3 Major Laws Hitting the City of Philadelphia on January 1st

While hundreds of bills move through City Hall each year, these three updates will have the most immediate impact on your wallet and your neighborhood starting January 1, 2026.

1. The 10-Cent Paper Bag Fee

Following the city's 2021 ban on single-use plastic bags, many Philadelphians swapped plastic for paper. However, starting January 1, that "free" paper bag at the supermarket is a thing of the past.

• The Change: Retailers are now legally required to charge a minimum of $0.10 for every single-use paper bag provided at the point of sale.
• The Goal: This fee was created to close the "environmental loophole" that allowed paper bag use to surge after the plastic ban. Because paper bags require more energy and water to produce than plastic bags do, the city is using this fee as a "nudge" to encourage shoppers to bring their own reusable cloth bags.
• Where the Money Goes: Unlike a typical tax, this 10-cent fee is kept by the retailer to help offset the higher cost of paper bags.

2. The End of Small Business Tax Exemptions

For many small business owners in Philadelphia, January 1 marks a significant shift in tax liability. Two key exemptions that previously shielded smaller enterprises from city taxes are officially expiring.

• U&O Tax Reset: The annual $2,000 Use and Occupancy (U&O) Tax exemption ends on January 1, 2026. Previously, many small businesses occupying commercial space paid little to nothing; now, every company using a Philly property for business purposes will be responsible for the full tax amount.
• BIRT Filing Requirements: The $100,000 exemption for the Business Income and Receipt Tax (BIRT) is also being removed. This means that in 2026, every business operating in Philadelphia—regardless of its revenue— will be required to file a BIRT return and pay any outstanding liabilities.

3. Adoption of the 2021 International Building Codes

For contractors, developers, and homeowners planning renovations, the rules for "how" you build are getting a significant update. Starting January 1, Philadelphia is officially adopting the 2021 International Codes (I-Codes).

• Building Safety & Energy: This update moves the city from the 2018 standards to the more modern 2021 versions. These codes include stricter requirements for energy performance, fire safety, and plumbing systems.
• The Grace Period: While the law takes effect on the 1st, the city typically allows applications filed before July 1, 2026, to choose between the old 2018 and new 2021 codes. However, any project started after that date must strictly follow the new 2021 safety guidelines.

Bonus: The Fair Chance Law (Taking Effect January 6)

While it doesn't start exactly on New Year's Day, a significant update to the Fair Chance Law goes into effect less than a week later. Beginning January 6, Philadelphia employers are prohibited from considering "summary offenses" (the lowest level of criminal infractions) during hiring and must follow a much shorter 4-year "lookback" period for misdemeanors.