PRINTER'S NO. 432
No. 419 Session of 1981
INTRODUCED BY POTT, FEBRUARY 9, 1981
REFERRED TO COMMITTEE ON FINANCE, FEBRUARY 9, 1981
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," removing tax preference items from the definition 11 of "taxable income." 12 The General Assembly of the Commonwealth of Pennsylvania 13 hereby enacts as follows: 14 Section 1. Subclause 1 of clause (3) of section 401, act of 15 March 4, 1971 (P.L.6, No.2), known as the "Tax Reform Code of 16 1971," amended December 8, 1980 (No.195), is amended to read: 17 Section 401. Definitions.--The following words, terms, and 18 phrases, when used in this article, shall have the meaning 19 ascribed to them in this section, except where the context 20 clearly indicates a different meaning: 21 * * * 22 (3) "Taxable income." 1. In case the entire business of the
1 corporation is transacted within this Commonwealth, for any 2 taxable year which begins on or after January 1, 1971, taxable 3 income for the calendar year or fiscal year as returned to and 4 ascertained by the Federal Government, or in the case of a 5 corporation participating in the filing of consolidated returns 6 to the Federal Government, the taxable income which would have 7 been returned to and ascertained by the Federal Government if 8 separate returns had been made to the Federal Government for the 9 current and prior taxable years, subject, however, to any 10 correction thereof, for fraud, evasion, or error as finally 11 ascertained by the Federal Government: Provided, That additional 12 deductions shall be allowed from taxable income on account of 13 any dividends received from any other corporation but only to 14 the extent that such dividends are included in taxable income as 15 returned to and ascertained by the Federal Government: Provided 16 further, That additional deductions shall be allowed from 17 taxable income in an amount equal to the amount of any reduction 18 in an employer's deduction for wages and salaries as required by 19 section 280C of the Internal Revenue Code as a result of the 20 employer taking a credit for "new jobs" pursuant to section 44B 21 of the Internal Revenue Code[: Provided further, That taxable 22 income will include the sum of the following tax preference 23 items as defined in section 57 of the Internal Revenue Code, as 24 amended, (i) excess investment interest; (ii) accelerated 25 depreciation on real property; (iii) accelerated depreciation on 26 personal property subject to a net lease; (iv) amortization of 27 certified pollution control facilities; (v) amortization of 28 railroad rolling stock; (vi) stock options; (vii) reserves for 29 losses on bad debts of financial institutions; (viii) and 30 capital gains but only to the extent that such preference items 19810H0419B0432 - 2 -
1 are not included in "taxable income" as returned to and 2 ascertained by the Federal Government]. No deduction shall be 3 allowed for net operating losses sustained by the corporation 4 during any other fiscal or calendar year: Provided, That for the 5 calendar year 1981 and fiscal years beginning in 1981 and 6 thereafter, a net operating loss, as provided by section 172 of 7 the Internal Revenue Code, shall be allowed as a deduction and a 8 carryover pursuant to the following schedule: 9 Net Operating Loss for Year Carryover 10 1981 1 year 11 1982 2 years 12 1983 and thereafter 3 years 13 The net operating loss shall be carried to the earliest of the 14 taxable years to which, under this schedule, such loss may first 15 be carried. In the case of regulated investment companies as 16 defined by the Internal Revenue Code of 1954, as amended, 17 "taxable income" shall be investment company taxable income as 18 defined in the aforesaid Internal Revenue Code of 1954, as 19 amended. In arriving at "taxable income" for Federal tax 20 purposes for any taxable year beginning on or after [January 1, 21 1971, any corporate net income tax due to the Commonwealth 22 pursuant to the provisions of this article shall not be allowed 23 as a deduction and the amount of corporate tax so due and 24 excluded from Federal taxable income under the Internal Revenue 25 Code shall not be apportioned but shall be subject to tax at the 26 rate imposed under this article.] January 1, 1981, no deduction 27 shall be allowed for taxes imposed on or measured by net income. 28 * * * 29 Section 2. This act shall take effect immediately and shall 30 apply to taxable income for the calendar or fiscal year of the 19810H0419B0432 - 3 -
1 corporation beginning on or after January 1, 1981. A7L72ML/19810H0419B0432 - 4 -