Pennsylvania Corporate Income Tax Changes

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AAFCPAs would like to make clients aware, if you are subject to Pennsylvania’s corporate income tax, there are two significant changes instituted pursuant to H.B. 1342, signed by the governor on July 8th, 2022, effective starting in 2023.

CORPORATE TAX RATE

The current Corporate Net Income Tax (CNIT) rate is 8.99%.  There will be an annual phase-down of this rate starting in 2023:

  • 2023 – 8.99%
  • 2024 – 8.49%
  • 2025 – 7.99%
  • 2026 – 7.49%
  • 2027 – 6.99%
  • 2028 – 6.49%
  • 2029 – 5.99%
  • 2030 – 5.49%
  • 2031 and beyond – 4.99%

APPORTIONMENT

For tax years beginning after December 31, 2022, there will be a change to the method of calculating the sales factor for CNIT apportionment.  Receipts from certain intangible property will be sourced using the market-based rules rather than the location of the income-producing activity.

Such intangibles include:

  • Receipts from patents
  • Royalties
  • Franchise agreements
  • Sales of securities held for sale to customers in the ordinary course of business

These changes are an important consideration in any tax forecasts or planning that include state effective rate calculations.

If you have any questions or need help managing your tax compliance, please contact Kelly Zack, MST at kzack@nullaafcpa.com, 774.512.4001; or your AAFCPAs Partner.


About the Author

Kelly Zack, MST

Kelly is a senior leader in AAFCPAs’ Commercial Tax practice. She advises individuals, partnerships, corporations, nonprofits, and trusts operating in multiple states and municipalities on opportunities to save tax dollars through advanced tax planning and risk mitigation. This includes the identification of all location-specific tax incentives and credits that could impact business entities and their owners. Kelly brings expertise in nexus analysis for income/franchise tax and sales and use taxes along with the analysis of state …