House Finance Committee reports combined-reporting bill after hours of testimony and debate

The House Finance Committee voted 14–12 to report House Bill 16 10, a measure sponsored by state representatives Elizabeth Fiedler and Mary Jo Daley that would require unitary combined reporting for corporate net income tax filers beginning with tax year 2026.

The bill would require related business entities under common ownership to file a single combined report on a water's-edge basis, add a new statutory definition for tax havens (with limited carve-outs for legitimate business purposes), create rules to apportion net operating losses and tax credits within a unitary group, and include a safe-harbor for tax years 2026 and 2027, according to testimony presented to the committee.

Supporters said combined reporting would reduce profit-shifting and make tax liability fairer for Pennsylvania businesses that operate primarily in the Commonwealth. "73% of the corporations active in our state pay no corporate taxes to the Commonwealth at all. 73%," Representative Elizabeth Fiedler said, arguing the change would require national firms to pay tax on the share of their business conducted in Pennsylvania. Independent analyst Michael Mazeroff said states that adopted combined reporting have seen meaningful revenue increases and that "Combined reporting will raise revenue on net. No question."

Opponents and some technical witnesses raised concerns about administrative complexity, international double-taxation risks, and greater volatility in corporate income tax receipts. Leonor Heavey, senior tax counsel for the Council on State Taxation, urged a no vote and warned the measure "would make Pennsylvania's most volatile revenue source even more volatile." Heavey and other witnesses noted existing measures—an "add-back" statute adopted in 2013 and the economic-nexus approach used since 2022—already target some avoidance strategies.

Department of Revenue testimony referenced changes to Pennsylvania corporate tax policy, including a scheduled reduction in the corporate net income tax rate to 4.99% by 2031 and an expansion of net operating loss (NOL) carryforward limits (from a 40% cap toward 80%). Supporters said those changes, plus the bill's apportionment and tax-haven rules, modernize how the Commonwealth measures business activity.

Committee chair remarks reflected the divide. Chair Griner said she was not personally opposed to combined reporting but criticized the speed of the bill process and the lack of extended stakeholder negotiation. She cited department estimates—referenced in committee discussion—that, over coming years, the proposal could increase business tax liabilities (a figure she cited around $1.4 billion annually), and argued for more technical input. Sponsor Mary Jo Daley cited national precedent: "Combined reporting is generally regarded as the single most important corporate tax reform state lawmakers can contemplate," quoting an Institute on Taxation and Economic Policy passage that was introduced during her remarks.

The committee took a roll-call vote after more than an hour of testimony and questions; HB 16 10 was "reported from the finance committee as committed by a vote of 14 to 12." The bill will proceed according to House procedures for committees of reference.

Questions for further work raised during the hearing included the treatment of foreign affiliates, the mechanics of the proposed tax-haven definition, procedures for allocating credits and losses within a unitary group, and whether the Department of Revenue and stakeholders have sufficient time to implement the new reporting regime.

Fiscal and implementation details discussed in committee: the bill would take effect for tax year 2026; it includes a safe harbor for 2026–27; it adds explicit allocation rules for losses and credits within unitary groups; and department testimony noted the CNIT rate reduction schedule and prior changes to NOL rules that interact with this proposal.

Committee action: HB 16 10 was called up for consideration, received testimony from sponsors, Department of Revenue staff, nonprofit tax counsel, and independent analysts, and was reported by committee with a 14–12 vote.

The committee record shows continuing disagreement between members who prioritized closing perceived loopholes and those who urged additional stakeholder negotiation and technical refinement before sending the bill further in the process.