New Business Privilege Tax Reform Bill Introduced

Measures Provide Targeted Relief to Local and Small Businesses

PHILADELPHIA, PA – City Council members Bill Green and Maria Quiñones Sánchez today introduced new legislation providing significant tax relief for Philadelphia-based and small businesses, continuing their efforts to reform Philadelphia’s business privilege tax (BPT).

“For three years, we have been working to further the goals of tax fairness; leveling the playing field for local businesses, including manufacturers; small business tax relief; and generating economic growth by removing some tax-related disincentives to locating and expanding a business in the City,” Councilwoman Sánchez explained. “This legislation is part and parcel of that ongoing work and is as close to a compromise as we were able to come with the Administration and in discussions with stakeholder groups, including the Chambers of Commerce.”

The legislation contains two main parts:
(1) an exemption from the gross receipts and net income parts of the BPT for the first $100K of receipts of all businesses; and
(2) putting in place "single sales factor apportionment,” meaning that Philadelphia businesses would pay the high rate (6.45%) net income tax only on income derived from sales in Philadelphia.

“This legislation proposes far more and far more targeted business tax reduction than is currently in the Five-Year Plan,” Councilman Green remarked. “By focusing tax relief on Philadelphia businesses and small businesses – which are the heart of our local economy – this legislation is an important step on the path toward broader BPT reform, which we continue to believe is essential for removing the ‘profitability penalty’ businesses now face for locating in the City.”

Further discussing the legislation, Councilwoman Sánchez noted the importance of extending the $100K exemption to both the gross receipts and the net income prongs of the BPT: “One of the key findings from our analysis of BPT data over the past three years is that Philadelphia’s small businesses pay a disproportionately high share of the net income tax. Providing an exemption just on the gross receipts tax would do little to help these businesses, which we know are especially important to economic growth in post-recession periods.”

Regarding “single sales factor apportionment,” Councilman Green explained that the current apportionment structure – whereby Philadelphia businesses with property and employees in the City pay net income tax on a portion of their non-City sales – is particularly burdensome for the City’s exporting industries, including manufacturing. “With the distressing news this week from Sunoco, this change, which helps level the playing field for Philadelphia businesses, gains ever more urgency. We must take bold action to at once maintain and grow our manufacturing sector and its family-sustaining jobs.”

While the legislation continues planned gradual reductions in the net income tax, the Councilmembers Green and Sánchez remain committed to complete elimination of this tax, a tax that punishes profitability.

“The data – and a cursory look at City Line Avenue – show just how harmful the net income tax is and how it drives successful businesses and their jobs right out of the city,” Councilman Green noted. “We will continue to push for elimination of this tax,”

Councilwoman Sánchez stated, “a change we think is essential to making the City economically competitive within the region.” The legislation introduced today will provide over $50 million per year of tax relief targeted toward Philadelphia-based and small businesses. Councilwoman Sánchez concluded, “We look forward to our continued work with our Council colleagues, key stakeholders, and the Administration, as we pursue overarching policy goals we think all Philadelphians concerned about jobs and economic growth can get behind.”

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"I ran for office four years ago and I am running today because I love this City... My campaign theme in 2007 and still today - 'beholden to none, accountable to all' - reflects my commitment to be a strong, independent voice for all Philadelphians." - Bill Green