Pennsylvania Governor Tom Wolf signed the fiscal year 2022-2023 budget and related legislation on July 8, 2022. The budget includes changes that will impact individuals as well as corporations. Here is a brief summary.

Corporate Income Tax Rate Reductions

The corporate net income tax rate will be reduced from 9.99% to 4.99% over the next nine years. For the tax year beginning January 1, 2023, the corporate net income rate will be 8.99% and will be reduced an additional 0.5% each year until it reaches 4.99% in 2031.

Economic Nexus

Effective for tax years beginning after December 31, 2022, corporations with no physical presence in Pennsylvania are deemed to have nexus in Pennsylvania when they have sales of $500,000 or more per year sourced to Pennsylvania.

New Corporation Sourcing Rules

Effective for tax years beginning after December 31, 2022, the sourcing rules have been changed for sales of particular intangible property to where the benefit is received (market-based) instead of where the income-producing activity is performed (cost-of-performance).

Like-Kind Exchanges

Effective for tax years beginning after December 31, 2022, Pennsylvania will conform to IRC Section 1031 of the federal tax code, allowing gains from a qualified like-kind exchange to be tax-deferred for personal income tax.

Section 179 Expense Deduction

Effective for tax years beginning after December 31, 2022, Pennsylvania will conform to IRC Section 179 of the federal tax code, which allows individual owners of pass-through entities to take a deduction for the total purchase price of qualifying property in the year placed in service. This eliminates the $25,000 limit and conforms to the federal limit currently $1.08 million.

Educational Tax Credits

Both the Educational Improvement Tax Credits (EITC) and the Opportunity Scholarship Tax Credits (OSTC) increased significantly.

Child Care Program

Effective after June 30, 2022, a refundable personal income tax credit calculated at 30% of the federal child and dependent care tax credit is available for those who qualify for the federal program.

For More Information

For more information on how these changes may impact you, contact Glen Dymond at Isdaner & Company, LLC.