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CompetePA. www.CompetePA.com. CompetePA Briefing Presentation to the PA Foundry Association Monday, May 16, 2011 11:00am – 12:00pm Days Inn, State College, PA. Presentation Agenda. Background What is CompetePA? What are our top policy priorities? What has the coalition accomplished?

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Competepa

CompetePA

www.CompetePA.com


Competepa

CompetePA Briefing

Presentation to the PA Foundry Association

Monday, May 16, 2011

11:00am – 12:00pm

Days Inn, State College, PA


Presentation agenda
Presentation Agenda

  • Background

    • What is CompetePA?

    • What are our top policy priorities?

    • What has the coalition accomplished?

  • CompetePA Today

    • Where we stand now / current budget situation

    • How potential changes could affect our competitiveness

  • Q/A


What is competepa
What is CompetePA?

  • Coalition founded in 2005

  • 139 members from across the Commonwealth

    • Includes major corporations, small businesses, Chambers of Commerce, business organizations and associations

  • Working to solve the serious business tax competitiveness problems that are contributing to the low rate of job creation in Pennsylvania




What are our top policy priorities
What are our top policy priorities?

  • Create a single sales factor (SSF) apportionment formula, removing the disincentive for employers to grow jobs and investment in Pennsylvania.

  • Remove the cap on net operating loss (NOL) carryforwards, which will even the playing field for many types of Pennsylvania businesses, especially cyclical businesses and those with high-growth potential.

  • Address the corporate net income tax (CNI) rate, which is the second highest in the nation.


Current sales factor and nol climate
Current Sales Factor and NOL Climate

Pennsylvania Economy League, March 2011


Cni rates of major us states
CNI Rates of Major US States

PA Today

10%

9%

8%

7%

6%

5%

Corporate Net Income Tax Rate

4%

3%

2%

1%

0%

WISCONSIN

MONTANA

MINNESOTA

TENNESSEE

DELAWARE

MARYLAND

ARIZONA

WEST VIRGINIA

IDAHO

INDIANA

MISSOURI

CONNECTICUT

ALABAMA

PENNSYLVANIA

CALIFORNIA

MASSACHUSETTS

NORTH CAROLINA

NEW YORK

NEW HAMPSHIRE

RHODE ISLAND

Pennsylvania Economy League, May 2010

Major States


Competepa progress through the years

HB650 which eliminates the cap on the amount of net operating loss a company can carry forward is passed in House (176-18)

May 2005

November 2005

HB515 which introduces a sales factor weight of 100% in the CNI apportionment formula is passed in House (197-0)

HB515 passed in Senate (31-19) with amendments that include the addition of language from HB650 to eliminate the cap on NOL

House concurred in Senate amendments, as amended by the House

December 2005

Senate concurred in House amendments to Senate amendments

HB515 Signed in House and Senate/Vetoed by Governor

Motion to override Governor's Veto defeated, and the Governor's Veto sustained (116 - 76)

2006-07 enacted budget includes improvements to CNI tax: 1) cap on NOL carryforwards raised from $2 million to $3 million or 12.5% (whichever is greater), 2) sales factor raised from 60% to 70%, and 3) CSFT phase-out lowered from 4.99 to 4.89 for 2006

Coalition successfully defends against new business taxes and supports the continued phase out of the CSFT

2009-10 enacted budget includes improvements to CNI tax: 1) cap on NOL carryforwards raised to $3 million or 20% (whichever is greater) and 2) sales factor raised from 70% to 90%. These improvements will be made through a two-year phase-in and coupled with a three-year increase in the CSFT

CompetePA Progress Through the Years

January 2006

May 2006

June 2007

October 2009


Current pa business tax policies
Current PA Business Tax Policies operating loss a company can carry forward is passed in House (176-18)

  • CNI Sales Factor Weight:

    • 2010-11 budget = 90% sales factor

  • NOL cap:

    • 2010-11 budget = $3 million or 20%

  • Capital Stock & Franchise Tax Phase-Out:

    • 2010, 2011 = 2.89 mills

    • 2012 phase-out resumes = 1.89 mills

    • 2013 = .89 mills

    • 2014 = 0 mills


Where we stand now current budget situation
Where We Stand Now / Current Budget Situation operating loss a company can carry forward is passed in House (176-18)

  • The Governor’s budget included the reinstatement of the phase-out of the Capitol Stock and Franchise Tax, until it is completely eliminated in 2014.

  • The Governor also made the commitment to address the Net Operating Loss Carry Forward, Single Sales Factor and reduction of the Corporate Net Income Tax rate in future years.


How potential changes could affect our competitiveness
How potential changes could affect our competitiveness operating loss a company can carry forward is passed in House (176-18)

  • Even though the Governor supports a new tax philosophy, we still need to be diligent on groups who do not share that same philosophy, republicans and democrats alike.

  • Each day, Pennsylvania companies make decisions about hiring, expanding or reducing jobs.

  • When deciding where to expand or locate, corporations review the total tax environment - including sales factor, NOL carryforward policy and CNI rate - in determining the most favorable state to invest in. Clearly the state with a lower cost of doing business has the advantage.

    BOTTOM LINE – If Pennsylvania is to compete nationally and globally, we must have a pro-growth plan that attracts new companies to locate here and encourages those already in business here to expand their operations. We feel we can increase our competitiveness by moving to a single sales factor, eliminating the cap on NOL carryforwards and reducing the CNI rate.


Competepa
Q & A operating loss a company can carry forward is passed in House (176-18)

Additional information can be found on our web site:

http://competepa.org


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