THE GENERAL ASSEMBLY OF PENNSYLVANIA

SENATE BILL

INTRODUCED BY CORMAN, SCARNATI, BROWNE, EARLL, EICHELBERGER, ORIE, VANCE, ALLOWAY, BAKER, BOSCOLA, BRUBAKER, ERICKSON, FOLMER, FONTANA, GORDNER, KASUNIC, KITCHEN, PIPPY, RAFFERTY, ROBBINS, STACK, VOGEL, WAUGH, D. WHITE AND WONDERLING, FEBRUARY 19, 2009

REFERRED TO FINANCE, FEBRUARY 19, 2009  

AN ACT

Amending the act of March 4, 1971 (P.L.6, No.2), entitled "An

act relating to tax reform and State taxation by codifying

and enumerating certain subjects of taxation and imposing

taxes thereon; providing procedures for the payment,

collection, administration and enforcement thereof; providing

for tax credits in certain cases; conferring powers and

imposing duties upon the Department of Revenue, certain

employers, fiduciaries, individuals, persons, corporations

and other entities; prescribing crimes, offenses and

penalties," further defining "taxable income" for purposes of

corporate net income tax.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  Section 401(3)4(c) of the act of March 4, 1971

(P.L.6, No.2), known as the Tax Reform Code of 1971, amended

July 12, 2006 (P.L.1137, No.116), is amended to read:

Section 401.  Definitions.--The following words, terms, and

phrases, when used in this article, shall have the meaning

ascribed to them in this section, except where the context

clearly indicates a different meaning:

* * *

(3)  "Taxable income."  * * *

4.  * * *

(c)  (1)  [The] Except as provided for in paragraph (c)(3),

the net loss deduction shall be the lesser of:

(A)  (I)  For taxable years beginning before January 1, 2007,

two million dollars ($2,000,000);

(II)  For taxable years beginning after December 31, 2006,

the greater of twelve and one-half per cent of taxable income as

determined under subclause 1 or, if applicable, subclause 2 or

three million dollars ($3,000,000); or

(B)  The amount of the net loss or losses which may be

carried over to the taxable year or taxable income as determined

under subclause 1 or, if applicable, subclause 2.

(1.1)  In no event shall the net loss deduction include more

than five hundred thousand dollars ($500,000), in the aggregate,

of net losses from taxable years 1988 through 1994.

(2)  (A)  A net loss for a taxable year may only be carried

over pursuant to the following schedule:

(B)  The earliest net loss shall be carried over to the

earliest taxable year to which it may be carried under this

schedule. [The] Except as provided for in paragraph (c)(3), the 

total net loss deduction allowed in any taxable year shall not

exceed:

(I)  Two million dollars ($2,000,000) for taxable years

beginning before January 1, 2007.

(II)  The greater of twelve and one-half per cent of the

taxable income as determined under subclause 1 or, if

applicable, subclause 2 or three million dollars ($3,000,000)

for taxable years beginning after December 31, 2006.

(3)  Any limit on the net operating loss deduction in a

taxable year under subclauses (1) and (2) shall not apply to the

deduction of start-up period losses. For the purposes of this

subclause, start-up period losses are the sum of the net loss or

losses incurred in the corporation's first taxable year plus its

nine succeeding taxable years. A reorganization, as the term is

defined under section 303(a)(3)(iv)(B), shall be disregarded for

the purposes of applying this subclause.

Section 2.  This act shall apply to net operating loss

deductions for taxable years beginning after December 31, 2009.

Section 3.  This act shall take effect immediately.