Because the legislation was not enacted until July of 2024, some entities potentially impacted by this legislation may have already filed their original return for the 2023 tax year. The statutory language is clear that the election must be made by the taxpayer on an originally filed return. Taxpayers impacted by this legislation that have already filed their 2023 Form RCT-101’s cannot amend their reports to make this election. Rather, the related entity should addback the intangible expense or cost and/or the interest expense or cost on its 2023 Form RCT-101 and then claim the existing statutory credit found at 72 P.S. § 7401(3)1.(t)(1) for tax paid by the entity reporting the amounts in question in its taxable income. In the unusual situation where the related entity believes it is not made whole by the existing statutory credit, it has the right to file an appeal with the Board of Appeals requesting relief which, assuming the appeal is timely, will be considered by the Board on a case-by-case basis.
Taxpayers impacted by this legislation that have NOT already filed their 2023 Form RCT-101’s can make the election on their originally filed return. To make the election, the taxpayer should enter the amount they are electing to exclude as an Other Deduction on page 2, Section C Line 2D of the PA Corporate Net Income Tax calculation and provide additional details on REV-860, Schedule OD – Other Deductions. The taxpayer should list each related entity separately on the Schedule OD and include the related entity’s name and Federal EIN in the Description column of Schedule OD. The corresponding amount of income being excluded should be listed in the associated Amount column. Failure to provide these details will result in the disallowance of the deduction.