Q&A with the Pennsylvania Department of Revenue

How does the DOR determine whether hedge funds, private equity funds, and/or similar types of investment vehicles are engaging in a “business” for PIT purposes?

Jun 30, 2011

In light of recent BF&R decisions in which the Department of Revenue’s representative did not dissent, which criteria will the DOR now use to determine whether hedge funds, private equity funds and/or similar types of investment vehicles are engaging in a “business” for PIT purposes?


The Department does not anticipate making any policy changes related to the criteria for business activity. The criteria are located in 61 Pa. Code § 103.12. The Department’s position is that business entities such as hedge funds that do not market a product or service to the general public but are merely a group of people who invest for their own benefit are not conducting a business.

See the following excerpts from the PIT Guide and Revenue website Q&A, below:

B. What is Not a Business or Profession

The following activities do not constitute the operation of a business, profession or farm and are, therefore, reportable in other classes of Pennsylvania income-

A sale, discontinuation, or abandonment of a business or segment thereof;

An isolated or nonrecurring transaction which is not a normal or routine business activity;

The ownership or disposition of assets which are held for long-term investment purposes;

Trading in or hedging securities for personal purposes; and

A non-operating interest in coal, oil, gas, or minerals in place unless they serve an operational function in the operation of the owner's business.

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