PRINTER'S NO. 915
No. 815 Session of 1997
INTRODUCED BY PETRONE, COY, PISTELLA, BUNT, OLASZ, HERSHEY,
PESCI, VAN HORNE, ROBINSON, STABACK, BATTISTO, FLICK, ITKIN,
MELIO, LEVDANSKY, GEIST, L. I. COHEN, ROONEY, HENNESSEY,
RAMOS, JAMES, BELFANTI, BOSCOLA, PRESTON AND SEYFERT,
MARCH 12, 1997
REFERRED TO COMMITTEE ON FINANCE, MARCH 12, 1997
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
1 provided.
2 Section 3. Definitions.
3 The following words and phrases when used in this act shall
4 have the meanings given to them in this section unless the
5 context clearly indicates otherwise:
6 "Business facility." A property that is depreciable under
7 section 167 of the Internal Revenue Code of 1986 (Public Law 99-
8 514, 26 U.S.C. § 167) and that is used in this Commonwealth in
9 manufacturing or mining operations which are engaged in as a
10 commercial enterprise conducted for profit. The term does not
11 include machinery, equipment or other real and tangible personal
12 property which is classified as three-year property under
13 section 168(e) of the Internal Revenue Code of 1986 (Public Law
14 99-514, 26 U.S.C. § 168(e)). The term does not include a
15 replacement facility.
16 "Business facility employee." An individual who is employed
17 by the taxpayer in the operation of a qualified business
18 facility during the taxable year for which the credit under
19 section 4 is claimed and who performs duties in connection with
20 the operation of the new business facility on:
21 (1) a regular, full-time basis; or
22 (2) a part-time basis if the individual is customarily
23 performing the duties at least 32 hours per week throughout
24 the taxable year.
25 "Department." The Department of Revenue of the Commonwealth.
26 "Qualified business facility." A business facility which
27 meets all of the following:
28 (1) Is employed by the taxpayer in the conduct of a
29 business. If the taxpayer's only activity with respect to the
30 facility is to lease the facility to a person who is not a
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1 related taxpayer, the facility is not a qualifying business
2 facility. If the taxpayer employs only a portion of the
3 facility in the operation of a revenue-producing enterprise
4 and leases another portion of the facility to a person who is
5 not a related taxpayer or does not otherwise use the other
6 portions in the operation of a revenue-producing enterprise,
7 the portion employed by the taxpayer is a qualifying business
8 facility.
9 (2) Is purchased or leased by the taxpayer after July 1,
10 1987.
11 (3) Was not in service or use during the 90 days
12 immediately prior to purchase or lease. This paragraph may be
13 waived by the Department of Revenue upon application of the
14 taxpayer setting forth good cause.
15 "Qualified business facility investment." The value of the
16 qualified business facility, excluding inventory and property
17 held for sale to customers in the ordinary course of the
18 taxpayer's business, multiplied by the qualifying percentage.
19 (1) The value of the qualified business facility during
20 the taxable year shall be determined as follows:
21 (i) If the taxpayer owns the qualified business
22 facility, the value of the qualified business facility is
23 the original cost of the facility.
24 (ii) If the taxpayer leases the qualified business
25 facility, the value of the qualified business facility is
26 the lessor's original cost or eight times the net annual
27 rental rate. The net annual rental rate is the annual
28 rental rate paid by the taxpayer minus any annual rental
29 rate received by the taxpayer under subleases.
30 (2) The qualifying percentages shall be determined under
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1 the following table, and property classification shall be
2 determined under section 168(e) of the Internal Revenue Code
3 of 1986 (Public Law 99-514, 26 U.S.C. § 168(e)):
4 Property Classification Qualifying Percentage
5 3-year property 0
6 5-year property 50
7 7-year property 100
8 10-year property 100
9 15-year property 100
10 20-year property 100
11 31.5-year property 100
12 "Related taxpayer."
13 (1) Any of the following:
14 (i) An individual, corporation, partnership, trust
15 or association controlled by the taxpayer.
16 (ii) An individual, corporation, partnership, trust
17 or association under the control of the taxpayer.
18 (iii) An individual, corporation, partnership, trust
19 or association controlled by an individual, corporation,
20 partnership, trust or association under the control of
21 the taxpayer.
22 (2) For purposes of this definition, control of a
23 corporation means ownership, directly or indirectly, of stock
24 possessing at least 80% of the combined voting power of all
25 classes of stock entitled to vote.
26 (3) For purposes of this definition, an individual is
27 deemed under the control of the taxpayer if the individual
28 and the taxpayer are related by consanguinity, affinity or
29 adoption.
30 (4) For purposes of this definition, section 318 of the
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1 Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. §
2 318) is controlling.
3 "Replacement facility."
4 (1) A business facility that replaces another business
5 facility located in this Commonwealth which:
6 (i) the taxpayer or a related taxpayer used in
7 connection with an activity for more than two years
8 during the five years immediately preceding the
9 replacement; and
10 (ii) was not used by the taxpayer or a related
11 taxpayer in connection with an activity for at least one
12 year immediately following the replacement.
13 (2) The term does not include a new business facility in
14 which the taxpayer's qualified business facility investment
15 exceeds the lesser of $3,000,000 or 300% of the qualified
16 business facility investment in the old business facility.
17 Section 4. Tax credit.
18 (a) General rule.--If a taxpayer's qualified business
19 facility results in at least 50 new business facility employees
20 or if the taxpayer makes a new qualified business facility
21 investment in excess of $2,000,000, the taxpayer is eligible for
22 a credit against the tax imposed under Articles II, III, IV and
23 VI of the act of March 4, 1971 (P.L.6, No.2), known as the Tax
24 Reform Code of 1971.
25 (b) Amount.--The amount of the credit under this section
26 shall be the greater of 10% of the qualified business facility
27 investment or $100 per new business facility employee. The
28 number of new business facility employees during a taxable year
29 shall be determined as follows:
30 (1) Determine the average number of employees reported
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1 quarterly for the taxable year.
2 (2) Determine the average number of employees reported
3 quarterly over the two prior taxable years.
4 (3) Subtract the average under paragraph (2) from the
5 average under paragraph (1).
6 (c) Time.--The credit under this section may be taken in the
7 taxable year in which, under the taxpayer's depreciation
8 practice, the period for depreciation with respect to the
9 qualified business facility investment begins and in each of the
10 eight succeeding taxable years.
11 (d) Maximum.--The portion of the credit used may not exceed
12 the following percentages:
13 (1) For the first taxable year in which the credit is
14 taken, 90% of the taxes due in that taxable year.
15 (2) For the second taxable year in which the credit is
16 taken, 80% of the taxes due in that taxable year.
17 (3) For the third taxable year in which the credit is
18 taken, 70% of the taxes due in that taxable year.
19 (4) For the fourth taxable year in which the credit is
20 taken, 60% of the taxes due in that taxable year.
21 (5) For the fifth taxable year in which the credit is
22 taken, 50% of the taxes due in that taxable year.
23 (6) For the sixth taxable year in which the credit is
24 taken, 40% of the taxes due in that taxable year.
25 (7) For the seventh taxable year in which the credit is
26 taken, 30% of the taxes due in that taxable year.
27 (8) For the eighth taxable year in which the credit is
28 taken, 20% of the taxes due in that taxable year.
29 (9) For the ninth taxable year in which the credit is
30 taken, 10% of the taxes due in that taxable year.
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1 (e) Carryover.--Credits earned under this section, to the
2 extent not utilized, may be carried over for up to seven
3 additional years by the taxpayer and shall then expire.
4 (f) Change in status.--If, during a taxable year, the situs
5 of a qualified business facility is moved outside this
6 Commonwealth within 48 months after the credit is taken for it,
7 the taxes payable under Articles II, III, IV and VI of the Tax
8 Reform Code of 1971 shall be increased, in the taxable year that
9 the situs of the qualified business facility is moved, by the
10 amount of credit previously granted for the qualified business
11 facility and utilized by the taxpayer.
12 Section 5. Transfer of qualified business facilities.
13 If a taxpayer has established a qualified business facility
14 and if, prior to the total utilization of the credit under
15 section 4, all or a portion of the qualified business facility
16 is acquired by or leased to another taxpayer, the transferor
17 may, if the transferee recognizes the collective bargaining
18 agent, under the Labor Management Relations Act, 1947 (61 Stat.
19 136, 29 U.S.C. § 141 et seq.), of the employees of the
20 transferor, do any of the following:
21 (1) Treat the portion of the new business facility
22 acquired by or leased to the transferee as a qualified
23 business facility held by the transferor. In this case the
24 transferor shall be entitled to the remaining portion of the
25 credit that has not been utilized, but the transferee shall
26 not be entitled to any portion of the credit.
27 (2) Allow the transferee to claim the portion of the
28 credit that has not been utilized.
29 Section 6. Regulations.
30 The department may promulgate regulations to administer this
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1 act.
2 Section 7. Effective date.
3 This act shall take effect in 60 days.
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