Major Changes to Pennsylvania's Corporate Net Income Tax

David A. Applebaum, Robert A. Bacine, Jeffrey R. Hoffmann, Marjorie J. Scharpf

Governor Tom Corbett signed Act 85 into law on July 2, 2012, which impose significant changes to Pennsylvanias corporate net income tax for tax years beginning after December 31, 2012.

Most importantly, all business income will be apportioned according to a single sales factor formula. Previously, income was apportioned according to three factors: property, payroll & sales.The single sales factor apportionment scheme applies only to the CNIT. It does not apply to the capital stock/franchise tax or personal income tax. Interestingly, none of the loophole closing measures that were passed by the House as part of HB 2150 earlier this year are included in the new budget. The Senate did not act on the legislation, and Governor Corbett would not support it.