PRINTER'S NO. 1350
No. 1196 Session of 1995
INTRODUCED BY PETRONE, FLICK, VAN HORNE, HENNESSEY, GEIST,
READSHAW, HUTCHINSON, LAUGHLIN, DALEY, McCALL, BELFANTI,
PRESTON, CIVERA AND RICHARDSON, MARCH 16, 1995
REFERRED TO COMMITTEE ON FINANCE, MARCH 16, 1995
AN ACT
1 Providing for tax credits for investments that result in new
2 jobs.
3 The General Assembly of the Commonwealth of Pennsylvania
4 hereby enacts as follows:
5 Section 1. Short title.
6 This act shall be known and may be cited as the Job
7 Expansion, Retention and Business Investment Tax Credit Act.
8 Section 2. Declaration of policy.
9 The General Assembly finds and declares as follows:
10 (1) The encouragement of economic growth and development
11 in this Commonwealth is in the public interest and promotes
12 the general welfare of the people.
13 (2) In order to encourage capital investment in
14 businesses in this Commonwealth and thereby increase
15 employment and economic development, a jobs expansion,
16 retention and business investment tax credit should be
17 provided.
1 Section 3. Definitions.
2 The following words and phrases when used in this act shall
3 have the meanings given to them in this section unless the
4 context clearly indicates otherwise:
5 "Business facility." A property that is depreciable under
6 section 167 of the Internal Revenue Code of 1986 (Public Law 99-
7 514, 26 U.S.C. § 167) and that is used in this Commonwealth in
8 manufacturing or mining operations which are engaged in as a
9 commercial enterprise conducted for profit. The term does not
10 include machinery, equipment or other real and tangible personal
11 property which is classified as three-year property under
12 section 168(e) of the Internal Revenue Code of 1986 (Public Law
13 99-514, 26 U.S.C. § 168(e)). The term does not include a
14 replacement facility.
15 "Business facility employee." An individual who is employed
16 by the taxpayer in the operation of a qualified business
17 facility during the taxable year for which the credit under
18 section 4 is claimed and who performs duties in connection with
19 the operation of the new business facility on:
20 (1) a regular, full-time basis; or
21 (2) a part-time basis if the individual is customarily
22 performing the duties at least 32 hours per week throughout
23 the taxable year.
24 "Department." The Department of Revenue of the Commonwealth.
25 "Qualified business facility." A business facility which
26 meets all of the following:
27 (1) Is employed by the taxpayer in the conduct of a
28 business. If the taxpayer's only activity with respect to the
29 facility is to lease the facility to a person who is not a
30 related taxpayer, the facility is not a qualifying business
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1 facility. If the taxpayer employs only a portion of the
2 facility in the operation of a revenue-producing enterprise
3 and leases another portion of the facility to a person who is
4 not a related taxpayer or does not otherwise use the other
5 portions in the operation of a revenue-producing enterprise,
6 the portion employed by the taxpayer is a qualifying business
7 facility.
8 (2) Is purchased or leased by the taxpayer after July 1,
9 1987.
10 (3) Was not in service or use during the 90 days
11 immediately prior to purchase or lease. This paragraph may be
12 waived by the Department of Revenue upon application of the
13 taxpayer setting forth good cause.
14 "Qualified business facility investment." The value of the
15 qualified business facility, excluding inventory and property
16 held for sale to customers in the ordinary course of the
17 taxpayer's business, multiplied by the qualifying percentage.
18 (1) The value of the qualified business facility during
19 the taxable year shall be determined as follows:
20 (i) If the taxpayer owns the qualified business
21 facility, the value of the qualified business facility is
22 the original cost of the facility.
23 (ii) If the taxpayer leases the qualified business
24 facility, the value of the qualified business facility is
25 the lessor's original cost or eight times the net annual
26 rental rate. The net annual rental rate is the annual
27 rental rate paid by the taxpayer minus any annual rental
28 rate received by the taxpayer under subleases.
29 (2) The qualifying percentages shall be determined under
30 the following table, and property classification shall be
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1 determined under section 168(e) of the Internal Revenue Code
2 of 1986 (Public Law 99-514, 26 U.S.C. § 168(e)):
3 Property Classification Qualifying Percentage
4 3-year property 0
5 5-year property 50
6 7-year property 100
7 10-year property 100
8 15-year property 100
9 20-year property 100
10 31.5-year property 100
11 "Related taxpayer."
12 (1) Any of the following:
13 (i) An individual, corporation, partnership, trust
14 or association controlled by the taxpayer.
15 (ii) An individual, corporation, partnership, trust
16 or association under the control of the taxpayer.
17 (iii) An individual, corporation, partnership, trust
18 or association controlled by an individual, corporation,
19 partnership, trust or association under the control of
20 the taxpayer.
21 (2) For purposes of this definition, control of a
22 corporation means ownership, directly or indirectly, of stock
23 possessing at least 80% of the combined voting power of all
24 classes of stock entitled to vote.
25 (3) For purposes of this definition, an individual is
26 deemed under the control of the taxpayer if the individual
27 and the taxpayer are related by consanguinity, affinity or
28 adoption.
29 (4) For purposes of this definition, section 318 of the
30 Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. §
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1 318) is controlling.
2 "Replacement facility."
3 (1) A business facility that replaces another business
4 facility located in this Commonwealth which:
5 (i) the taxpayer or a related taxpayer used in
6 connection with an activity for more than two years
7 during the five years immediately preceding the
8 replacement; and
9 (ii) was not used by the taxpayer or a related
10 taxpayer in connection with an activity for at least one
11 year immediately following the replacement.
12 (2) The term does not include a new business facility in
13 which the taxpayer's qualified business facility investment
14 exceeds the lesser of $3,000,000 or 300% of the qualified
15 business facility investment in the old business facility.
16 Section 4. Tax credit.
17 (a) General rule.--If a taxpayer's qualified business
18 facility results in at least 50 new business facility employees
19 or if the taxpayer makes a new qualified business facility
20 investment in excess of $2,000,000, the taxpayer is eligible for
21 a credit against the tax imposed under Articles II, III, IV and
22 VI of the act of March 4, 1971 (P.L.6, No.2), known as the Tax
23 Reform Code of 1971.
24 (b) Amount.--The amount of the credit under this section
25 shall be the greater of 10% of the qualified business facility
26 investment or $100 per new business facility employee. The
27 number of new business facility employees during a taxable year
28 shall be determined as follows:
29 (1) Determine the average number of employees reported
30 quarterly for the taxable year.
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1 (2) Determine the average number of employees reported
2 quarterly over the two prior taxable years.
3 (3) Subtract the average under paragraph (2) from the
4 average under paragraph (1).
5 (c) Time.--The credit under this section may be taken in the
6 taxable year in which, under the taxpayer's depreciation
7 practice, the period for depreciation with respect to the
8 qualified business facility investment begins and in each of the
9 eight succeeding taxable years.
10 (d) Maximum.--The portion of the credit used may not exceed
11 the following percentages:
12 (1) For the first taxable year in which the credit is
13 taken, 90% of the taxes due in that taxable year.
14 (2) For the second taxable year in which the credit is
15 taken, 80% of the taxes due in that taxable year.
16 (3) For the third taxable year in which the credit is
17 taken, 70% of the taxes due in that taxable year.
18 (4) For the fourth taxable year in which the credit is
19 taken, 60% of the taxes due in that taxable year.
20 (5) For the fifth taxable year in which the credit is
21 taken, 50% of the taxes due in that taxable year.
22 (6) For the sixth taxable year in which the credit is
23 taken, 40% of the taxes due in that taxable year.
24 (7) For the seventh taxable year in which the credit is
25 taken, 30% of the taxes due in that taxable year.
26 (8) For the eighth taxable year in which the credit is
27 taken, 20% of the taxes due in that taxable year.
28 (9) For the ninth taxable year in which the credit is
29 taken, 10% of the taxes due in that taxable year.
30 (e) Carryover.--Credits earned under this section, to the
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1 extent not utilized, may be carried over for up to seven
2 additional years by the taxpayer and shall then expire.
3 (f) Change in status.--If, during a taxable year, the situs
4 of a qualified business facility is moved outside this
5 Commonwealth within 48 months after the credit is taken for it,
6 the taxes payable under Articles II, III, IV and VI of the Tax
7 Reform Code of 1971 shall be increased, in the taxable year that
8 the situs of the qualified business facility is moved, by the
9 amount of credit previously granted for the qualified business
10 facility and utilized by the taxpayer.
11 Section 5. Transfer of qualified business facilities.
12 If a taxpayer has established a qualified business facility
13 and if, prior to the total utilization of the credit under
14 section 4, all or a portion of the qualified business facility
15 is acquired by or leased to another taxpayer, the transferor
16 may, if the transferee recognizes the collective bargaining
17 agent, under the Labor Management Relations Act, 1947 (61 Stat.
18 136, 29 U.S.C. § 141 et seq.), of the employees of the
19 transferor, do any of the following:
20 (1) Treat the portion of the new business facility
21 acquired by or leased to the transferee as a qualified
22 business facility held by the transferor. In this case the
23 transferor shall be entitled to the remaining portion of the
24 credit that has not been utilized, but the transferee shall
25 not be entitled to any portion of the credit.
26 (2) Allow the transferee to claim the portion of the
27 credit that has not been utilized.
28 Section 6. Regulations.
29 The department may promulgate regulations to administer this
30 act.
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1 Section 7. Effective date.
2 This act shall take effect in 60 days.
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