In a historic move, the Pennsylvania House of Representatives has passed legislation to close the so-called "Delaware loophole" by requiring combined reporting from multi-state corporations.

House Bill 1610, introduced by Reps. Elizabeth Fiedler (D-Phila.) and Mary Jo Daley (D-Montgomery), marks the first time the House has approved such a measure aimed at overhauling corporate tax fairness in the state.

Currently, large corporations can legally shift profits to states like Delaware, which has no corporate income tax, to avoid paying Pennsylvania’s corporate net income tax.

Combined reporting would prevent this by requiring businesses to report their total profits across all states and pay taxes proportionally on the share generated in Pennsylvania.

“When 73% of the corporations active in this state pay no corporate taxes at all, and working people struggle to afford the basics, that's not fairness, that's exploitation,” said Rep. Fiedler. “It’s ridiculous, puts small businesses at a disadvantage, and leaves our public services without adequate funding.”

Supporters say the bill would generate millions in revenue for public services while easing the tax burden currently placed on small businesses and individual taxpayers.

Critics of the current system argue it contributes to one of the most regressive tax structures in the nation.

“Just like every hard-working Pennsylvanian has to pay their taxes, major national corporations need to pay their fair share as well,” said Rep. Daley. “Under this plan, multistate companies will never be able to hide revenue in other states offering loopholes.”

Pennsylvania is one of the few remaining states that has not adopted combined reporting.

If signed into law, the state would join 28 others that already use the system to crack down on corporate tax avoidance.

House Bill 1610 now heads to the Senate for further consideration.