ICYMI: Bipartisan PA House, Senate Members Support NOL Reform

In case you missed it … Last week, bipartisan members of the Pennsylvania House of Representatives and Senate voiced their strong support for pro-growth business tax reform that would make Pennsylvania more competitive by eliminating its start-up tax and improving the treatment of net operating losses (NOLs) in the state tax code.


During a virtual press conference on Tuesday, PA Chamber President & CEO Luke Bernstein and Flashfood President & CEO Nick Bertram were joined by Senator Greg Rothman (R-Cumberland), Senator Nick Miller (D-Lehigh), Representative Josh Kail (R-Beaver), and Rep. Paul Friel (D-Chester) in calling for the enactment of bipartisan legislation to raise or eliminate the cap on NOL deductions in Pennsylvania.


The lawmakers and advocates emphasized the importance of aligning Pennsylvania’s tax treatment of business losses with 48 other states (and the federal government) for the state to become more competitive, retain businesses, and attract new ones.


Net operating loss reform has emerged as a top priority for the business community as state budget negotiations get underway. The PA Chamber-led effort has attracted supported from Democratic and Republican lawmakers in both chambers of the General Assembly. Last week’s press conference attracted statewide press coverage; select stories are excerpted below.


Tired of losing to ‘frigging Ohio,’ PA lawmakers propose pro-business tax policy

by Taylor Millard | Delaware Valley Journal

Democratic Gov. Josh Shapiro routinely complains he’s “sick and tired” of Pennsylvania losing out to “frigging Ohio” on economic development.

A bipartisan group of Pennsylvania lawmakers, including Rep. Paul Friel (D-Pottstown), hope a proposed tax deduction for startup companies will jumpstart investment. It targets net operating losses (NOL) when deductions exceed taxpayer income within a tax period.

“This is smart business,” said Friel during a Tuesday conference call organized by the Pennsylvania Chamber of Business and Industry. “The economic return to Pennsylvania is significant, and we’re losing out if we’re not pursuing this.”


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For PA businesses and legislators, NOL takes on new meaning – No Opportunities Lost

by Ed Gruver | Central Penn Business Journal

NOL, an acronym for Net Operating Loss, is the result of a business spending more money than it makes each year. For Pennsylvania’s business leaders and legislators, NOL may just as well stand for No Opportunities Lost.

“We all know that (semiconductor manufacturer) Intel selected Ohio (to build a $20B facility) and did not look at Pennsylvania, and other large entities have picked other states other than Pennsylvania,” PA Chamber of Business CEO and President Luke Bernstein said in a conference call. “We need to work harder to ensure that we get jobs and attract employers that want to be located right here.”


Bipartisan legislation includes Senate Bill 346 and House Bill 2226. Both are steps forward from a competition standpoint since Pennsylvania is one of just two states that caps NOL carryforward deductions below the federal limit of 80 percent of taxable income, the commonwealth capping at 40 percent.


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‘Status quo’ protects 48th in the nation business tax rule

by Christen Smith | The Center Square


Just two states in the country prevent businesses from carrying over most of their net operating losses into the new year: New Hampshire and Pennsylvania.

Net operating losses are common among start-up businesses, where costs sunk into hiring and capital can take years to recoup. In the meantime, federal law permits owners to carry those losses into the new year, thereby reducing their tax bill. Twenty-five states put no percentage cap on the allowable amount, while an additional 19 match the federal limit. In Pennsylvania, the rate is set at 40 percent.

Critics say the state’s outlier status discourages business growth in favor of the status quo. The freshman batch of lawmakers in the General Assembly, coupled with a strong appetite for economic reform, however, offers hope.


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Pa. pols seek tax code change to recruit startups, help industry

by Eric Schiccitano | Sunbury Daily Item


A bipartisan mix of Pennsylvania lawmakers look to raise or eliminate the cap on net operating losses that businesses can carry over, calling the proposals essential to making the commonwealth more competitive in recruiting and encouraging business investments.

Democratic Sen. Nick Miller and Rep. Paul Friel joined Republican Sen. Greg Rothman and Rep. Josh Kail on Tuesday in promoting separate legislative proposals to change state law on net operating losses — when tax deductions exceed a year’s income.


In Pennsylvania, business owners can carry forward up to 40 percent of net losses across up to 20 years. The federal cap is 80 percent and according to the Pennsylvania Chamber of Business and Industry, the Keystone State is just one of two in the country with a rate below the feds. According to the PA Chamber, the commonwealth’s current structure particularly harms startup businesses and those in a cyclical business cycle.


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Pennsylvania lawmakers, groups urge change to Net Operating Loss

by Angélica Serrano-Román | Bloomberg Tax


Pennsylvania legislators and business groups are urging the passage of a bipartisan bill that would increase the carryover limitation on net operating losses. Senate Bill 346 would gradually raise the NOL limit from the current level of 40 percent of taxable income to 80 percent by 2026, mirroring the federal threshold.


Of states with an NOL limitation, only Pennsylvania and New Hampshire have thresholds under 80%, said Luke Bernstein, president and chief executive officer of the Pennsylvania Chamber of Business and Industry, during a press conference Tuesday.


Sen. Nick Miller (D), the Democratic chair of the Pennsylvania Senate Finance Committee, acknowledged that the state is already working on its fiscal 2024-2025 budget, but expressed optimism about the bill’s “phased approach” and its progress in the Senate.


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Pa. lawmakers want end to 40% NOL cap to attract biz

by Michael Nunes | Law360


A bipartisan group of Pennsylvania lawmakers voiced support Tuesday to ditch the state’s 40 percent cap on net operating loss deductions and either match the federal standard or eliminate the limit altogether.


Limiting the carryforward deduction at 40 percent of taxable income discourages new businesses from setting up shop in the state, members of the state House and Senate finance committees said during a virtual media call hosted by the Pennsylvania Chamber of Business and Industry. Lawmakers said the deduction should either match the federal 80 percent cap or be done away with entirely to spur startup growth.


Sen. Greg Rothman, R-Mechanicsburg, a member of the Senate Finance Committee who sponsored a bill that would slowly move the state toward the federal limit, said not loosening up the cap is tantamount to a penalty on small and large businesses. “The effect of it,” he said, is that “we are losing to other states that don’t have this penalty.”


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Red tape to green light: Pennsylvania leaders seek tax reform for startups

by Liv Demarco | Broad + Liberty

Pennsylvania is gearing up to ditch its business “startup penalty” and rollout the welcome mat for new companies.

In a virtual press conference hosted by the Pennsylvania Chamber of Business and Industry, state legislators and prominent business leaders came together to discuss the need to reform the state’s treatment of net operating losses (NOLs) in order to foster economic growth and attract new businesses.

With strong bipartisan backing and a unified vision for economic growth, Pennsylvania’s leaders are hopeful that these changes will soon become a reality, fostering a more competitive and prosperous environment for businesses and startups statewide.


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Founded in 1916, the Pennsylvania Chamber of Business and Industry is the state's largest broad-based business association, with its membership comprising businesses of all sizes and across all industry sectors. The PA Chamber is The Statewide Voice of BusinessTM.