Proposed tax overhaul in PA could uncap Net Operating Loss deductions, spur business growth

28 May 2024- Rep. Josh Kail (R-Beaver/Washington) offers hope to Pennsylvanians through the introduction of commonsense legislation that would uncap businesses’ Net Operating Loss (NOL) carryforward deductions by 2025. This dynamic tax strategy will empower small businesses and make Pennsylvania more attractive to, and competitive for, new business.

Currently, Pennsylvania caps a business’ NOL carryforward deduction at 40% of taxable income. In fact, Pennsylvania is one of only two states that cap NOL deductions below the federal limit (80% of taxable income). For start-ups, which likely experience losses in their first few years, this cap is a penalty. The same goes for manufacturers in the commodity markets who often have major fluctuations in profits and losses.

“Making Pennsylvania business-friendly is not just a goal; it’s a fundamental necessity, which is why I am calling for an end to the start-up penalty,” said Kail. “My legislation promotes a tax structure that is beneficial for entrepreneurs and cyclical businesses, both of which are critical to a healthy economy. By uncapping NOL deductions, we achieve an environment that welcomes innovation and fosters opportunities for family-sustaining jobs. My legislation establishes hope for enhancing the quality of life for all residents of the Commonwealth.”