Legislation that seeks to reduce the state’s corporate net income (CNI) tax — currently at 9.99 percent, the second-highest rate in the nation — and raise the cap on the net operating loss provision has cleared the state House of Representatives Finance Committee. Floor action on the legislation, HB 440, is expected in the next few weeks.

Governor Tom Corbett asked for the business tax cuts in his February budget address. The committee attached Corbett’s language to HB 440, which would close the so-called “Delaware loophole.” In some instances, the loophole permits corporations to claim earnings in Delaware, which has no corporate income tax, to avoid taxes in Pennsylvania.

The bill would require corporations to “add back” specific transactions to their Pennsylvania taxable income they can now avoid by incorporating in Delaware.

“For the first couple of years, we think this will be revenue neutral,” said Todd Brysiak, who works for state Representative Dave Reed, R-Indiana, the sponsor of the bill. “Based on what’s happened in other states, we will collect anywhere from $70 million to $90 million more in taxes a year, but then lose about the same because of the reductions.”

The tax reduction language will reduce the CNI from 9.99 percent to 6.99 percent over 10 years.

The bill would also increase the state’s net operating loss cap from $3 million to $5 million, allowing certain corporations to reduce their tax liability by offsetting earnings from previous losses.