Turzai Legislation to Help Improve Economic Climate for Businesses
3/12/2009
House Republican Whip Mike Turzai (R-Allegheny) has introduced legislation, House Bill 710, that will remove the caps on Net Operating Losses, thereby helping to improve the state’s business climate and entice more family-sustaining jobs to stay and companies to expand in Pennsylvania.
 
“During this tough economic climate, we need to do everything we can to keep jobs in Pennsylvania,” Turzai said. “Removing the cap on net operating losses will help manufacturers lower overhead costs so that they can thrive and expand in Pennsylvania. This change will be a huge incentive for job creators to relocate to Pennsylvania and help strengthen the Commonwealth’s economy.”
 
Similar legislation Turzai sponsored to increase Pennsylvania’s business competitiveness was signed into law during the 2005-06 session. Act 116 of 2006 increased the cap on net operating loss carry-forwards from $2 million to the current level of $3 million or 12.5 percent of taxable income, which was a marked improvement for Pennsylvania’s businesses.
 
The current cap on Pennsylvania’s net operating loss deduction penalizes start-up companies and cyclical companies by significantly increasing their effective state tax rate. Net operating loss carry-forward provisions allow corporate employers to use a business loss to offset income earned in future tax years in order to adjust their corporate net income tax liability. 
 
“In almost every state, employers are allowed to apply all of their recent losses against their current and near-future tax liability,” said David N. Taylor, Executive Director of the Pennsylvania Manufacturers’ Association. “Rep. Turzai’s pro-growth legislation would modernize our tax code and bring Pennsylvania in line with the rest of our competitors.  Without it, Pennsylvania businesses that don’t earn a profit in tidy 12-month chunks will continue to take a bigger tax hit than their out-of-state competitors do.  We need to fix this problem NOW.”
 
Pennsylvania is one of two states to cap a business taxpayer’s net operating loss deduction. Forty-five states and the federal government allow for the use of unlimited net operating losses.
 
“We have a tremendous opportunity to reform our business tax structure in order to better position the Commonwealth to recover from the economic downturn in a much stronger competitive position,” said Gene Barr, Vice President of Government and Public Affairs for the Pennsylvania Chamber of Business and Industry. “Removing the restrictive NOL cap is one step Pennsylvania must take to bolster economic growth.”
 
Turzai said this legislation will put Pennsylvania on a more level playing field with regards to competing with other states for new industry.
 
Rep. Mike Turzai
28th District
Pennsylvania House of Representatives

(412) 369-2230
Contact: Tricia Graham
 (717) 260-6296