Pennsylvania's corporate income tax would drop by 30 percent over six years and the so-called "Delaware loophole" would be closed starting in 2013 under a bipartisan reform proposal introduced this morning.

House Bill 2150 would level the playing field for companies doing business in Pennsylvania, grow the economy and foster job creation, said two lead sponsors, Republican state Rep. Dave Reed of Indiana County and Democratic state Rep. Eugene DePasquale of York County.

The bill would add an "expense add-back provision" to the tax code to stop companies from transferring revenue to Delaware-based affiliates as a way to avoid paying Pennsylvania tax. The provision would only affect businesses making transfers "for the sole purpose of tax avoidance," Reed said in a statement.

The plan also would reduce Pennsylvania's corporate net income tax from 9.9 percent to 6.9 percent in 0.5-percentage point increments over six years, beginning in 2014.

If HB 2150 becomes part of the upcoming budget negotiations, it could be passed as early as this year, Reed and DePasquale said in a news conference.

The Pennsylvania Chamber of Business & Industry is reviewing the language of the new bill, said Sam Denisco, vice president of government affairs.

The chamber has supported similar proposals in the past, he said. It has long advocated a lower corporate income tax; and although it opposed former Gov. Ed Rendell's proposal to close the Delaware loophole through mandatory unified combined reporting, it supports curbing tax avoidance abuses in principle, he said.

Certain business tax reforms have been stymied for years in Pennsylvania, with advocates of loophole closure generally opposing proposals that only lowered rates and vice versa. Addressing both issues together "may be the right equation to get the ball over the goal line," Reed said.

In addition, HB 2150 would:

• Shift Pennsylvania's tax apportionment system to a single-sales factor. Advocates say the current system taxes firms with operations in Pennsylvania more than firms that only sell goods here.
• Remove Pennsylvania's cap on carrying forward net operating losses into a subsequent tax year. The cap hurts companies that experience sharp revenue swings, such as startups and businesses in cyclical industries, according to the Allegheny Conference, a Pittsburgh business organization.

Closing the Delaware loophole could add at least $30 million to $40 million to state revenue, judging from a similar provision adopted in Virginia, Reed and DePasquale said in a news conference this morning. They declined to offer revenue estimates for the bill's other provisions.

The hope is that reforms would attract enough new taxpaying businesses to Pennsylvania to more than make up for the proposed cuts, DePasquale said.

Generally, 1 percentage point of corporate net income tax in Pennsylvania translates to about $200 million in revenue, Densico said.

The chamber will want to see detailed revenue projections, and will evaluate the likely effect on member companies, before reaching a verdict, Denisco said.