Corporate Net Income Tax (CNIT)

The Pennsylvania Department of Revenue (Department) released Corporate Tax Bulletin 2019-04 (Bulletin) on Sept. 30, 2019, which establishes that nexus is created for corporate net income tax (CNIT) for out-of-state corporations when gross receipts sourced to Pennsylvania surpass $500,000.

Once this threshold is surpassed, a filing requirement is created.  The new economic nexus threshold is effective Jan. 1, 2020 1.  This bulletin release by the Department is in response to the United States Supreme Court’s decision in South Dakota v. Wayfair 2

With this bulletin, Pennsylvania becomes the latest state to utilize the Wayfair decision as the basis for creating a bright-line economic nexus standard for corporate income tax.

The CNIT has been historically applied to any corporation doing business in Pennsylvania, carrying on activities in Pennsylvania not protected under Public Law 86-272 (P.L. 86-272) 3, having capital or property employed in Pennsylvania, or owning property within Pennsylvania 4.

Wayfair Decision

As a result of the Wayfair decision, the Department has determined that under the CNIT nexus statutory standards apply to any corporation regardless of physical presence.

As a result, any corporation exceeding these new nexus standards will be required to file a CNIT report with the Department.

The Department also clarified that this new factor-based economic nexus standard will not apply to taxpayers claiming protection under P.L 86-272; however, taxpayers claiming this protection may still establish economic nexus based on other activities and will be required to file a CNIT report with the Department.

What This Means for You

Similar to the Department’s actions with sales and use tax economic nexus, the Department has issued Corporate Income Tax Bulletin 2019-04 before Pennsylvania’s legislature has enacted any statutory or regulatory changes. 

As of now, it is unknown when or if the state will take official legislative action on this issue and how the state legislature plans to interpret economic nexus for corporate income tax.

The Department’s approach to economic nexus for CNIT does create some issues.  The Bulletin indicates that the $500,000 threshold need only be surpassed “per year” to create nexus. 

The Department does not indicate whether this applies to the current fiscal or calendar year, nor does the guidance specify for any short period tax years. It is not yet clear as to how this “per year” basis will be accounted for. 

Also, the Bulletin does not provide any guidance concerning estimated payment requirements or any type of safe harbor standards.

The release of Bulletin 2019-04 marks the latest event of states taking a more interpretive stance on Wayfair and economic nexus standards.

Recently, we have seen Hawaii 5, Texas 6, and Massachusetts 7 begin the process of enacting factor-based economic nexus standards for corporate income tax. 

As more states begin to assert new nexus standards for corporate income taxes, the authority to apply Wayfair for income tax nexus remains unclear.

Since Wayfair, we have seen sweeping changes in sales tax nexus policy from almost every state. 

Nearly all states have some sort of economic nexus statute regarding sales tax and income tax, and it remains unclear as to how this new complexity and administrative burden of a factor-based economic nexus will affect taxpayers. 

It is likely that as time passes and Wayfair is interpreted in broader applications such as corporate income tax, we will see more states implementing similar factor-based economic nexus standards for income taxes.


  1. Corporation Tax Bulletin 2019-04, Nexus for Corporate Net Income Tax Purposes, Pennsylvania Department of Revenue, Sept. 30, 2019.
  2. 138 S. Ct 2010 (2018)
  3. 15 U.S.C. 381 et seq. P.L. 86-272
  4. 72 PA. STAT. 7402
  5. SB495 SD2 HD1
  6. Proposed amendments to TEX. ADMIN. CODE 3.586
  7. 830 CMR 63.39.1(3)(D)


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