CPAs need to be aware of current tax developments in key states to properly advise clients that are doing business in multiple jurisdictions. As state and local tax jurisdictions continue to face budgetary and staffing challenges, it is crucial for CPAs to regularly monitor developments in surrounding jurisdictions. This article will address some key developments in New York City, Pennsylvania, and Virginia that will impact your corporations, pass-through entities, and individual taxpayers.

New York City

On August 31, 2022, Governor Kathy Hochul signed into law New York State Senate Bill 9454 which allows for the retroactive effective date of the New York City Pass-Through Entity Tax (NYC-PTET) of January 1, 2022. For the NYC-PTET, taxpayers can now make this election for their 2022 fiscal year, instead of the original effective date of January 1, 2023.

It should be noted that the NYC-PTET was created as part of the 2023 fiscal year budget for New York and largely mirrors the New York State Pass-Through Entity Tax (NYS-PTET). The NYC-PTET permits eligible “city partnerships” and “eligible city resident S Corporations” to make an irrevocable election to pay tax at the entity level in a similar method as the NYS-PTET election.

The NYC-PTET will have a flat rate of 3.876%, and a credit will be available to resident partners, members, and shareholders against their personal income tax in an amount equal to their share of the NYC-PTET paid on their behalf. It should be noted that the NYC-PTET does not replace the NYC Unincorporated Business Tax or the NYC General Corporations Tax.

Taxpayers will need to ensure they have properly elected into the NYS-PTET before making the separate opt-in election for the NYC-PTET. Taxpayers must have elected into the NYS-PTET by September 15, 2022, in order to be eligible to elect into the NYC-PTET.

In addition to the NYC-PTET changes, included in Senate Bill 9454 was a provision setting an economic nexus threshold standard for corporations selling within the City of New York. Under the new economic nexus provision, corporations with receipts from activities within the city of $1 million or more in a tax year will be considered to have nexus within the city and be subject to NYC General Corporations Tax. If a corporation has activity within the city and is a member of a unitary group with total receipts into the city of more than $1 million, individual unitary corporate members will similarly be subject to taxation if they have receipts totaling $10,000 or more in a tax year, and the corporation has at least 10 customers or locations within the city.


In July, Governor Tom Wolf signed into law HB 1342 (Act 53), which includes a reduction to the corporate income tax rate, market-based sourcing rules for receipts from sales of intangible assets, and codification of the Pennsylvania Department of Revenue’s (DOR) economic nexus standard for corporate income taxes, among other changes.

Gradual reduction of corporate income tax rate.

Starting in 2023, the current 9.99% corporate income tax rate will decrease to 4.99% over the course of nine years. The rate will be reduced to 8.99% in 2023 and reduced by 0.5% each year until it reaches 4.99% in 2031.

Market-based sourcing for intangibles.

In determining apportionment of business income, Pennsylvania historically sourced receipts from sales of intangible assets based on a costs-of-performance method. Effective for tax years beginning after December 31, 2022, such receipts will now be sourced using the market-based sourcing method. This apportionment sourcing change aligns the sourcing method for the sales of intangibles with the method already being used for sourcing the sales of services, tangible personal property, and real property.

Corporate income tax nexus.

HB 1342 codifies the Pennsylvania DOR’s economic nexus standard for corporate net income taxes. In Corporation Tax Bulletin 2019-04, DOR indicated there is to be a rebuttable presumption of a filing requirement for a corporation without physical presence in Pennsylvania if it has $500,000 or more of Pennsylvania-sourced gross receipts. Under the new law, corporate net income tax applies to corporations that have substantial nexus with Pennsylvania. The law defines “substantial nexus” as “a direct or indirect business activity that is sufficient to grant the commonwealth authority under the [U.S.] Constitution … to impose tax … and for which a basis exists … to apportion or allocate the corporation’s income to [the] commonwealth.” Business activities include the following: 1) leasing or licensing intangible property that is used in the commonwealth, 2) regularly engaging in transactions with in-state customers involving intangible property (such as loans), or 3) selling intangible property that was used by a corporation in the commonwealth. Similar to the DOR policy, the new law includes a rebuttable presumption that a corporation with $500,000 or more of sales sourced in the current tax year to Pennsylvania has substantial nexus in Pennsylvania without regard to physical presence in the state.


Beginning in October, approximately 3.2 million eligible taxpayers will receive a one-time rebate from the Virginia Department of Taxation. This rebate is meant to assist Virginia individual taxpayers with the effects of inflation. The rebate amounts are $250 for single filers and $500 for joint filers. Taxpayers can check their eligibility at

Eligible taxpayers are those with a 2021 Virginia tax liability who filed their 2021 state individual income tax returns by November 1, 2022. Rebates are processed based on when the taxpayer’s 2021 return is filed. Taxpayers who filed their returns by July 1, 2022, should expect their rebates in late October; those who filed their returns between July 1, 2022, and November 1, 2022, will receive their rebates within four months of filing their return. If taxpayers are receiving a refund via direct deposit, they should expect to receive their rebate in the same manner. All other taxpayers will receive their rebate via paper check.

If money is owed by the taxpayer to the Virginia Department of Taxation, or another state or local agency, the rebate will first be used to offset the liability and only then will any remaining excess amount be refunded. In these cases, letters will be sent out to affected taxpayers explaining the liability and will include contact information in the event of any follow-up taxpayer inquiries.

As state and local taxing authorities continue to wrestle with fiscal matters, it is important that CPAs stay on top of these developments in order to properly advise their multi-state clients.

Corey L. Rosenthal, JD, is a principal and the state and local tax practice leader at CohnReznick LLP, New York, N.Y.