Q&A with the Pennsylvania Department of Revenue

How does the federal credit for health insurance paid on behalf of the company for its employee affect the state return?

Sep 30, 2013
For federal purposes there is a credit for health insurance paid on behalf of the company on its employees – this credit is either an add back to income or deduction from expenses on the federal return as well – from my understanding this credit which was added to federal income is not a deduction on the state return – meaning you are paying state taxes for a credit you never received on the state.

Under current statute the calculation of PA taxable income begins with federal-taxable income before special deductions and net operating losses. Currently Article IV of the Tax Reform Code of 1971 does not permit an adjustment to taxable income for expenses which were disallowed in calculation of federal taxable income when claiming this credit.

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These documents provide a summary of the answers provided by the Department of Revenue to the PICPA Committee on State Taxation at its annual question and answer session. These documents are classified as revenue information issued for informational purposes only for the convenience of PICPA members. Pursuant to 61 Pa. Code Section 3.4, these documents should not be relied upon for any purpose or used in tax appeals. Taxpayers requiring a binding opinion on their specific fact situation may request a written letter ruling under 61 Pa. Code Section 3.3.