Pa. Decouples from Fed. Corporate Tax Breaks in Budget

Tax attorney Jennifer Karpchuk was quoted in a Law360 article examining Pennsylvania's decision to decouple from recent federal corporate tax benefits for research and experimentation (R&E), qualified production property expensing and the Internal Revenue Code Section 163(j) interest deduction calculation. The move, part of H.B. 416 signed by Gov. Josh Shapiro, is projected to preserve more than $1 billion in state revenue next fiscal year and reflects a policy choice to prioritize budget solvency while ongoing corporate rate reductions and higher net operating losses (NOLs) continue to roll out. Ms. Karpchuk, who co-chairs Holland & Knight's State and Local Tax Team, noted Pennsylvania's long history of following federal R&E treatment and commented on the effects of stepping away from a return to immediate expensing.

"Now, it is decoupling from the federal change that would have moved back to immediate expensing. While it is an added cost to the state, it was a cost that had been incurred for decades prior to the 2022 change," she said.

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