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(foreign dividend gross-up) of the Internal Revenue Code of 1986. The 50 percent of travel and entertainment expense that is disallowed on
Taxpayers must complete REV-798, Schedule C-2, PA Dividend the federal form is not permitted as a deduction for Pennsylvania
Deduction Schedule. purposes.
LINE 2B All other deductions must be reported on REV-860, Schedule OD, Other
Deductions. Include an additional schedule if more space is needed.
Interest on U.S. Securities. Interest on U.S. securities is deductible, but
must be reduced by: Add Lines 2A, 2B, 2C and 2D and enter the result on Line 2, Total
Deductions.
•Any interest on indebtedness incurred to carry the securities;
•Any expenses incurred in the production of such interest income;
•Any other expenses deducted on the federal income tax return that LINE 3A
would not have been allowed under Section 265 of the Internal Enter the total amount of taxes imposed on or measured by net income
Revenue Code of 1986, if the interest were exempt from federal and deducted on the attached copy of the federal tax return. All taxpayers
income tax. reporting expenses for taxes on federal income tax returns must complete
REV-860, Schedule of Taxes, even if no taxes are imposed on or
However, interest from repurchase agreements is not considered interest
measured by net income. If a state’s tax is based on the higher of a tax
from U.S. securities. Therefore, it is not deductible.
on net income or a tax on another item, such as gross receipts or net
To calculate the net U.S. interest deduction on Line (2B): worth value, the taxpayer is required to add back the entire amount of
•Provide a detailed schedule showing the calculation of net U.S. the tax in periods where the liability is based on net income. If a state’s
interest deduction and include a listing of investments that generated tax is a combination of a tax on net income and a tax on another item,
the exempt interest income. such as gross receipts or net worth, the income portion of the tax is added
Pennsylvania allows a pass-through exemption from corporate net back.
income for interest or dividend income received from a regulated NOTE: The portion of Philadelphia business income and receipts
investment company to the extent such distribution or dividend is derived tax measured by net income must be included.
from obligations free from state taxation. Such obligations include those
issued by the U.S. Government; the Commonwealth of Pennsylvania; LINE 3B
any public authority, commission, board or other agency created by the
commonwealth; any political subdivision of the commonwealth; or any This amount is the bonus depreciation claimed by the corporate taxpayer
public authority created by any such subdivision. under IRC Section 168(k) in the calculation of federal taxable income.
To support any claim for a pass-through deduction for corporate net
income tax purposes, the taxpayer must submit evidence that the income LINE 3C
was received from a regulated investment company. A schedule must be Act 52 of 2013 requires the add-back of intangible expense to income for
submitted indicating the percentage of income applicable to exempt interest, royalties, patents, trademarks, etc., between affiliated entities in
obligations and the percentage of income applicable to nonexempt certain instances. In order to report the add-back for tax years beginning
obligations, including repurchase agreements, obligations of the Federal in 2016, taxpayers must complete REV-802, Schedule C-6, Add-Back for
National Mortgage Association, (Fannie Mae), the Government National Intangible Expense or Related Interest Expense. The total amount of
Mortgage Association (Ginnie Mae) and any other obligations that were additions from Schedule C-6, Line 11 should be carried to and included
not actually issued by the U.S. Government. as a separate line item on RCT-101, Page 2, Section C, Line 3D. REV-802
All income claimed to be exempt must be reduced by any expenses can be found on the department’s website at www.revenue.pa.gov.
incurred in the production of such income and this information must be
IMPORTANT: REV-802, Schedule C-6, Add-back for Intangible
included to support all entries on Line 2B.
Expenses or Cost and Related Interest, must be submitted with
RCT-101.
LINE 2C
This amount is the combination of additional depreciation deduction LINE 3D
allowed under Act 89 of 2002 for IRC Section 168(k) property and the
additional Bonus Depreciation deduction allowed after Act 72 of 2018. The total of all additions from REV-860, Schedule OA, is carried to
RCT-101, Page 2, Section C, Line 3E.
LINE 2D Add Lines 3A, 3B, 3C and 3D and enter the result on Line 3, Total
Other allowable deductions. As an example, certain charitable Additions.
contributions may be deductible for a subsidiary corporation which has
income on a separate company basis. Targeted jobs credit wages is LINE 4
another deductible item. If issued prior to Feb. 4, 1994, net gains on the
Line 1 minus Line 2 plus Line 3.
sale of U.S. or PA securities are deductible. FICA tax obligation on
employee tips, if taken as a credit for federal purposes, are also If all business is transacted in Pennsylvania, skip Lines 5 through 9. Enter
deductible. amount from Line 4 on Line 10.
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