Pennsylvania – Department issues interpretation of Add-Back provisions

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March 2016


On February 19, 2016, the Pennsylvania Department of Revenue (DOR) issued Information Notice Corporation Taxes 2016-01 (Notice), which provides guidance regarding the add-back provision (Add-Back) enacted in July 2013.  Effective for tax years beginning after December 31, 2014, the Add-Back disallows certain Pennsylvania Corporate Net Income Tax (CNIT) deductions for transactions between affiliated entities involving intangible expenses and costs.

Among the guidance provided, the Notice interprets the application of the Add-Back to include embedded intangible costs and interest paid to third party banks if related to the acquisition of intangible assets from an affiliated entity.  The Notice also provides further insight regarding the DOR’s intended application of the exceptions to the Add-Back and the credit for taxes paid.

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Peter Michalowski

Peter Michalowski

State and Local Tax Leader, PwC US

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