Council at last OKs business-tax reform

Posted: November 04, 2011

PHILADELPHIA is now open for business.

That's the message City Council hopes to send via yesterday's unanimous votes for two bills to significantly change the city's business-tax structure.

For years Council griped that city-based businesses are at a competitive disadvantage because they're charged a gross-receipts tax even if they lose money. Meanwhile, chain stores, like Wal-Mart, pay zip because they're not headquartered in the city.

But soon all businesses can expect some tax relief with the passage of a bill, introduced by Council members Maria Quinones-Sanchez and Bill Green, that would exempt the first $100,000 from the gross-receipts and net-income portions of the business- privilege tax.

"It's the largest single tax reform in a single bill, in a single act in tax history," Green said.

Additionally, city-based businesses would pay only the net income tax on revenue from sales inside the city. Both parts of the bill would be phased in over three years.

The exemption part of the bill would be in full effect by fiscal year 2015, and the latter portion would be in full effect by fiscal year 2016.

Under the legislation, the gross-receipts-tax rate would freeze. Scheduled rollbacks in the net income tax would continue, but at a slower pace.

The measure follows a more dramatic 2010 bill that attempted to shift the business-tax burden from the net-income tax, which taxes profits, to the gross-receipts tax, which taxes sales. The administration opposed that bill and it was tabled following claims that it would hurt the construction industry, insurance and hotels.

The second bill OK'd yesterday would eliminate business taxes for the first two years for all new businesses that employ at least three full-time workers by the first year and six workers by the second year.

"I'm hoping my bill will allow people to make the decision to be an entrepreneur," sponsor Jim Kenney said.

It would also eliminate the business-privilege license fee for all businesses starting in fiscal year 2014. Mayor Nutter strongly supports both bills, which passed 16-0. Councilwoman Joan Krajewski was absent.

"These bills send the right message to current and future employers that Philadelphia is open for business," said Joseph Mahoney, executive vice president of the Greater Philadelphia Chamber of Commerce. "This is a win- win for everyone."

Council also passed a bill by Councilman Darrell Clarke that would require the city only to capture raccoons that are nuisances and to avoid killing them.

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