Pennsylvania lawmakers are looking to the state tax code to motivate manufacturers to produce personal protective equipment (PPE).
In an April 3 cosponsorship memo, Sen. John Blake (D) urged fellow lawmakers to support legislation that would provide a tax credit equal to 100 percent of costs a business incurs when converting or retrofitting a facility to manufacture PPE.
“Across the Commonwealth, our small businesses and manufacturers are finding creative ways to utilize their facilities to pitch in and assist in our state response to the COVID-19 pandemic,” Blake said in an April 3 news release. “It is imperative that as they support our residents and our health care professionals that we provide state assistance to help retrofit facilities and increase production of personal protective equipment here in Pennsylvania.”
The tax credit would be for businesses subject to the corporate net income tax, which is levied at a rate of 9.99 percent. The credit could also be for the personal income tax for passthrough businesses, Blake told Tax Notes in an emailed statement. Businesses would be eligible for the tax credit if the conversion is done to produce PPE to assist with Pennsylvania’s response to the coronavirus, according to Blake's sponsorship memo. The program would be capped at $50 million annually.
Also on April 3, Sen. Vincent Hughes (D) circulated a cosponsorship memo on legislation that would expand loan guarantees to manufacturers and businesses retrofitting facilities to produce PPE. The loans would be made under the state's First Industries Fund, which is administered by the Department of Community and Economic Development (DCED). The program guarantees 50 percent of an outstanding principal balance, or 90 percent if the loan is for an agricultural project, up to $2.5 million, according to the department's website.
The legislation comes weeks after Gov. Tom Wolf (D) announced a multi-agency web portal that would expedite the procurement of PPE and critical medical supplies for hospitals and medical facilities across the state. Items listed as most needed include surgical masks, N95 respirators, alcohol-based hand rubs, ventilators, hospital gowns, and testing kits.
The loan guarantee memo was filed by Hughes after he worked with a distiller converting operations to produce hand sanitizer. The tax credit memo was filed by Blake after working with a manufacturer that retrofitted its operations to produce protective goggles and masks for healthcare workers, Blake said.
"The members of the Pennsylvania Distillers Guild are doing our contribution on a not-for-profit basis, and we certainly appreciate any support we can get during this time of converting our businesses in an effort to help our fellow Pennsylvanians," Robert Cassell, president of the Pennsylvania Distillers Guild, told Tax Notes.
The portal was created by the DCED in conjunction with the Pennsylvania Manufacturers’ Association, The Hospital and Healthsystem Association of Pennsylvania, and the Pennsylvania Chamber of Business and Industry, among others.
Pennsylvania Manufacturers’ Association President David Taylor told Tax Notes on April 7 that the state should also address more immediate needs, including establishing protection from lawsuits for manufacturers who are retooling factories to produce this equipment.
“We also need the governor to revise the business closure list. The governor’s orders scrambled the supply chains, and you have industries deemed essential but don’t have the parts they need,” Taylor said. “Let’s figure out the credits later on; we’re burning daylight to get this pandemic under control, and we should have done this three weeks ago. This is deeply important.”
Taylor said that Wolf’s list of businesses allowed to remain open did not match the list of critical infrastructure workers put out by the federal Cybersecurity and Infrastructure Security Agency. The result was that some vendors or suppliers needed to apply and secure a waiver to continue producing materials for manufacturers or businesses making critical supplies. Wolf closed the waiver process for businesses April 3.
“Textile manufacturers are shut down, which affects a business that wants to retool to make hospital linens,” Taylor said. “They can’t make those products out of wishful thinking — they need fabric. . . . We need anyone who is a vendor or supplier for anything deemed essential to be waived.”
Other legislation that would provide longer-term relief moved to the Senate Finance Committee on April 3.
H.B. 2377, cosponsored by Reps. David Rowe (R) and Francis Ryan (R), would suspend personal income taxes and sales taxes during the disaster emergency issued by Wolf on March 6. The personal income tax would resume after the declaration of disaster emergency is lifted.
“While access to loans is helpful, it is much more important to reduce the costs for our constituents to allow all to have the financial wherewithal to recover as soon as possible after the emergency has passed. Actions taken now will determine how long the lingering effects of this emergency will be felt in our communities and our economy,” Rowe and Ryan wrote in a memo attached to the bill.
Although there is no fiscal note available for the bill, personal income tax and sales tax revenue together account for approximately 73 percent of the state’s revenue sources, according to state budget documents.
And according to March 2020 revenue collections released by the Department of Revenue April 1, personal income tax revenue for the month totaled $1.1 billion while sales tax revenue totaled $839.2 million.