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After more than 100 days, state budget impasse may be nearing end
Business would see some progress, lose on CSFT After considerable back-and-forth over the past week, the state House on Wednesday passed budget legislation primarily along party lines that could end the more than 100-day impasse. The general appropriations bill would fund $27.799 billion in state spending. A partial list of appropriations that made it into the bill is available here. The tax code bill, would raise $1.73 billion in new revenues. The Senate was expected to vote on the fiscal code bill today. It contains the "agreed to" language, but also includes provisions related to the leasing of state lands for Marcellus Shale drilling and to the creation of an independent budget and fiscal office that vary from the House plan. As in the original handshake agreement and subsequent budget plans since, the latest proposal would unfortunately revert the Capital Stock and Franchise tax back to 2008 level of 2.89 mills retroactive to Jan. 1, 2009. The 2.89 rate would be effective through 2011. The change would amount to $373.9 million this fiscal year and $550.6 million in 2010-11. The budget would include some additional progress on two of the unified business community's top business tax priorities. It would increase the cap on Net Operating Loss Carryforwards from $3 million or 12.5 percent of taxable income to $3 million or 15 percent in 2009 and $3 million or 20 percent through 2013; and would change the Corporate Net Income tax apportionment formula from 70 percent sales, 15 percent property and 15 percent payroll to 85 percent sales, 7.5 percent property and 7.5 percent payroll. The formula would then become 90 percent/5 percent/5 percent in 2010-11. The pending budget rejects the broad-based 2 percent tax on health insurance premiums opposed by PA Chamber members, calling instead for an extension of the Gross Receipts Tax on Medicaid-only managed care organizations. However, the bill includes a mechanism that would result in the termination of the GRT if the tax is found to be an impermissible taxing scheme The tax code bill would require the bi-monthly remittance of the Personal Income Tax and Sales Tax, which could potentially increase red tape for companies that are accustomed to uniform rules among other states with regard to tax remittance timelines. The plan also calls for an increase in the cigarette tax and a new tax on small cigars; revised revenue estimates for a tax amnesty program; and $100 million in surplus funds from the MCARE account. Under the budget, the state's Rainy Day Fund would be depleted. A number of tax credits were also reduced, including the Education Improvement Tax Credit and Research and Development Tax Credit. Additional items that are part of the tax code bill are available here. |
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