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Capital Stock and Franchise Tax in Pennsylvania

Capital Stock and Franchise Tax in Pennsylvania

Issue Overview: The capital stock and franchise tax is a property tax imposed on the capital stock value of businesses in Pennsylvania. Determined through a complex formula, it is a tax paid regardless of whether a business has net income. The CSFT represents a double tax on businesses in Pennsylvania, which also pay either the corporate net-income tax or the personal income tax.

NFIB succeeded in 2000, eliminating the minimum required payment of $200 for small businesses, reducing the rate from 10.99 mils to 8.99 mils and winning a nine-year phase-out of the tax.

NFIB Position: NFIB maintains that the CSFT is an unfair double tax on Pennsylvania businesses. NFIB supports the continued phase-out of the CFST at the rate established in 2000. NFIB also supports raising the current exemption of $125,000 to $250,000. This would essentially exempt the smallest businesses from the burden of this tax. NFIB continues to address this issue with the General Assembly in hopes of getting ongoing relief for small businesses.

Issue Status:
2005 Action:

    • May 11: On Second Consideration in House.
    • May 3: House Finance Committee Reports HB 1312 as amended. 
    • April 11: House Bill 1312 (sponsored by Rep. Mark Mustio) would restart the scheduled phase-out of the CFST to the original schedule before the changes were made by the Rendell administration.

 

2006 Action: NFIB was successful in securing $44.7 million CSFT reductions in the 2005-06 state budget by accelerating the phase-out of the CSFT by .1 mil and raising the small-business exemption to $150,000.

2007 Action: NFIB will continue its efforts to accelerate the phase out of the CSFT in the 2007-08 legislative session.

What to Do: Contact the governor and your Senate and House members.

What to Say: Urge them to continue the phase out of the CSFT. Explain to them how the CSFT negatively affects your business. Tell them that postponing the phase-out of the CSFT would be considered a tax increase for business.