Two bills that are part of a Small Business Tax Reform package recently passed the state Senate. Last week, the Senate passed S.B. 347, relating to “Like-Kind Exchanges;” S.B. 349, relating to Section 179 Expense Deductions, passed last month. Both bills are aimed at removing state tax barriers for small businesses.
Senate Bill 347 eliminates a disadvantage faced by Pennsylvania small businesses when competing with those in other states.
Under federal tax law, a “like-kind” exchange under the Internal Revenue Code allows for tax deferral when property is exchanged for similar property. This long-standing federal provision allows employers to invest in the job-creating assets businesses need to remain competitive. Every state but Pennsylvania provides for a similar deferral on the state level. The bill is before the House Finance Committee for consideration.
Senate Bill 349 would bring state tax law governing expense deductions in line with federal law, eliminating the unequal treatment of small businesses in Pennsylvania. The increase in limits makes it easier for employers to buy equipment and invest, which promotes job growth.
Senate Bill 349 would align Pennsylvania law with Section 179 of the federal tax code. Section 179 allows owners of pass-through businesses to take a tax deduction for the full purchase price of qualifying equipment. Pennsylvania law allows those subject to state corporate income tax to take the full deduction, but limits the deductions for businesses subject to the state personal income tax to $25,000. Senate Bill 349 would provide equity for small businesses, increasing the deduction during the current year from $25,000 to $1.05 million, or consistent with the federal limit.
“This legislation provides much-needed relief for struggling businesses, allowing them to invest back in the Commonwealth and create more jobs,” said Pennsylvania Chamber of Business and Industry President and CEO Gene Barr. “Both are key components of the Chamber’s ‘Bringing PA Back’ initiative, a member-driven recovery effort to advocate for policies that will rebuild Pennsylvania’s economy in a manner that provides opportunity for all.”