In the near future, I plan to introduce legislation that would clarify that any goodwill recorded in Call Reports filed by banks with the FDIC is excluded from the bank shares tax calculation, as intended by Act 55 of 2007. Act 55’s intent was to exclude goodwill for all combinations and acquisitions.

In calculating the bank shares tax, the value of any goodwill and US obligations as recorded in Call Reports is deducted from total bank equity. The goodwill deduction applies to any goodwill required to be recorded by banks due to changes in accounting rules that took effect July 1, 2001.

Recently, the Pennsylvania Department of Revenue has taken a new position in examinations and appeals that threatens to strip most banks of the benefits of the goodwill deduction. Although it was never their stated position, DOR is now asserting that the goodwill deduction is not available when a combination of two bank holding companies occurs followed by or simultaneous with the merger of their bank subsidiaries. Because most bank combinations occur through holding company mergers, this change in policy could deny most banks the benefits of goodwill deductions that have been claimed for many years, and not previously denied by the department.

Please join me in co-sponsoring this legislation. If you have any questions regarding this legislation, please contact Matt Deegan in my office at 717-787-9684 or mdeegan@pasen.gov.