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American Water Works Company Inc : Pennsylvania American Water President Brings Tax Policy Recommendations to House Panel

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04/11/2013 | 09:05pm CEST

In testimony today before the House Finance Committee, Pennsylvania American Water President Kathy L. Pape advocated a number of tax policy proposals that would significantly improve Pennsylvania's competitive position relative to other states.

Pape pointed out that Pennsylvania has the highest flat rate and second highest marginal rate corporate net income (CNI) tax in the nation. "Since the United States has the highest national corporate net income tax in the world, Pennsylvania therefore has the second highest marginal CNI on the face of the earth," she said. In addition to testifying on behalf of Pennsylvania American Water, Pape appeared before the panel in her role as chairperson-elect of the Pennsylvania Business Council and spoke is support of Governor Corbett's tax package.

Pape advocated a gradual approach to reducing the commonwealth's high corporate net income tax rate, with a phase-down from the current 9.99 percent rate to 6.99 percent - or about the national average - by 2025.

Her testimony also addressed the challenge posed by limitations on net operating loss (NOL) carryforward, which current tax law caps deductions at the higher of $3 million or 20 percent of taxable liability. She said the Pennsylvania Business Council's proposal would scale that up to $5 million or 30 percent and hold there until the corporate net income tax rate is reduced to 6.99 percent.

Pape said, "Most states and the Internal Revenue Service allow 100 percent deduction of net operating losses in the following profitable year. Pennsylvania is one of a handful that does not and presently limits the write-off to 20 percent."

She called the NOL issue "of immense importance" to Pennsylvania's older industries, utilities and energy firms, noting that NOL deductions smooth out the tax liability of cyclical firms that experience wide swings in profits and losses.

Pape also said final elimination of the Capital Stock and Franchise Tax (CSFT) with this year's budget is "a victory for all Pennsylvanians and a testament to our Legislature's ability to make good on a promise over three gubernatorial administrations. While it took longer than planned, the CSFT phase-out is a critical step to making Pennsylvania more competitive."

She stated, "When companies like Pennsylvania American Water have to pay higher taxes, those costs typically get passed through to customers in the form of increased rates. That's why we strongly believe in these policy changes and provisions, because they will enable our company to reduce tax costs, which has long-term benefits for our customers and the communities we serve."

Pennsylvania American Water, a subsidiary of American Water (NYSE: AWK), is the largest water utility in the state, providing high-quality and reliable water and/or wastewater services to approximately 2.2 million people. Founded in 1886, American Water is the largest publicly traded U.S. water and wastewater utility company. With headquarters in Voorhees, N.J., the company employs approximately 6,700 dedicated professionals who provide drinking water, wastewater and other related services to an estimated 14 million people in more than 30 states and parts of Canada.

Pennsylvania American Water
Terry Maenza
T: 610-670-7789, ext. 1009
M: 610-849-6484

© Business Wire 2013
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