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House Co-Sponsorship Memoranda
House of Representatives
Session of 2013 - 2014
Regular Session
MEMORANDUM
| Posted: | June 14, 2013 02:40 PM |
|---|---|
| From: | Representative Matt Gabler |
| To: | All House members |
| Subject: | Amendments to the Bank Shares Tax |
| Under Pennsylvania law, banking institutions in the Commonwealth pay their taxes to the state through a tax known as the Bank Shares Tax. This tax is currently the subject of pending litigation before the Pennsylvania Supreme Court. Unfortunately, technical glitches in the current law provide advantages to out-of-state banks over in-state banks in tax liabilities both when mergers occur and when liability is apportioned for banks located outside of Pennsylvania who do business in the Commonwealth. In the near future, I plan to introduce legislation to modernize and correct the problems with Pennsylvania’s bank shares tax. My legislation will resolve ambiguities in the current law that have resulted in litigation; create incentives for banks to expand employment and investment in Pennsylvania; and ensure that all banks doing business in Pennsylvania are subject to the same taxation. Under current law, the bank shares tax is levied at a rate of 1.25% calculated on a bank’s total equity capital averaged over a six year period. Disputes about how to calculate the six year average when mergers occur and how to measure bank equity have resulted in extensive litigation which has exposed both the Commonwealth and taxpayers to unpredictable liabilities. To prospectively resolve these problems, my legislation will eliminate the use of the six year moving average and provide a more precise definition of equity capital. For banks operating both in Pennsylvania and in other states, current law apportions liabilities to the Commonwealth based on a bank’s payroll, deposits and receipts paid or received within Pennsylvania. My legislation will provide for apportionment based solely on receipts, this is similar to the single sales factor currently used by corporations in the Commonwealth. This change will incentivize banks to expand employment and develop bank offices in Pennsylvania while eliminating the elements of current law that disincentivize banks from increasing their employment in Pennsylvania. Furthermore, Pennsylvania’s bank shares tax is currently imposed only on banks “located” within the Commonwealth. As a result, banks headquartered in Pennsylvania are forced to pay taxes to all states in which they serve customers, while banks headquartered in other states pay taxes to Pennsylvania only if they open branches or offices in Pennsylvania. My legislation will level the playing field by ensuring that all banks doing business in Pennsylvania are subject to the same taxation regardless of the location of their branches or offices. I invite you to join me in co-sponsoring this legislation. Please contact my office at 260-6142 if you have any questions. |