HARRISBURG - A House committee approved legislation Monday to close some loopholes on state business taxes and reduce the state corporate net income tax rate in an opening move to address a key state budget issue.
The measure approved by the Finance Committee includes a method to close the "Delaware Loophole" sought by majority House Republicans, and Gov. Tom Corbett's proposal to reduce the CNI tax rate from 9.99 percent to 6.99 percent over a decade starting in 2015.
The loophole allows businesses headquartered in other states to avoid paying the CNI tax on their operations here.
The measure would require businesses, even if headquartered in other states, to comply with an "expense add back" provision - a requirement that they pay taxes on profits. The bill targets businesses that are taking advantage of the Delaware Loophole for the sole purpose of tax avoidance, said Rep. David Reed, R-62, Indiana, the sponsor.
Adding the CNI tax rate phaseout will make the bill tax revenue-neutral for businesses, he said.
The House plans to vote on this bill next month to position the business tax cuts issue for inclusion in the state budget for fiscal 2013-14, said Mr. Reed. Lawmakers faced a June 30 deadline to pass the budget. On the panel, Rep. Mike Peifer, R-139, Honesdale, voted for the bill. Reps. Phyllis Mundy, D-120, Kingston, the ranking Democrat, and Sid Michaels Kavulich, D-112, Taylor, voted against it.
Ms. Mundy said the bill's ad-back provision will not close the Delaware Loophole.
"You only want to give the illusion you have," she said to GOP lawmakers.
Ms. Mundy has sponsored legislation to require businesses to "add back" intangible items such as patents and trademarks to their Pennsylvania taxable income.
She has another bill to require corporations and their related subsidiaries to file taxes as a single company - the combined reporting method.
Contact the writer: rswift@timesshamrock.com