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On the Hill: PA Chamber Marks Progress on Top Legislative Priorities

The PA Chamber has made major policy strides this session on behalf of our broad-based membership and has identified three legislative areas as top priorities for the current session: tax reform, permitting reform, and workforce development.

We know that Act 53 of 2022 brought us decades’ worth of tax reforms, including reducing our state’s corporate net income tax rate in half by 2031, but more progress remains! Topping the PA Chamber’s priority list are two additional tax reforms that will make our tax code even more competitive and enticing for investment and job creation:

  • Accelerating the CNI Phasedown: Should we really have to wait nearly a full decade to realize the benefits of Act 53? Accelerating the CNI phasedown would make even greater strides toward the PA Chamber’s mission of bringing jobs, investment and economic opportunity back to PA – and Gov. Josh Shapiro and a strong bipartisan group of lawmakers have already voiced their support! S.B. 345 was reported from the Senate Finance Committee in a bipartisan vote and would bring the CNI rate down to 4.99% by 2026, 5 years sooner than what was enacted in Act 53.
  • Improving the Treatment of Net Operating Losses: Right now, Pennsylvania is one of only two states that cap NOL deductions below the federal limit of 80% – a major red flag to employers, and one that especially hurts start-ups and small to mid-sized businesses. Improving treatment of NOLs will generate a fairer tax system, which will promote future growth and make the Keystone State a more attractive place to do business overall. S.B. 346 was reported from the Senate Finance Committee unanimously and would raise Pennsylvania’s cap from 40% to 80% by 2027.

We’ve also laid out a comprehensive set of permitting reform solutions to modernize our current process and keep Pennsylvania competitive with other states. Our team has been advocating for these solutions at the state and federal level, and our efforts have garnered significant attention and legislative action.

Most recently, the state Senate answered our calls for reform by passing S.B. 350, requiring state agencies to create an accessible tracking system for applicants to check on the status of their permit applications as they move through the process. The bill also lays out a timeframe in which permits must be reviewed and issued, or otherwise be “deemed approved,” and provides for expanded use of third-party contractors to review applications – a big part of helping permits move through the process more expediently. The bill now awaits action in the House, and we’re urging House lawmakers to pass it without delay.

Finally, our multi-faceted workforce development strategy is targeted toward closing the job skills gap and helping to develop the next generation of skilled, inspired workers.  This includes:

  • Supporting employers and employees as they work through childcare challenges, encouraging resources be directed toward an “all of the above” childcare benefits strategy.
  • Encouraging reentrants and individuals with criminal records to reenter the workforce, including by expanding 2018’s groundbreaking Clean Slate law, which seals old criminal records so individuals have the confidence to get back to work and employers can help close workforce gaps – a win-win for workers, business owners and the economy!
  • Engaging across a number of workforce development policies that will build the workforce of tomorrow, and encourage people to live, work and raise families in Pennsylvania.

Senate Answers Call on Permitting Reform; Tax Bills Clear Committee

Last week, the Pennsylvania Senate voted to pass a comprehensive permitting reform bill that addresses several of the business community’s top concerns regarding the current process, while two committees advanced a suite of proposals to improve Pennsylvania’s tax competitiveness and enhance the permit appeals process, respectively.

Here are the highlights from last week’s session:

 

Permitting Reform

The PA Chamber coordinated a broad coalition of chambers of commerce and other statewide employer associations in sending a letter to Gov. Shapiro and state lawmakers last Monday calling for reforms to Pennsylvania’s system of issuing state permits for construction and other projects. Two days later, a bipartisan majority of senators voted to pass Chamber-supported legislation, Senate Bill 350, sponsored by Sen. Kristin Phillips-Hill (R-York).

Senate Bill 350 would require state agencies that issue permits to post information about the permits they grant on their website, create an accessible tracking system for applicants to check on the status of their applications, and clearly state the legal authority on which the agencies rely when rejecting a permit application. Moreover, the bill establishes a timeframe in which permits must be reviewed and issued – or otherwise be “deemed approved,” and provides for expanded use of authorized third-party contractors to review applications.

The PA Chamber sent a memo to Senate lawmakers last Wednesday, urging their support for this critical legislation. Senate Bill 350 later passed by a bipartisan vote of 29-19.

In a statement, PA Chamber President Luke Bernstein hailed the bill’s passage as a “generational opportunity” to enact reforms that “would lead to more jobs, greater transparency, and ultimately, a stronger economy.” To read the Chamber’s full statement on Senate Bill 350, click here.

Additionally, Bernstein joined Sen. Phillips-Hill on an episode of her podcast, Kristin’s Corner, prior to the vote to discuss the positive impacts this legislation would have on Pennsylvania’s economy. To listen to their conversation, click here.

The Senate Environmental Resources and Energy Committee separately voted on Wednesday to advance Senate Bill 198. Sponsored by Sen. Camera Bartolotta (R-Washington), the bill aims to improve the state’s permit appeals process. The PA Chamber sent a memo to committee members ahead of its consideration to express support for the proposal, which later passed by a vote of 7-4.

 

Business Tax Reform

The PA Chamber coordinated a separate letter from employer and industry associations to the governor and legislators last Monday urging them to build on the historic, bipartisan tax reforms accomplished last session to further improve Pennsylvania’s business tax competitiveness. On Wednesday, the Senate Finance Committee advanced proposals to expedite the reduction of Pennsylvania’s corporate net income tax (CNIT) and improve the treatment of net operating losses (NOLs) in the state tax code.

Senate Bill 345, sponsored by Senate Majority Whip Ryan Aument (R-Lancaster), would accelerate the CNIT phasedown, immediately reducing the tax rate to to 7.99 percent and enacting a full percentage-point annual reduction until it reaches 4.99 percent in 2026, five years sooner than the timeline established by the enactment of Act 53. The bill passed with bipartisan support.

Senate Bill 346, sponsored by Senator Greg Rothman (R-Cumberland), would increase the limit on previous years’ business NOLs that employers can carry forward and deduct from its profits in a given tax year. Pennsylvania is currently one of the only states whose treatment of NOLs is not at least consistent with the federal tax code. This unfortunate distinction makes Pennsylvania less competitive and unattractive to investment, particularly from start-up companies that frequently suffer losses in their early years. S.B. 346 would raise the cap on NOL deductions (currently 40 percent of taxable income) by ten percent annually until it reaches the federal limit of 80 percent in 2027. The bill passed committee with unanimous support.

The PA Chamber robustly supports Senate Bill 346, which would put Pennsylvania on par with 48 other states and federal tax laws – helping us attract new and additional business investment into the Commonwealth.

Both bills will be eligible for consideration by the full Senate when lawmakers return in June.

PA Chamber Leads Statewide Coalition Urging State Leaders to Support Pro-Growth Tax Policies

HARRISBURG – Today, the Pennsylvania Chamber of Business and Industry led a coalition of statewide associations and chambers of commerce from across the Commonwealth in calling on Governor Josh Shapiro and members of the state legislature to support policies that will further improve the state’s business tax competitiveness.

In a letter, the coalition expressed appreciation for the legislature’s bipartisan efforts last year to advance significant tax reform and emphasized the urgency of building on these successes during the current legislative session, as other states pursue similar efforts to improve their tax structures to attract business investment.

“We appreciate these critical reforms and thank the General Assembly for the overwhelmingly bipartisan support” the letter reads. “At the same time, we know that other states are moving forward as well. We are in perpetual competition to cultivate and showcase an attractive business climate and urge your ongoing support for pro-growth tax policy initiatives that will make the Commonwealth more competitive.”

The coalition encouraged lawmakers to continue supporting pro-growth tax policy initiatives, such as improving the treatment of net operating losses (NOLs) and expediting the corporate net income (CNI) tax rate reduction phasedown, while cautioning policymakers from pursuing “burdensome tax increases or additional requirements” that would jeopardize Pennsylvania’s tax competitiveness.

Full text of the letter is available here.

A Look Ahead for the Week of May 8, 2023

This week, committees in the Pennsylvania Senate will meet to consider proposals that the PA Chamber has identified as top priorities for the current legislative session.

 

Permitting reform

On Monday, the Senate Committee on Intergovernmental Operations will consider S.B. 350 – legislation introduced by Sen. Kristin Phillips-Hill, R-York, that would address several of the business community’s top concerns regarding Pennsylvania’s antiquated permitting process.

The state’s current process has long been criticized as overly burdensome and punitive, often leading to unreasonable delays and uncertainty for permit seekers. This proposed legislation aims to increase transparency throughout the permitting process.

If passed, the bill will require agencies that issue permits to post information about the permits they grant on their website, create an accessible tracking system for applicants to check on the status of their applications, and clearly state the legal authority on which the agencies rely when rejecting a permit application.

The tracking system will include processing time, dates of each permit, completeness review, technical review, elevated review, and an estimated time remaining for each incomplete phase of the permit approval process. Moreover, the bill establishes a timeframe in which permits must be reviewed and issued – or otherwise be “deemed approved.”

These reforms will provide greater transparency and give applicants greater assurance that their request will be processed fairly and expediently by the relevant agency.

On Wednesday, the Senate Environmental Resources and Energy Committee will meet to consider S.B. 198, legislation introduced by Sen. Camera Bartolotta, R-Washington, that aims to streamline the appeal process for permit denials.

For further information on the PA Chamber’s proposed solutions to improve PA’s permitting processes, visit the the On the Hill section of our website.

 

Net Operating Losses (NOLs)

On Tuesday, the Senate Finance Committee will consider S.B. 346 – legislation introduced by Sen. Greg Rothman, R-Cumberland. This bill deals with the treatment of Net Operating Losses in the state Tax Code – i.e., an employer’s ability to deduct past losses from current year’s profits.

Pennsylvania is currently at an economic disadvantage as one of only two states in the nation that does not allow businesses to deduct NOLs consistent with the federal limit. Instead, state law currently caps the proportion of eligible deductions at 40 percent – exactly half the federal rate.

This policy has been widely criticized as a de facto tax on emerging businesses and has been shown to negatively impact our state’s job creators while turning away businesses that might otherwise choose to locate in the Commonwealth. Senate Bill 346 would gradually increase the NOL carryover limit, squaring it with the federal limit of 80 percent over a period of four years.

Improving the treatment of Net Operating Losses remains a top priority for the PA Chamber, as it continues to affect a significant proportion of our membership as well as the Commonwealth’s broader economic prospects.

 

Accelerating the CNI phasedown

The Senate Finance Committee will also consider S.B. 345 – legislation introduced by Senate Majority Whip Ryan Aument, R-Lancaster that seeks to build on last session’s historic, bipartisan reduction of the Corporate Net Income Tax rate.

Prior to the passage of Act 53 last year, Pennsylvania had the second highest CNI in the nation – a huge deterrent for businesses looking to invest in the Keystone State. Thanks to the efforts of bipartisan lawmakers, Pennsylvania’s CNI is currently at 8.99 percent (down from 9.99 percent) and will decrease by 0.5 percent annually over the next eight years until it reaches 4.99 in 2031.

Senate Bill 345 would accelerate this phasedown, including an immediate drop to 7.99 percent and a full percentage-point reduction each year until it reaches 4.99 percent in 2026, five years sooner than the timeline established by the enactment of Act 53.

The PA Chamber understands that a more competitive business tax code will help attract greater investment in our state while conferring several “downstream” benefits including greater GDP, higher wages, and increased home values. Together, these benefits will enable Pennsylvania employers to create more family-sustaining jobs while helping them recruit and retain talent.