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
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
T: 610-670-7789, ext.