Last week, the Pennsylvania Chamber of Business and Industry led a coalition of more than 70 chambers of commerce across the Commonwealth in calling on Governor Josh Shapiro and members of the General Assembly to improve Pennsylvania’s economic competitiveness by eliminating the state’s tax penalty on start-up businesses.
In a letter addressed to the governor and legislative leaders, the coalition highlighted the urgency of improving Pennsylvania’s tax treatment of Net Operating Losses (NOLs).
The coalition cited the negative impact of Pennsylvania’s current business tax and regulatory climate, noting that the state ranks among the worst in the nation for job seekers and key economic indicators. The Kauffman Foundation recently identified Pennsylvania as having the lowest rate of new entrepreneurs in the entire country.
“Governor Shapiro and leaders in the House and Senate have each acknowledged the need to improve Pennsylvania’s economic competitiveness,” the letter reads. “Improving the treatment of Net Operating Losses is a major step towards this goal. Pennsylvania’s 40 percent cap on NOLs is one of the most restrictive in the nation, hindering start-ups and cyclical businesses.”
The coalition emphasized the importance of increasing the cap on NOL deductions, which allow businesses to offset their tax liabilities with previous losses, as a means to attract more employers and reduce hurdles to entrepreneurship and business growth.
Net operating loss reform has emerged as a bipartisan priority in both the state House and Senate. The letter points out that 24 states have no cap on NOLs, while Pennsylvania is one of just two states that caps NOL deductions below the federal limit of 80 percent of taxable income.
“We appreciate the many proposals that policymakers and advocates have put forth to spur Pennsylvania’s economy and urge lawmakers to focus on competitiveness,” the letter continues. “We urge you to prioritize correcting Pennsylvania’s treatment of start-up businesses so the Commonwealth can compete on an equal playing field to attract entrepreneurs, new employers, and the jobs, economic development, and prosperity they bring to communities.”
Full text of the letter is available here.
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