wireless services are subject to both of the Sales and Use Tax and GRT at 6 and 5 percent, respectively. However, while Pennsylvania follows clear and updated language under the federal Mobile Telecommunications Sourcing Act regarding the SUT on telecommunications, GRT definitions haven’t been modernized. This has created confusion as to whether wireless series are included in that tax base, which H.B. 994 would remedy by inserting the clear definitions from the SUT statute into the GRT statute. “This would bring consistency between the application of the sales and use tax and gross receipts taxes,” Denisco said in a memo to House members. “It would also eliminate confusion and uncertainty over which services were subject to taxation both now and in the future.”

Representatives Kurt Masser and David Millard voted in favor of all three of these bills.

All three bills now await further consideration in the state Senate.