Here is a brief summary of some Pennsylvania opportunities:
Net Operating Losses
We think Pennsylvania’s NOL cap violates the state constitution. Taxpayers should compute their NOL deduction without regard to the cap. We are currently litigating this issue on behalf of our clients. If the cap has prevented your company from using any of your net operating losses, we think you are entitled to a refund.
Market-Based or Cost-of-Performance Sourcing? Your Choice.
Taxpayers selling services may choose the most beneficial method of sourcing receipts from those sources for sales-factor purposes (through 2013). That’s because the Department of Revenue does the same. Taxpayers should take a page from the Department’s book. Those located in Pennsylvania should use market sourcing; those outside Pennsylvania should use cost-of-performance sourcing. This opportunity is only available through 2013; after that, the state has switched to market-based sourcing for services.
Franchise Tax
You have a refund opportunity if your corporation invests in subsidiaries. The amount of the refund is:
If this calculation produces a refund, contact one of our lawyers.
Bonus Depreciation
Taxpayers have a choice when it comes to bonus depreciation: (1) follow federal bonus depreciation; (2) compute Pennsylvania depreciation without regard to federal bonus depreciation; or (3) compute Pennsylvania depreciation using the statutory “3/7” method (i.e., per the return instructions). If your company would benefit from one of these options, contact one of our lawyers.
Separate Elections
Despite the Westinghouse case, we believe taxpayers that file consolidated federal returns are entitled to make different elections at the state level. Elect the reduced federal research credit. Make an IRC § 59(e) election. Elect MACRS instead of straight line depreciation. It’s your choice.
Remotely Accessed Software
If you paid sales tax on software, you may have a refund opportunity. The software is subject to Pennsylvania tax only to the extent it is used in Pennsylvania. Suppose you house software on a server in Pennsylvania. If 10% of your company’s users are located in Pennsylvania, only 10% of the software is subject to tax. If you paid tax on the full price, consider filing a refund claim.
Pennsylvania State Tax Intelligence
Given our inside view into Pennsylvania state taxes—our team includes the most recent attorney general responsible for handling tax matters for the Department of Revenue—we have unparalleled insights to Department positions and otherwise unavailable information, so that we can deliver accurate and timely information to clients. Consequently, we are able to anticipate the effects of certain legislative changes and legal opinions, allowing us to best advise clients on their state tax planning and controversies in Pennsylvania.
