PA Adopts “No Tax Increase” Budget for 2010-11

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For the first time in years, Pennsylvania has adopted an "on time" budget! And, notwithstanding continued softness in revenue collections, the budget includes no general tax increases – in fact, no tax bill was passed as part of this year’s budget process! However, we do expect the General Assembly and Governor Rendell to work toward adoption of a natural gas severance tax sometime this Fall. And, if the federal government fails to appropriate an additional $800 million for Pennsylvania’s Medicaid program – money anticipated in the new PA budget - legislators soon could be back at the budget table.

The good news for companies doing business in Pennsylvania is that a number of tax proposals fell by the wayside in the budget process. Proposals to either eliminate or cap the sales tax vendor’s allowance had garnered some support. The Governor and some legislators had favored expanding the sales tax base to include many services consumed by business, and had proposed eliminating the bad debt refund provision and exemptions such as direct mail advertising materials, returnable containers, public utility equipment and wrapping supplies. With the Commonwealth facing a multi-billion dollar structural deficit next year due to loss of federal stimulus funds and due to increased pension funding obligations, these and other tax proposals will almost certainly be put back on the table by one or another of the participants in next year’s budget process.

The Governor’s long-sought proposal for combined reporting of corporate net income taxes may also be back on the table next year, regardless of the winner of this fall’s gubernatorial election, inasmuch as it also has its legislative backers.

On the downside, a number of companies advocating single sales factor apportionment will have to wait another year.

Please see full article below for more information.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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