Business and Personal Tax Changes
following are changes in Pennsylvania Business and Personal Taxes effective when
in Corporate Taxes:
annual net operating loss (NOL) deduction is now the greater of 12.5% of taxable
income or $3.0 million effective for years beginning after 12/31/06. The previous
limit was $2.0 million.
corporate net income tax apportionment factor for sales has been increased from
60% to 70%. The payroll and property factors have been reduced from 20% to 15%
each. This is effective for the year ended 12/31/06. The apportionment factors
for capital stock tax purposes remain unchanged.
minimum taxable capital stock valuation has been increased from $125,000 to $150,000.
The capital stock tax rate has been decreased from 4.99 mills to 4.89 mills. This
is effective for the year ended 12/31/06. Also, the capital stock tax rate will
decrease 1.00 mills for each subsequent year until it is completely phased out
Federal S corporation will automatically become a Pennsylvania S corporation effective
this year. If for any reason a Pennsylvania S corporation wishes to be treated
as a C corporation for Pennsylvania purposes, it will be necessary to file a Form
settlement notices from the state will be discontinued for all settlements mailed
after 1/1/08. Notices will be sent only if there is a change in assessment. Notices
will have to be sent Certified Mail by the state. Corporations receiving any such
notices will have 90 days from the notice date to petition the Board of Finance
and Review for a review.
in Personal Income Taxes:
Effective for 2006 tax returns, contributions to a Federal Sect. 529 Education
Plan will be deductible up to $12,000 per student. Since husband and wife can
file separate returns, this should presumably allow each to make the contribution.
Contributions to a Health Savings Account will now be deductible for the year
2006. These are accounts where taxpayers have a high deductible medical insurance
plan (usually $5,000 or more) and self insure the deductible.