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Tax package gets rare bipartisan support in Harrisburg

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Wednesday, Jan. 25, 2012

HARRISBURG — Efforts to close a corporate tax loophole received a major boost today when House GOP leaders joined Democratic lawmakers to urge its passage.

Closing the so-called Delaware loophole is an issue that has languished at least seven years. Former Democratic Gov. Ed Rendell never could persuade legislators to pass it.

But combining the measure with corporate tax cuts GOP lawmakers seek produced an unusual bipartisan group of 21 Democrats and Republicans, who called for both ideas to be part of this year's budget negotiations.

Now, multi-state corporations can legally reduce their Pennsylvania tax liability by transferring ownership of certain assets to an affiliated company in Delaware.

The new proposal targets companies taking advantage of the loophole solely for Pennsylvania tax avoidance, lawmakers said. Certain expenses would be required to be added back for tax purposes.

The first year, the measure would generate just $30 to $40 million in additional state revenue, said House Majority Policy Chairman David Reed, R-Indiana. He teamed with Democratic Rep. Eugene DePasquale, of York, for an overall tax fairness package introduced today.

In subsequent years, the added revenue could be hundreds of millions of dollars a year, Reed indicated. Revenue brought in under the proposal would go toward tax reductions for business.

The plan calls for reducing the state's Corporate Net Income Tax from 9.99 percent to 6.99 percent over six years.

Pennsylvania's CNI tax rate is second-highest in the nation.

House Speaker Sam Smith, R-Punxsutawney, and Majority Leader Mike Turzai, R-Bradford Woods, attended the news conference today to discuss the measures.

Rendell "wanted to take a sledgehammer" to the loophole, Turzai said, but the proposal offered today takes a "laser-like" approach to fixing the problem.

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