PRINTER'S NO. 3551
No. 2540 Session of 1976
INTRODUCED BY MORRIS, JUNE 22, 1976
REFERRED TO COMMITTEE ON EDUCATION, JUNE 22, 1976
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," increasing the personal income, corporate stock
11 and franchise, bank shares, title insurance and trust company
12 shares, and insurance premiums taxes, imposing a State gross
13 receipts tax upon unincorporated businesses, codifying
14 provisions taxing mutual thrift institutions and increasing
15 the tax to compensate for the gradual elimination of school
16 real property taxes, and authorizing the Department of
17 Revenue to collect a surtax when levied by school districts.
18 The General Assembly of the Commonwealth of Pennsylvania
19 hereby enacts as follows:
20 Section 1. Section 302, act of March 4, 1971 (P.L.6, No.2),
21 known as the "Tax Reform Code of 1971," added August 31, 1971
22 (P.L.362, No.93), amended March 13, 1974 (P.L.179, No.32), is
23 amended to read:
24 Section 302. Imposition of Tax.--(a) There is hereby imposed
25 an annual tax to be paid by resident individuals, estates or
26 trusts at the [rate of two per cent] rates provided in
1 subsection (c) hereof on the privilege of receiving each of the
2 classes of income hereinafter enumerated in section 303.
3 (b) There is hereby imposed an annual tax to be paid by
4 nonresident individuals, estates or trusts at the [rate of two
5 per cent] rates provided in subsection (c) hereof on the
6 privilege of receiving each of the classes of income enumerated
7 in section 303 from sources within this Commonwealth.
8 (c) The rates of the taxes imposed in the two preceding
9 subsections shall be, for the taxpayer's calendar year 1977, two
10 and two-tenths per cent; calendar year 1978, two and four-tenths
11 per cent; calendar year 1979, two and six-tenths per cent;
12 calendar year 1980, two and eight-tenths per cent; calendar year
13 1981 and thereafter, three per cent.
14 Section 2. Article III of the act, added August 31, 1971
15 (P.L.362, No.93), is amended by adding a part to read:
16 ARTICLE III
17 PERSONAL INCOME TAX
18 * * *
19 PART XII
20 LOCAL SCHOOL SURTAX COLLECTIONS
21 Section 370. Local School Surtax.--The chief administrator
22 of each school district of the first class A, each school
23 district of the second, third and fourth class whose board of
24 directors levy, and, in the case of districts of the first
25 class, whose city council authorizes and whose members of the
26 board of public education levy an additional tax for school
27 purposes upon the classes of personal income tax as provided in
28 this article, as authorized under section 602.2 of the act of
29 March 10, 1949 (P.L.30, No.14), known as the "Public School Code
30 of 1949," and determines that the department shall act as its
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1 collection agent, shall so notify the department each year by
2 submitting a certified copy of the resolution or ordinance and
3 an affidavit setting forth the amount of the tax to be collected
4 by the department for the school district. The department shall
5 include in all forms and instructions prepared for the
6 collection of the personal income tax appropriate instructions
7 and procedures to enable the residents of the school districts
8 where the local school surtax is levied, and collection by the
9 department authorized, to compute and pay over to the
10 Commonwealth said surtax. The department shall remit to each
11 school district all such taxes collected by it on their behalf
12 within sixty days after receipt of same.
13 Section 371. Procedure; Enforcement; Penalties.--Parts I,
14 III, IV, VI, VII, VIII, IX, X and XI are incorporated by
15 reference in this part in so far as they are consistent with
16 this part and applicable to the surtax to be collected
17 hereunder.
18 Section 3. The act is amended by adding articles to read:
19 ARTICLE V-A
20 UNINCORPORATED BUSINESS ASSOCIATIONS GROSS RECEIPTS TAX
21 PART I
22 DEFINITIONS
23 Section 501-A. Definitions.--The following words, terms and
24 phrases when used in this article shall have the meaning
25 ascribed to them in this section except where the context
26 clearly indicates a different meaning.
27 (a) "Person." Any individual, partnership or unincorporated
28 association; whenever used in any clause prescribing or imposing
29 a penalty the term "person" as applied to associations shall
30 mean the partners or members thereof; "person" shall not include
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1 domestic or foreign corporations of any class.
2 (b) "Wholesale dealer" or "wholesale vender." Any person
3 who sells to dealers in or vendors of goods, wares and
4 merchandise.
5 (c) "Retail dealer" or "retail vendor." Any person who
6 sells to dealers in or vendors of goods, wares and merchandise
7 who is not a wholesale dealer or vendor.
8 (d) "Manufacturer." Any person who sells goods, wares and
9 merchandise of his own growth or production.
10 (e) "Business." The carrying on or exercising for gain or
11 profit within the Commonwealth of Pennsylvania by any person of
12 any trade, business, profession, vocation or making sales to
13 persons within the Commonwealth or of any manufacturing,
14 commercial or financial service or business including but not
15 limited to manufacturers, brokers, wholesale dealers or
16 wholesale vendors, retail dealers or retail vendors.
17 "Business" shall not include the following: any business
18 conducted by a nonprofit unincorporated association organized
19 for religious, charitable or educational purposes; any authority
20 created and organized under and pursuant to any act of Assembly;
21 the business of any insurance company, association or exchange
22 or any fraternal benefit or beneficial society or any other
23 state under the laws of which insurance companies, associations
24 or exchanges or fraternal benefit or beneficial societies of
25 this Commonwealth doing business in such other state would be
26 subjected by reason of the tax imposed by this act to additional
27 or further taxes, fines, penalties or license fees by such other
28 state and any employment for a wage or salary.
29 (f) "Financial service" or "financial business." The
30 services and transactions of unincorporated private banks and
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1 bankers, building and loan associations, savings and loan
2 associations, credit unions, savings banks, banks, bank and
3 trust companies, trust companies, investment companies
4 registered as such with the Federal Securities and Exchange
5 Commission, holding companies, dealers and brokers in money
6 credits, commercial paper, bonds, notes, securities and stocks,
7 monetary metals factors and commission merchants.
8 (g) "Gross volume of business." Gross receipts and shall
9 include both cash and credit transactions as reported for
10 Federal income tax purposes; it shall exclude (i) the dollar
11 volume of annual business covering the resale of goods, wares or
12 merchandise taken by a dealer as a trade-in or as part payment
13 for other goods, wares and merchandise in the usual and ordinary
14 course of his business except to the extent that the resale
15 price exceeds the trade-in allowance; (ii) in the case of
16 financial business, the cost of securities and other similar
17 property sold, exchanged, paid at maturity or redeemed, and
18 moneys or credits received in repayment of advances, credits and
19 loans, but not to exceed the principal amount of such advances,
20 credits and loans and shall exclude deposits; and (iii) the
21 receipts or the portion thereof attributable to any item of sale
22 involving the bona fide delivery of goods, commodities, wares or
23 merchandise to a location regularly maintained by the other
24 party to the transaction outside the limits of the Commonwealth
25 and not for the purpose of evading payment of the tax or any
26 portion thereof imposed under this act.
27 (h) "Department." The Department of Revenue of this
28 Commonwealth.
29 (i) "Taxable year." The calendar year or the fiscal year
30 beginning during the calendar year.
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1 PART II
2 IMPOSITION AND RATE OF TAX
3 Section 502-A. Imposition and Rate of Tax.--Every person
4 engaging in any business in the Commonwealth shall pay an
5 unincorporated business associations gross receipts tax for the
6 taxable year 1977 at the rate of one mill; and for the taxable
7 year 1978, at the rate of two mills; 1979, three mills; 1980,
8 four mills; and for the taxable years 1981 and thereafter, five
9 mills, on each dollar of the gross volume of business,
10 transacted by such person in that taxable year.
11 PART III
12 RETURNS AND PAYMENT OF TAX
13 Section 503-A. Returns.--Every person subject to the tax
14 imposed by this act shall on or before the fifteenth day of May
15 following the taxable year file with the department a return
16 upon a form furnished by the department setting forth his name,
17 business, business address, and such other information as may be
18 necessary in arriving at the gross volume of business transacted
19 by him during the preceding year and the amount of the tax due.
20 Section 504-A. Payment.--At the time of filing the return
21 the person making the same shall pay to the department the
22 amount of tax shown as due thereon.
23 PART IV
24 POWERS AND DUTIES OF DEPARTMENT
25 Section 505-A. Powers and Duties of Department.--(a) It
26 shall be the duty of the department to collect and receive the
27 taxes, interest, fines and penalties imposed by this act. It
28 shall keep a record showing the amount received from each person
29 paying the tax, interest, fine and penalty and the date of such
30 receipt.
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1 (b) The department is hereby charged with the administration
2 and enforcement of the provisions of this act and is hereby
3 empowered to prescribe, adopt, promulgate and enforce
4 regulations relating to any matter pertaining to the
5 administration and enforcement of this act including provision
6 for the reexamination and correction of returns and payments
7 alleged or found to be incorrect or as to which an overpayment
8 is claimed or found to have occurred.
9 (c) The department is hereby authorized to examine the
10 books, papers and records of any person in order to verify the
11 accuracy of any return made or if no return has been made to
12 ascertain the tax due. Every such person is hereby directed and
13 required to give to the department the means, facilities and
14 opportunity for such examinations and investigations as are
15 hereby authorized.
16 Section 506-A. Suit on Collections; Penalty.--(a) The
17 Commonwealth may sue for the recovery of taxes, interest, fines
18 and penalties due and unpaid under this act.
19 (b) If for any reason the tax is not paid when due in each
20 year interest at the rate of six per cent per annum on the
21 amount of said tax and in addition a penalty of one per cent of
22 the amount of the unpaid tax for each month or fraction thereof
23 during which the tax remains unpaid shall be added and
24 collected. Where suit is brought for the recovery of any such
25 tax the person liable therefor shall in addition be liable for
26 the costs of collection and the interest and penalties herein
27 imposed.
28 PART V
29 FINES AND PENALTIES
30 Section 507-A. Fines and Penalties.--Whoever makes any false
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1 or untrue statement on his return or who refuses to permit
2 inspection of the books, records or accounts of any business in
3 his custody or control when the right to make such inspection by
4 the department is requested and whoever fails or refuses to file
5 a return required by this act shall upon summary conviction be
6 sentenced to pay a fine of not more than three hundred dollars
7 ($300).
8 PART VI
9 MISCELLANEOUS PROVISIONS
10 Section 508-A. Other Taxes.--It is hereby declared to be the
11 intention of the General Assembly that the tax imposed under
12 this act shall be in addition to any and all other taxes imposed
13 by the Commonwealth.
14 Section 509-A. Saving Clause.--Notwithstanding anything
15 contained in any law to the contrary the validity of any
16 ordinance or part of any ordinance or any resolution or part of
17 any resolution and any amendments or supplements thereto now or
18 hereafter enacted or adopted by any political subdivision
19 providing for or relating to the imposition, levy or collection
20 of any mercantile license tax shall not be affected or impaired
21 by anything contained in this act.
22 ARTICLE V-B
23 MUTUAL THRIFT INSTITUTIONS TAX
24 PART I
25 DEFINITIONS
26 Section 501-B. Definitions.--As used in this article "mutual
27 thrift institution" shall be construed to mean every savings
28 bank without capital stock incorporated by or under any law of
29 this Commonwealth, every building and loan association, every
30 savings and loan association incorporated under the laws of this
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1 Commonwealth and every Federal savings and loan association
2 incorporated under the laws of the United States and located
3 within this Commonwealth.
4 PART II
5 IMPOSITION OF RATE OF TAX
6 Section 502-B. Imposition; Report and Payment of Tax;
7 Exemptions.--(a) Every mutual thrift institution shall annually,
8 upon the fifteenth day of April each year beginning in the year
9 1965, make a report to the Department of Revenue, setting forth
10 the entire amount of net earnings or income received or accrued
11 by said mutual thrift institution from all sources during the
12 preceding year, and such other information as the department may
13 require, and upon such net earnings or income the said mutual
14 thrift institution shall pay into the State Treasury, through
15 the Department of Revenue, for the use of the Commonwealth,
16 within the time prescribed by this article for making such
17 annual report, a State excise tax at the rate of eleven and one-
18 half per cent annually for the years 1969 through 1976, and at
19 the rate of twelve per cent for the year 1977; twelve and one-
20 half per cent for the year 1978; thirteen per cent for the year
21 1979; thirteen and one-half per cent for the the year 1980; and
22 fourteen per cent for the year 1981 and thereafter, upon such
23 annual net earnings or income, for the privilege of doing
24 business in the Commonwealth. On or before the thirtieth day of
25 April, 1970, and each year thereafter, each such mutual thrift
26 institution shall file a tentative report and pay on account of
27 the tax due upon such earnings or income received or accrued
28 during that year not less than eighty per cent of the amount of
29 said tax, the said amount to be computed by applying the current
30 tax rate to eighty per cent of the net earnings or income of
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1 such institution for the immediate prior year, or of the
2 estimated net earnings or income of such corporation to be
3 received or accrued during the current year. The remaining
4 portion of the tax due shall be paid upon the date the
5 institution's annual report is required herein to be made.
6 Should it subsequently be determined that the amount of the net
7 earnings or income of the institution reported for the immediate
8 prior year or of the estimated net earnings or income stated by
9 such institution and employed in the computation of the
10 tentative tax was understated by ten per cent or more, there
11 shall be added to the tax determined to be due an additional one
12 per cent of the amount of said tax for each per cent of such
13 understatement, and said additional tax shall bear interest from
14 the date the tentative tax was due.
15 (b) If, however, any such mutual thrift institution closes
16 its fiscal year, not upon the thirty-first day of December, but
17 upon some other date the tax shall be imposed upon such annual
18 net earnings or income received or accrued during its fiscal
19 year and the tentative report for the fiscal year beginning in
20 1964 and for each fiscal year thereafter shall be made and the
21 tentative tax for such year shall be paid within one hundred
22 twenty days after the close of the preceding fiscal year, and
23 the remaining portion of the tax due upon the net earnings or
24 income received or accrued during such year shall be paid within
25 the time prescribed by this article for making the annual report
26 for such year.
27 (c) Net earnings or income shall be determined in accordance
28 with generally accepted principles of accounting, either on a
29 cash or accrual or combined cash and accrual basis, depending on
30 the method of bookkeeping employed by each mutual thrift
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1 institution, and in computing such net earnings or income,
2 amounts credited or paid as dividends or interest to
3 shareholders, holders of accounts or depositors shall be
4 included among the allowable deductions.
5 (d) Mutual thrift institutions subject to the provisions of
6 this act shall be exempt from all other corporate taxes imposed
7 by the Commonwealth for State purposes, and from all local
8 taxation imposed by political subdivisions of this Commonwealth
9 under the authority of the laws of this Commonwealth, except
10 taxes on real estate or transfers thereof.
11 PART III
12 PROCEDURE; ENFORCEMENT; PENALTIES
13 Section 503-B. Procedure; Enforcement; Penalties.--Parts
14 III, IV, V, VI and VII of Article IV are incorporated by
15 reference into this article in so far as they are applicable to
16 the tax imposed hereunder.
17 PART IV
18 REPEALER
19 Section 504-B. Repealer.--The act of June 22, 1964 (P.L.16,
20 No.2), known as "The Mutual Thrift Institutions Tax Act," is
21 repealed.
22 Section 4. The act is amended by adding sections to read:
23 Section 602.2. Additional Tax in Lieu of School Real
24 Property Tax.--In addition to the taxes imposed by subsections
25 (a), (b), (f) and (g) of section 602, there is hereby imposed a
26 tax for the calendar year 1977 or the fiscal year beginning in
27 1977, at the rate of three mills; for 1978, six mills; 1979,
28 nine mills; 1980, twelve mills and 1981 and thereafter, fifteen
29 mills.
30 Section 701.1. Additional Tax in Lieu of School Real
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1 Property Tax.--In addition to the taxes imposed by section 701,
2 there is hereby imposed a tax for the calendar year 1977, at the
3 rate of seven-tenths mills; for 1978, one and four-tenths mills;
4 1979, two and one-tenth mills; 1980, two and eight-tenths mills;
5 and for 1981 and thereafter, three and five-tenths mills.
6 Section 801.1. Additional Tax in Lieu of School Real
7 Property Tax.--In addition to the taxes imposed by section 801,
8 there is hereby imposed a tax for the calendar year 1977, at the
9 rate of seven-tenths mills; 1978, one and four-tenths mills;
10 1979, two and one-tenth mills; 1980, two and eight-tenths mills;
11 and 1981 and thereafter, three and five-tenths mills.
12 Section 902.1. Additional Tax in Lieu of School Real
13 Property Tax.--In addition to the taxes imposed by subsection
14 (a) of section 902, there is hereby imposed a tax for general
15 revenue purposes for the calendar year 1977, at the rate of
16 four-one-hundredths per cent; for 1978, eight-one-hundredths per
17 cent; 1979, twelve-one-hundredths per cent; 1980, sixteen-one-
18 hundredths per cent and 1981 and thereafter, twenty-one-
19 hundredths per cent.
20 Section 5. This act shall take effect immediately.
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