S.B. 1278, introduced by Sen. Camera Bartolotta, R-Carroll Township, and Sen. Judy Ward, R-Hollidaysburg, would allow businesses with fewer than 50 employees or less than $5 million in net asset value as of Dec. 31 of the year that the NOL arose to temporarily carry back NOLs to tax years 2018 through 2020. Qualifying businesses must also have fewer than 10 partners or shareholders, according to the bill.
Small business would be able to apply for a tentative tax refund if they were profitable in any of the five years prior to the loss beginning immediately after the passage of S.B. 1278, under a provision that is modeled after the Coronavirus Aid, Relief and Economic Security Act's
treatment of NOLs, according to a July 28 memorandum sent to state senators to solicit support for the measure."This carryforward provision would be temporary, providing immediate relief for small businesses just when they need it most," according to the memorandum.
Under the measure, small businesses would be allowed to take a net loss against other income sources. Those businesses would also be able to take NOLs against future years for up to 20 years, creating parity with the state's corporate NOL treatment.
"While countless small businesses were shuttered, many large corporate entities were able to stay open as life-sustaining businesses," according to the memorandum. "These large corporations will be able to deduct their losses from the year, while the small, family-owned businesses that closed their doors cannot."
Bartolotta, in a statement released Monday, said that small businesses, including many in the restaurant and hospitality industries, have taken the brunt of the economic damage caused by the pandemic and "the ever-changing regulations of [Gov. Tom Wolf's] administration."
"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," Bartolotta said. "This legislation acknowledges the unique challenges facing small employers and creates a tax environment that will allow these businesses to prosper again."
Ward, in a statement, also criticized Wolf's response to the pandemic. "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."
The bill, if passed, would take effect immediately.
Representatives for Wolf, the Pennsylvania Chamber of Business and Industry and Pennsylvania Senate Pro Tempore Joseph B. Scarnati III, R-Brockway, did not immediately respond to requests for comment Monday.
--Editing by Joyce Laskowski.
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