After years of rumors that the tax would be phased out completely (maybe even since its enactment in 1844), the day has come. Effective January 1, 2016, Pennsylvania’s Capital Stock and Foreign Franchise Tax was finally eliminated.
Prior to its elimination, the tax applied to Pennsylvania corporations with capital stock, joint-stock associations, limited liability companies (LLCs), business trusts and all other entities classified as corporations for federal income tax purposes. In certain circumstances, the prospect of paying capital stock tax discouraged certain businesses from forming an LLC or other type of venture to which the tax applied, thus favoring organizations such as limited partnerships.
As a result of the elimination of the Capital Stock and Foreign Franchise Tax, many organizations subject to the tax will be filing final corporation tax returns for the 2015 tax year. Consult your attorney or tax professional to determine how this impacts your business, and learn more about the tax from the Pennsylvania Department of Revenue here.