PRIOR PRINTER'S NOS. 260, 2767, 3019 PRINTER'S NO. 3619
No. 238 Session of 1997
INTRODUCED BY BISHOP, BELARDI, TRELLO, RAMOS, YOUNGBLOOD,
PISTELLA, BOSCOLA, PESCI, L. I. COHEN, BELFANTI AND
WOJNAROSKI, FEBRUARY 4, 1997
AS RE-REPORTED FROM COMMITTEE ON APPROPRIATIONS, HOUSE OF
REPRESENTATIVES, AS AMENDED, JUNE 1, 1998
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 defining the term "compensation" to
11 include severance pay with exclusions; and adding definitions
12 relating to severance pay.
13 PROVIDING FOR THE EXCLUSION FROM TAXABLE PERSONAL INCOME OF <--
14 SUPPLEMENTAL UNEMPLOYMENT BENEFIT PLAN BENEFITS FOR
15 EMPLOYEES.
16 The General Assembly of the Commonwealth of Pennsylvania
17 hereby enacts as follows:
18 Section 1. Section 301(d) of the act of March 4, 1971 <--
19 (P.L.6, No.2), known as the Tax Reform Code of 1971, amended May
20 7, 1997 (P.L.85, No.7), is amended and the section is amended by
21 adding clauses to read:
22 Section 301. Definitions.--The following words, terms and
23 phrases when used in this article shall have the meaning
1 ascribed to them in this section except where the context
2 clearly indicates a different meaning. Unless specifically
3 provided otherwise, any reference in this article to the
4 Internal Revenue Code shall include the Internal Revenue Code of
5 1986 (Public Law 99-514, 26 U.S.C. § 1 et seq.), as amended to
6 January 1, 1997:
7 * * *
8 (d) "Compensation" means and shall include salaries, wages,
9 commissions, bonuses and incentive payments whether based on
10 profits or otherwise, severance pay, fees, tips and similar
11 remuneration received for services rendered, whether directly or
12 through an agent, and whether in cash or in property.
13 The term "compensation" shall not mean or include: (i)
14 periodic payments for sickness and disability other than regular
15 wages received during a period of sickness or disability; or
16 (ii) disability, retirement or other payments arising under
17 workmen's compensation acts, occupational disease acts and
18 similar legislation by any government; or (iii) payments
19 commonly recognized as old age or retirement benefits paid to
20 persons retired from service after reaching a specific age or
21 after a stated period of employment; or (iv) payments commonly
22 known as public assistance, or unemployment compensation
23 payments by any governmental agency; or (v) payments to
24 reimburse actual expenses; or (vi) payments made by employers or
25 labor unions, including payments made pursuant to a cafeteria
26 plan qualifying under section 125 of the Internal Revenue Code
27 of 1986 (Public Law 99-514, 26 U.S.C. § 125), for employe
28 benefit programs covering hospitalization, sickness, disability
29 or death, supplemental unemployment benefits or strike benefits:
30 Provided, That the program does not discriminate in favor of
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1 highly compensated individuals as to eligibility to participate,
2 payments or program benefits; or (vii) any compensation received
3 by United States servicemen serving in a combat zone; or (viii)
4 payments received by a foster parent for in-home care of foster
5 children from an agency of the Commonwealth or a political
6 subdivision thereof or an organization exempt from Federal tax
7 under section 501(c)(3) of the Internal Revenue Code of 1954
8 which is licensed by the Commonwealth or a political subdivision
9 thereof as a placement agency; or (ix) payments made by
10 employers or labor unions for employe benefit programs covering
11 social security or retirement; or (x) benefits payable under a
12 supplemental unemployment benefit plan whether or not they bear
13 a uniform relationship to the total compensation or to the basic
14 or regular rate of compensation received under Federal or State
15 law by a plan participant, such benefits may be payable on a
16 periodic basis or in the form of cash.
17 * * *
18 (i.3) "Highly compensated participant" means: (i) an
19 officer; (ii) a shareholder owning more than five per cent of
20 the voting shares or value of all classes of stock of the
21 employer; (iii) an individual who for the preceding taxable year
22 is in the group consisting of the top twenty per cent of all
23 full-time employes of the employer with at least three years of
24 service when ranked on the basis of compensation paid during the
25 taxable year; (iv) a partner or other self-employed individual;
26 or (v) a spouse or dependent of a highly compensated individual.
27 * * *
28 (s.01) "Severance pay" includes without limitation any
29 payment made upon separation from employment to a highly
30 compensated individual pursuant to any program under which the
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1 amount of contributions, the amount of earning on contributions
2 or allocation of contributions or earnings and the amount of
3 benefits are contingent upon a change in ownership or control of
4 any enterprise or in the ownership of a substantial portion of
5 the assets of any enterprise.
6 * * *
7 (t.1) "Supplemental unemployment benefit plan" means a plan,
8 program or arrangement established or maintained by an employer
9 or by an employe organization, or both, under which:
10 (1) no benefit is payable, or subject to anticipation,
11 assignment or pledge by any plan participant except upon lay-off
12 or involuntary separation from the employment of the employer
13 (whether or not such separation is temporary) resulting directly
14 from: (i) a permanent reduction in force; (ii) plant closing;
15 (iii) change in organizational structure; (iv) discontinuance of
16 an operation; or (v) the participant's failure to meet or
17 maintain standards of performance for the position due to
18 inability to carry out the responsibilities of the position,
19 health, obsolescence, failure to meet the changed
20 responsibilities of the position or similar circumstance beyond
21 the control of the participant; and
22 (2) no benefit is payable, or subject in any manner to
23 anticipation, assignment or pledge by any plan participant who:
24 (i) is separated or discharged because of the refusal to accept
25 another position with reasonably comparable compensation or the
26 commission of illegal acts, or insubordination, failure or
27 refusal to comply with rules or regulations or similar acts
28 within the control of the participant; or (ii) voluntarily
29 separates from service by retirement or otherwise.
30 * * *
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1 Section 2. This act shall apply to taxable years beginning
2 on or after January 1, 1999.
3 Section 3. This act shall take effect immediately.
4 SECTION 1. SHORT TITLE. <--
5 THIS ACT SHALL BE KNOWN AND MAY BE CITED AS THE EMPLOYEES
6 SUPPLEMENTAL UNEMPLOYMENT BENEFIT PLAN TAX EXCLUSION ACT.
7 SECTION 2. DEFINITIONS.
8 THE FOLLOWING WORDS AND PHRASES WHEN USED IN THIS ACT SHALL
9 HAVE THE MEANINGS GIVEN TO THEM IN THIS SECTION:
10 "HIGHLY COMPENSATED INDIVIDUAL." ANY OF THE FOLLOWING:
11 (1) AN OFFICER.
12 (2) A SHAREHOLDER OWNING MORE THAN 5% OF THE VOTING
13 SHARES OR VALUE OF ALL CLASSES OF STOCK OF THE EMPLOYER.
14 (3) AN INDIVIDUAL WHO FOR THE PRECEDING TAXABLE YEAR IS
15 IN THE GROUP CONSISTING OF THE TOP 20% OF ALL FULL-TIME
16 EMPLOYEES OF THE EMPLOYER WITH AT LEAST THREE YEARS OF
17 SERVICE WHEN RANKED ON THE BASIS OF COMPENSATION PAID DURING
18 THE TAXABLE YEAR.
19 (4) A PARTNER OR OTHER SELF-EMPLOYED INDIVIDUAL.
20 (5) A SPOUSE OR DEPENDENT OF A HIGHLY COMPENSATED
21 INDIVIDUAL.
22 "SUPPLEMENTAL UNEMPLOYMENT BENEFIT PLAN." A PLAN, PROGRAM OR
23 ARRANGEMENT ESTABLISHED OR MAINTAINED BY AN EMPLOYER OR BY AN
24 EMPLOYEE ORGANIZATION, OR BOTH, UNDER WHICH:
25 (1) NO BENEFIT IS PAYABLE, OR SUBJECT TO ANTICIPATION,
26 ASSIGNMENT OR PLEDGE BY ANY PLAN PARTICIPANT EXCEPT UPON LAY-
27 OFF OR INVOLUNTARY SEPARATION FROM THE EMPLOYMENT OF THE
28 EMPLOYER, WHETHER OR NOT SUCH SEPARATION IS TEMPORARY,
29 RESULTING DIRECTLY FROM:
30 (I) A PERMANENT REDUCTION IN FORCE;
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1 (II) PLANT CLOSING;
2 (III) CHANGE IN ORGANIZATIONAL STRUCTURE;
3 (IV) DISCONTINUANCE OF AN OPERATION; OR
4 (V) THE PARTICIPANT'S FAILURE TO MEET OR MAINTAIN
5 STANDARDS OF PERFORMANCE FOR THE POSITION DUE TO
6 INABILITY TO CARRY OUT THE RESPONSIBILITIES OF THE
7 POSITION, HEALTH, OBSOLESCENCE, FAILURE TO MEET THE
8 CHANGED RESPONSIBILITIES OF THE POSITION OR SIMILAR
9 CIRCUMSTANCE BEYOND THE CONTROL OF THE PARTICIPANT.
10 (2) NO BENEFIT IS PAYABLE, OR SUBJECT IN ANY MANNER TO
11 ANTICIPATION, ASSIGNMENT OR PLEDGE BY ANY PLAN PARTICIPANT
12 WHO:
13 (I) IS SEPARATED OR DISCHARGED BECAUSE OF THE
14 REFUSAL TO ACCEPT ANOTHER POSITION WITH REASONABLY
15 COMPARABLE COMPENSATION OR THE COMMISSION OF ILLEGAL
16 ACTS, OR INSUBORDINATION, FAILURE OR REFUSAL TO COMPLY
17 WITH RULES OR REGULATIONS OR SIMILAR ACTS WITHIN THE
18 CONTROL OF THE PARTICIPANT; OR
19 (II) VOLUNTARILY SEPARATES FROM SERVICE BY
20 RETIREMENT OR OTHERWISE.
21 SECTION 3. EXCLUSION.
22 COMPENSATION PAID TO AN EMPLOYEE AS SUPPLEMENTAL UNEMPLOYMENT
23 BENEFIT PLAN BENEFITS SHALL BE EXCLUDED FROM TAXATION BY THE
24 COMMONWEALTH UNLESS THE PAYMENTS ARE MADE TO A HIGHLY
25 COMPENSATED INDIVIDUAL PURSUANT TO ANY PROGRAM UNDER WHICH THE
26 AMOUNT OF CONTRIBUTIONS, THE AMOUNT OF EARNINGS ON CONTRIBUTIONS
27 OR ALLOCATION OF CONTRIBUTIONS OR EARNINGS AND THE AMOUNT OF
28 BENEFITS ARE CONTINGENT UPON A CHANGE IN OWNERSHIP OR CONTROL OF
29 ANY ENTERPRISE OR IN THE OWNERSHIP OF A SUBSTANTIAL PORTION OF
30 THE ASSETS OF ANY ENTERPRISE.
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1 SECTION 4. APPLICABILITY.
2 THIS ACT SHALL APPLY TO TAXABLE YEARS BEGINNING AFTER
3 DECEMBER 31, 1998.
4 SECTION 5. EFFECTIVE DATE.
5 THIS ACT SHALL TAKE EFFECT IN 60 DAYS.
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