PRIOR PRINTER'S NO. 706

PRINTER'S NO. 1439

THE GENERAL ASSEMBLY OF PENNSYLVANIA

SENATE BILL

No.

659

Session of

2023

INTRODUCED BY AUMENT, ROTHMAN, CULVER AND A. WILLIAMS,

MAY 3, 2023

SENATOR HUTCHINSON, FINANCE, AS AMENDED, MARCH 20, 2024

for tax credits in certain cases; conferring powers and

imposing duties upon the Department of Revenue, certain

employers, fiduciaries, individuals, persons, corporations

and other entities; prescribing crimes, offenses and

penalties," in personal income tax, further providing for

definitions, providing for elective tax imposed at pass-

through entity level and further providing for taxability of

partners and for income of a Pennsylvania S corporation.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

as amended to January 1, 1997, unless the reference contains the

phrase "as amended" and refers to no other date, in which case

the reference shall be to the Internal Revenue Code of 1986 as

it exists as of the time of application of this article. The

following words, terms and phrases when used in this article

shall have the meaning ascribed to them in this section except

where the context clearly indicates a different meaning:

* * *

(w) "Taxpayer" means any individual, estate or trust subject

to the tax imposed by this article, any partnership having a

corporation having a shareholder who is a taxpayer under this

Level.--(a) Notwithstanding any other provision of this

article, a pass-through entity may elect, on an annual basis, to

have the tax imposed under this article applied to the income of

the pass-through entity. The following shall apply:

(1) An electing pass-through entity PARTNERSHIP shall be

subject to and shall pay a tax imposed at the rate provided in

section 302(b) on:

(i) Each resident taxable owner's share of each class of

income and gain enumerated in section 303 for the taxable year.

(ii) Each nonresident taxable owner's share of each class of

OWNER'S SHARE OF EACH CLASS OF INCOME AND GAIN ENUMERATED IN

SECTION 303 FROM SOURCES WITHIN THIS COMMONWEALTH FOR THE

TAXABLE YEAR.

(3) AN ELECTING PENNSYLVANIA S CORPORATION WHOSE

SHAREHOLDERS ARE COMPRISED OF EITHER NONRESIDENT SHAREHOLDERS,

OR RESIDENT AND NONRESIDENT SHAREHOLDERS SHALL BE SUBJECT TO AND

SHALL PAY A TAX IMPOSED AT THE RATE PROVIDED IN SECTION 302(B)

ON EACH TAXABLE OWNER'S SHARE OF EACH CLASS OF INCOME AND GAIN

FOR THE TAXABLE YEAR.

in one or more pass-through entities shall include its share of

each class of income enumerated in section 303 received from

those pass-through entities. The pass-through entity that

generates an item of income, gain or loss shall determine its

classification and whether that item of income, gain or loss

constitutes income or loss from sources within this

Commonwealth.

(4) (6) Guaranteed payments made to a partner in a

partnership shall be treated as additional income allocated to

the partner. With respect to a nonresident taxable owner, only

credits otherwise available to the pass-through entity except a

credit for estimated taxes paid for the current taxable year

under this section or an overpayment of a prior-year tax paid

under this section.

(b) (1) Any election described under subsection (a) shall

be made by an individual with authority to bind the pass-through

entity or sign returns under this article or who is authorized

to make the election and represents to having the authorization

ORIGINAL DUE DATE OF the pass-through entity's return under this

(3) An election made under this section shall be irrevocable

for the taxable year.

(4) An election under this section may be made only for tax

years that the limitation on individual deductions applies under

26 U.S.C. § 164(b)(6) (relating to taxes).

(c) (1) A taxable owner of an interest in a pass-through

entity that elects to pay tax under subsection (a) shall be

allowed a refundable credit against the tax imposed under

section 302 in the amount of the taxable owner's share of the

tax that the pass-through entity actually paid under this

the corresponding income and gain of the pass-through entity.

(3) The credit allowed under this subsection shall be

applied after the application of all other tax credits available

to the owner for the taxable year. If the amount of the credit

allowable under this subsection for any taxable year exceeds the

tax due for the year under this article, the excess amount shall

be treated as an overpayment, to be credited or refunded.

(4) No credit shall be allowed to a taxable owner under

imposed under this article and provides the department on its

for the taxable year.

(d) A pass-through entity that elects to pay tax under

subsection (a) shall be required to make estimated tax payments

in four equal installments on or before the fifteenth day of the

fourth, sixth and ninth month of its taxable year, and the

fifteenth day of the first month of its subsequent taxable year.

(e) (1) On or before the date provided under section 330(a)

330.1(B ) OR 335(C) , each pass-through entity that elects to pay

tax under subsection (a) shall file a return for the taxable

year reporting the information required under this article

SUBSECTION (A).

(2) (3) The return filed under clause (1) shall include, in

a format as prescribed by the department, a certification by an

individual authorized to act on behalf of the pass-through

entity, which includes that all statements contained in the

certification are true RETURN ARE TRUE AND CORRECT .

(3) (4) Each pass-through entity that elects to pay tax

under subsection (a) shall report on a return required under

(i) Any tax due under this article. The balance of any tax

Security number or tax identification number and status as a

resident or nonresident. The pass-through entity must provide

information sufficient to identify a disregarded entity and its

taxable owners.

(iii) For each taxable owner who will be entitled to claim a

credit on a tax return, the taxable owner's share of the tax

imposed on the pass-through entity under this section.

(iv) Each resident taxable owner's share of the pass-through

entity's income and each nonresident taxable owner's share of

income from sources from within this Commonwealth included in

(4) (5) A pass-through entity that elects to pay tax under

subsection (a) shall not be required to withhold tax from a

nonresident taxable owner under section 324.

(5) (6) To meet the requirements of this section, if a

taxable owner holds an interest in the pass-through entity

through an entity that is a disregarded entity for purposes of

this article, the pass-through entity must provide information

sufficient to identify both the disregarded entity that holds an

owns the disregarded entity and is eligible for a credit under

(i) Classification as a resident taxable owner or a

nonresident taxable owner for purposes of calculating the pass-

through entity's tax under subsection (a).

(ii) The taxable owner's allocable share of the pass-through

entity's income included in the tax base for purposes of

computing the tax under subsection (a).

(iii) The owner's allocable share of the tax paid under

subsection (a).

(iv) Any other information, as required by the department.

(f) (E) (1) Any assessment of tax imposed under this

(2) Any determination of an overpayment or refund of tax

imposed under this section made subsequent to the filing of the

return under subsection (e) (D) shall be made at the pass-

through entity level at the tax rate applicable to the tax year.

(3) The pass-through entity shall be required to provide

each owner a statement of any adjustment of the taxable owner's

credit within ninety days of an assessment, overpayment or

refund becoming final.

credit on an amended return for the taxable owner's taxable year

(g) (F) The basis of both a resident taxable owner and

nonresident taxable owner of a pass-through entity that elects

to pay tax under subsection (a) shall be determined as if the

election under subsection (b) had not been made and each of the

taxable owners of the taxed pass-through entity had properly

taken into account each taxable owner's pro rata share of the

taxed pass-through entity's items of income, gain, loss and

deduction in the manner required with respect to a pass-through

entity for which no such election is in effect.

(h) (G) (1) Unless otherwise provided in, or inconsistent

(i) (H) (1) If the election is made, the pass-through

entity must, on or before the date the next estimated tax

payment is due after the election, make an estimated tax payment

equal to the total estimated tax that would have been due for

the tax year had the election been made for the full tax year,

and any nonresident withholding made under section 324 by the

pass- through entity for the current tax year may be applied by

the pass-through entity against its estimated tax liability.

effective date of this section CLAUSE , any nonresident

assess interest and penalties against an eligible pass-through

entity for any underpayment of estimated tax due under

subsection (d), so long as the eligible pass-through entity

acted in good faith with no intent to defraud the Commonwealth.

(j) (I) As used in this section, the following words and

phrases shall have the meanings given to them in this subsection

unless the context clearly indicates otherwise:

"Electing pass-through entity." A pass-through entity that

elects for a taxable year to be subject to the tax under this

section to determine its tax in accordance with subsection (a).