Pennsylvania’s Capital Stock Tax Eliminated

Feb 10, 2016

As of January 1, 2016, Pennsylvania’s Capital Stock and Foreign Franchise tax (CST) has been eliminated. The CST was imposed on certain entities, primarily corporations and limited liability companies (LLCs) doing business in Pennsylvania. The elimination of the CST does not affect the Corporate Net Income Tax. However, if your corporation or LLC is taxed as an S Corporation, your entity may need to file final Pennsylvania corporate income tax return for 2015. For additional information on the elimination of the CST from the Pennsylvania Department of Revenue website, click here.

The elimination of the CST may offer new planning opportunities when considering the right choice of entity to use in Pennsylvania. The traditional entity of choice in Pennsylvania for real estate investment has been the limited partnership (LP). Why? One primary reason was that LP’s were not subject to the CST. With the elimination of the CST, the LLC may now offer a more efficient structure for real estate investment. For example, an LP often involves the need to create 2 entities, the LP itself to acquire the real estate, and a second entity to serve as the LP’s general partner. The need for a second entity may be eliminated with an LLC.

If you are looking to start a new business, or considering a real estate investment, we can help. For more information, please contact us today at 215-572-8111.

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