BIRT and U&O Tax Exemptions Eliminated in Philly

The City of Philadelphia has announced significant changes that will affect every business operating within the city. In a December 10th notice, the Department of Revenue confirmed that the long-standing Business Income and Receipts Tax (BIRT) exemption and the Use and Occupancy Tax (U&O) exemption will be eliminated. These updates expand filing requirements and may increase tax obligations for thousands of taxpayers.

Below is an overview of the changes and how they may impact your business.

BIRT Exemption Eliminated for 2025
Beginning with Tax Year 2025, the $100,000 BIRT gross receipts exemption is removed. This means:

• All businesses with Philadelphia activity must file a BIRT return, even if gross receipts are below $100,000.
• The first return reflecting this change is due April 15th, 2026.

Businesses previously exempt from filing may now incur income-based or receipts-based tax liability. The City encourages taxpayers to ensure their Philadelphia Tax Center accounts are active and accurate.

U&O Exemption Eliminated Beginning in 2026
The $2,000 U&O exemption will be eliminated starting with the January 2026 filing.

• The first payment without the exemption is due January 25th, 2026.
• Updated “maximum tax” amounts will be reflected on monthly worksheets for commercial and industrial property users.

Additional Guidance from the City
The Department of Revenue highlighted several ongoing provisions:

• Businesses that were not required to file BIRT in the prior three years do not need to submit an estimated payment when filing their 2026 return.
• A 60% Net Profits Tax (NPT) credit will continue to apply to the net income portion of BIRT.
• Philadelphia still allows loss carryforwards for up to 20 years, though amended returns may be required to record prior losses. The City’s guidance says that to establish NOLs prior to 2015, taxpayers must file amended returns.

What Businesses Should Do Now
To prepare for these changes, businesses should:

• Forecast potential tax liabilities for 2025 and 2026.
• Review or create a Philadelphia Tax Center account.
• Maintain detailed records of Philadelphia and non-Philadelphia activity.
• Consult with tax professionals to understand the financial impact and potential planning opportunities.

We’re Here to Help
Our team works closely with Philadelphia-based organizations and is ready to guide you through these changes. If you would like assistance in evaluating your filing requirements or modeling liability scenarios, please contact us.