PRIOR PRINTER'S NO. 3261 PRINTER'S NO. 3407
No. 2349 Session of 2002
INTRODUCED BY T. STEVENSON, MANN, BOYES, S. H. SMITH, PIPPY,
E. Z. TAYLOR, LEDERER, GEORGE, GORDNER, McILHATTAN, RAYMOND,
GRUCELA, GABIG, FAIRCHILD, SATHER, WALKO, HUTCHINSON, KELLER,
FRANKEL, LEH, CRUZ, READSHAW, SHANER, KENNEY, BUNT, CAPPELLI,
CREIGHTON, MARKOSEK, TURZAI, CLYMER, BROWNE, HORSEY,
LAUGHLIN, FORCIER, R. STEVENSON, PICKETT, McCALL, HARHAI,
SAINATO, ROSS, GEIST, WANSACZ, KIRKLAND, COLAFELLA,
J. TAYLOR, ZUG, PALLONE AND STETLER, FEBRUARY 6, 2002
AS REPORTED FROM COMMITTEE ON FINANCE, HOUSE OF REPRESENTATIVES,
AS AMENDED, MARCH 12, 2002
AN ACT
1 Amending the act of March 4, 1971 (P.L.6, No.2), entitled "An
2 act relating to tax reform and State taxation by codifying
3 and enumerating certain subjects of taxation and imposing
4 taxes thereon; providing procedures for the payment,
5 collection, administration and enforcement thereof; providing
6 for tax credits in certain cases; conferring powers and
7 imposing duties upon the Department of Revenue, certain
8 employers, fiduciaries, individuals, persons, corporations
9 and other entities; prescribing crimes, offenses and
10 penalties," further providing for the sale or transfer of
11 unused research and development tax credits.
12 The General Assembly finds and declares as follows:
13 (1) It is important to the Commonwealth that companies be
14 encouraged to engage in research and development, to locate in
15 Pennsylvania and to expand their operations in this
16 Commonwealth.
17 (2) Many entities engaged in leading-edge research and
18 development struggle to access much needed capital during their
19 start-up years.
1 (3) Many entities engaged in research and development
2 activities currently are unable to take advantage of
3 Pennsylvania's research and development tax credit.
4 The General Assembly of the Commonwealth of Pennsylvania
5 hereby enacts as follows:
6 Section 1. Section 1704-B(c) of the act of March 4, 1971
7 (P.L.6, No.2), known as the Tax Reform Code of 1971, added May
8 7, 1997 (P.L.85, No.7), is amended and the section is amended by
9 adding subsections to read:
10 Section 1704-B. Carryover, Carryback, Refund and Assignment
11 of Credit.--* * *
12 (c) A taxpayer is not entitled to carry back, obtain a
13 refund of or assign an unused research and development tax
14 credit[.] except as provided in subsections (d), (e) and (f).
15 (d) The Pennsylvania Department of Community and Economic
16 Development in cooperation with the Pennsylvania Department of
17 Revenue shall establish a research and development tax credit
18 transfer REPURCHASE program to allow entities with unused, but <--
19 otherwise allowable, amounts of research and development tax
20 credits accrued beginning in the fiscal year 2000 and in each <--
21 fiscal year thereafter, which cannot be applied for the credit
22 tax year, to surrender those tax benefits for use by other
23 corporations within this Commonwealth, provided that the
24 taxpayer receiving the surrendered benefit is not affiliated,
25 pursuant to the attribution rules of section 318 of the Internal
26 Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. § 318), with
27 a corporation that is surrendering its tax benefits established
28 in this section. For the purposes of this section, the test of
29 affiliation is whether the entity controls five per cent of the
30 voting rights or five per cent or more of the value of all
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1 classes of stock of both the taxpayer receiving the benefits and
2 the corporation that is surrendering the benefits. TO EXCHANGE <--
3 SUCH CREDITS FOR A RESEARCH AND DEVELOPMENT REPURCHASE CREDIT AS
4 PROVIDED IN SUBSECTION (E).
5 (e) (1) The Department of Community and Economic <--
6 Development in cooperation with the Department of Revenue shall
7 review and approve applications by taxpayers to surrender unused
8 but otherwise allowable research and development tax credits.
9 Upon approval of said applications, the Department of Revenue
10 shall issue a research and development tax credit tax transfer <--
11 certificate that may be surrendered to a private corporation in
12 exchange for private financial assistance which shall equal at
13 least REPURCHASE CREDIT EQUAL TO seventy-five per cent of the <--
14 amount of the surrendered tax benefit.
15 (2) RESEARCH AND DEVELOPMENT TAX CREDITS AWARDED BEGINNING <--
16 IN THE CALENDAR YEAR 2000 AND IN EACH CALENDAR YEAR THEREAFTER
17 SHALL BE ELIGIBLE FOR THE REPURCHASE PROGRAM PROVIDED SUCH
18 CREDIT HAS REMAINED UNUSED FOR AT LEAST ONE YEAR AFTER THE DATE
19 OF THE AWARD OF THE CREDIT.
20 (3) THE AMOUNT OF RESEARCH AND DEVELOPMENT REPURCHASE
21 CREDITS AWARDED IN A FISCAL YEAR SHALL NOT EXCEED FIVE MILLION
22 DOLLARS ($5,000,000).
23 (4) THE DEPARTMENT OF COMMUNITY AND ECONOMIC DEVELOPMENT AND
24 THE DEPARTMENT OF REVENUE SHALL DEVELOP CRITERIA FOR THE
25 APPROVAL OR DISAPPROVAL OF APPLICATIONS. SUCH CRITERIA SHALL
26 INCLUDE, BUT NOT BE LIMITED TO, THE PROPOSED USE OF THE PROCEEDS
27 OF THE RESEARCH AND DEVELOPMENT REPURCHASE CREDIT.
28 (5) THE RESEARCH AND DEVELOPMENT REPURCHASE CREDIT MAY BE
29 APPLIED AGAINST A QUALIFIED TAX LIABILITY OF THE TAXPAYER. THE
30 DEPARTMENT OF REVENUE SHALL REFUND ANY UNUSED RESEARCH AND
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1 DEVELOPMENT REPURCHASE CREDIT UPON REQUEST BY THE TAXPAYER.
2 (f) The private financial assistance RESEARCH AND <--
3 DEVELOPMENT REPURCHASE CREDIT shall be used to assist in funding
4 expenses incurred in connection with the operation of the
5 surrendering corporation ENTITY, including, but not limited to, <--
6 expenses for fixed assets, materials, start-up, tenant fit-out,
7 working capital, salaries, research and development
8 expenditures, and any other expenses determined by the
9 Department of Community and Economic Development to be valuable
10 in expanding the corporation's ENTITY'S presence in this <--
11 Commonwealth.
12 (g) The Department of Community and Economic Development and
13 the Department of Revenue may adopt regulations as deemed
14 necessary to implement the provisions of this section.
15 Section 2. This act shall take effect in 60 days.
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