City of Philadelphia clarifies Business Income Receipts Tax (BIRT) policy to ease transition for businesses impacted by the exemption change

The City of Philadelphia clarified its Business Income & Receipts Tax (BIRT) policy, significantly impacting businesses filing for the first time in 2025. Previously exempt businesses with sales below $100,000 will now be classified as "new businesses," allowing them to avoid estimated payments when filing their first returns in 2026. This policy change results from the city’s decision to eliminate the BIRT exemption due to a legal challenge. Revenue Commissioner Kathleen McColgan stated that this support is crucial for small businesses transitioning to new tax obligations. In addition to the tax policy changes, the FY26 Budget allocates nearly $40 million for grant and technical assistance programs aimed at supporting local businesses.

These programs include grants up to $50,000 and free tax preparation services. The Department of Revenue's previous requirement for estimated payments has been modified, allowing new businesses to make quarterly payments in their second year. Full details on the tax clarification are available on the city's website.