Pa. lawmakers again move to close ‘Delaware loophole’

    A bill crafted to close a corporate tax loophole in Pennsylvania in a way that’s most palatable to businesses is teed up for consideration by the State House.

     

    The “Delaware loophole, which has bedeviled legislators and governors for years, is named for the business practice of transferring money from commonwealth subsidiaries to a corporation in Delaware — a state with no corporate taxes.

    There are different ways to go about closing it, and therein lies much of the conflict over a bill that’s passed a committee vote.

    Sponsor Rep. Dave Reed, R-Indiana, says the measure is intended to focus on only those companies moving money across state lines for the express purpose of avoiding taxation.

    “If they’re moving it for a valid business transaction, we’ve got no problem with that, that’s the normal state of business,” he said. “But if you’re just trying to avoid taxes in Pennsylvania, we want to close that loophole.”

    Several Democrats oppose the plan, saying there’s a better way to close the loophole — by requiring companies to file a single tax return for all of its affiliates so that it doesn’t matter if money is moved from one to another.

    The business lobby opposes such a method.

    Reed says he’s not taking that approach because, basically, it doesn’t stand a chance in the House — while a previous version of this bill passed the chamber with bipartisan support last year.

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