From NOL Limits to Childcare Credits: What Pennsylvania’s New Tax Law Means for You

On July 11, 2024, Pennsylvania’s Act No. 56, also known as Senate Bill 654 (S.B. 654), was officially signed into law. This new legislation introduces several significant changes to bolster the state’s tax code and provide financial relief for businesses and individuals. Here are the key highlights of the bill:

1. Net Operating Loss (NOL) Carryover Limit

• The NOL carryover limit will increase gradually from 40% to 80%, rising by 10% each year.
• Goodwill recorded in Call Reports filed by banks with the Federal Deposit Insurance Corporation is excluded from the bank shares tax calculation.

2. Childcare Contribution Credit

• Employers can claim a credit for up to 30% of their aggregate contributions to employees’ eligible childcare costs.
• The credit is capped at $500 per employee, and contributions from employers are excluded from the income of the receiving employees.
• This credit is applicable for tax years after December 31, 2024.

3. 529 and ABLE Account Contribution Credit

• Employers may claim a tax credit for matching contributions to an employee’s 529 or ABLE account.
• Contributions from employers are excluded from the income of the receiving employees.
• This provision is effective for tax years after December 31, 2024.

4. Student Loan Debt Interest Deduction

• A state personal income tax deduction for student loan debt interest has been introduced.
• The provision mirrors the federal maximum of $2,500.
• This provision is effective for the tax year after December 31, 2024.

5. Sales Tax Exemption for Cleaning Services

• A sales tax exemption has been implemented for services related to the cleaning or maintenance of storage traps used by food services or restaurants to collect grease waste.

6. Cryptocurrency Mining Exclusion

• Cryptocurrency mining operations will be excluded from the sales tax exemption for purchasing data center equipment.
• This change is effective after December 31, 2025.

7. Medical Cannabis Business Expenses Deduction

• A state-level deduction for medical cannabis business expenses will be effective after December 31, 2023.

8. Changes to Tax Credit Programs

• Updates have been made to the Neighborhood Assistance Program.
• Revisions have been enacted for the Coal Refuse Energy and Reclamation Tax Credit.
• Modifications have been made to the Rural Jobs and Investment Tax Credit.

The enactment of S.B. 654 marks a significant shift in Pennsylvania’s tax policies. The new law aims to provide financial support to businesses and individuals while adapting to the changing economic landscape.