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PHILADELPHIA-The spokesman for Philadelphia’s legal community warned the City Council that without tax reform, the city’s law firms, which collectively represent “one of the biggest companies in the region,” may be forced to exit Downtown. Without the legal services sector, which is concentrated mostly in Center City, Bar Association chancellor Gabriel Bevilacqua said, “Center City as it exists today would be totally unrecognizable. Whole parts of it would be deserted, blighted, barren.”

To emphasize the point, Bevilacqua took council members on a virtual tour of Market St. West, pointing to 12 nationally known law firms there that employ nearly 5,000 people. “What’s more, these firms represent only about one-third of all Philadelphia lawyers and support staff,” he said, adding that the 23 largest Philadelphia law firms employ nearly 10,000. “We are a regional economic powerhouse,” he asserted. “Without a more competitive tax climate, Philadelphia will not prosper and well known Philadelphia law firms may eventually be forced to maintain only a nominal presence within the city limits.”

Specifically, Bevilacqua took issue with a provision of the city’s business tax that taxes law firm partners’ income at a combined rate of at least 6.7%, but taxes compensation to owners of businesses that are operated as corporations or sole proprietorships at a rate ranging from 3.9% for non-residents to 4.5% for residents, according to the Bar Association. Calling this an inequity, Bevilacqua further argued that law firms were also penalized by the city’s tax on net income because they cannot deduct payments made to the partners, even where partners perform a significant level of service on behalf of their respective partnerships. “I cannot overstate the importance of the tax reform measures which you are considering and the actions which you may take,” he concluded.

Bevilacqua is a partner with the Saul Ewing firm. Barr Association vice chancellor Alan M. Feldman, a partner at Feldman, Shepherd, Wohlgelernter and Tanner, joined Bevilacqua in testifying before the City Council.

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