Ward, Bartolotta small business tax relief legislation

HARRISBURG – Senators Judy Ward (R-30) and Camera Bartolotta (R-46) introduced have introduced legislation to update state tax laws in order to provide critical assistance to small businesses that have been impacted by the COVID-19 pandemic.

The proposal is focused on providing tax relief to small employers who experienced losses during the pandemic. The Senators said that changes were necessary in order to provide immediate tax relief to small businesses that are struggling to survive during COVID-19.

The legislation would allow small businesses to take a net loss against other sources of income;

permit small businesses to take Net Operating Losses against future years for up to 20 years; and temporarily allow small businesses to “carry back” losses to previous tax years.

“Many small businesses that have been profitable for years are now seeing losses that are entirely due to COVID-19. Small shops and mom-and-pop operations do not have massive amounts of savings; they are holding on by a thread,” Ward said. “We cannot allow these families to lose everything they have worked so hard to build because of this virus – and the Wolf Administration’s response to it.”

“COVID-19 has devastated the economy, and small businesses that were forced to close as a result of the pandemic have taken the brunt of the damage. In some cases, small businesses were shuttered even while their competitors remained open,” Bartolotta said. “Many small employers were decimated by the pandemic and the ever-changing regulations of the Wolf Administration, particularly businesses in the restaurant and hospitality industries that are still crippled under the weight of strict government mandates. This legislation acknowledges the unique challenges facing small employers and creates a tax environment that will allow these businesses to prosper again.”

The bill would allow small businesses to take a net loss against other sources of income. This means that if a small business owner sells some personal property to make payroll, he or she would be able to deduct the business loss against the tax bill from selling the personal property.

Additionally, the measure would allow small businesses to take Net Operating Losses (NOL) against future years for up to 20 years. Large corporations can already claim NOLs under current law. The legislation would give small business owners the option to benefit from the same tax strategies as their larger competitors.

The legislation would also allow small businesses to carry back losses to previous tax years. Under the bill, businesses that suffered net operating losses in 2018 or 2019 could apply for a tentative tax refund if they were profitable in any of the five years prior to the loss. The legislation is modeled after the federal CARES Act, which temporarily reintroduced net operating loss carrybacks at the federal level.