PRINTER'S NO. 1315
No. 1159 Session of 1997
INTRODUCED BY ALLEN, LUCYK, ARGALL, BELFANTI, PHILLIPS, HASAY,
McCALL, EACHUS, DALEY, STAIRS, RAYMOND, S. H. SMITH, TULLI,
READSHAW, SATHER, JAROLIN, SEMMEL, COY, GANNON, MARKOSEK,
SERAFINI, LAUGHLIN, COLAIZZO, FARGO, STEELMAN, HERSHEY,
LEVDANSKY, HENNESSEY, YOUNGBLOOD, ARMSTRONG, WALKO, TIGUE,
GEORGE, GEIST, CORNELL, BENNINGHOFF, McNAUGHTON, STERN,
TRICH, TRELLO, SEYFERT AND HALUSKA, APRIL 3, 1997
REFERRED TO COMMITTEE ON FINANCE, APRIL 3, 1997
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," providing for an investment tax credit program.
11 The General Assembly of the Commonwealth of Pennsylvania
12 hereby enacts as follows:
13 Section 1. The act of March 4, 1971 (P.L.6, No.2), known as
14 the Tax Reform Code of 1971, is amended by adding an article to
15 read:
16 ARTICLE XVIII-A
17 INVESTMENT TAX CREDIT
18 Section 1801-A. Short Title.--This article shall be known
19 and may be cited as the Investment Tax Credit Law.
1 Section 1802-A. Investment Tax Credits Program.--(a) A
2 taxpayer shall be allowed an investment tax credit against the
3 taxes imposed under Articles II, IV and VI of the act. The
4 amount of the credit shall be a percentage applied to the cost
5 or other basis, for Federal income tax purposes, of tangible
6 personal property and other forms of tangible property,
7 described in subsection (b).
8 (b) Tangible personal property and other forms of tangible
9 property which qualify for investment tax credit treatment under
10 this section shall meet all of the following requirements:
11 (1) Be acquired through a purchase as defined under section
12 179(d)(2) of the Internal Revenue Code of 1986 (Public Law 99-
13 514, 26 U.S.C. § 179(d)(2)), or constructed by the taxpayer for
14 their own use.
15 (2) Be depreciable under section 167 of the Internal Revenue
16 Code of 1986.
17 (3) For property undergoing construction, the qualifying
18 property represents that portion transferred to the property
19 base for depreciation purposes.
20 (4) Have a useful life of greater than or equal to four (4)
21 years.
22 (5) Be located and used in this Commonwealth.
23 (6) Be used principally by the taxpayer in any of the
24 following:
25 (i) The production of goods by manufacturing, processing,
26 assembling, refining, mining or extracting.
27 (ii) The exploration, production and transportation of
28 natural gas or crude oil.
29 (iii) The production of syngas by manufacturing, processing,
30 assembling, refining, mining or extracting.
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1 (iv) The transportation of goods produced, manufactured,
2 processed, assembled, refined, mined or extracted in this
3 Commonwealth.
4 (v) Research and development.
5 (vi) Computer-related services as defined under section
6 201(dd) through (ii).
7 (7) With respect to property qualifying in 1998, the
8 qualifying property shall include expenditures for purchases on
9 or before January 1, 1998, which are transferred to the
10 property's depreciable basis on or after January 1, 1998,
11 regardless of the contract commitment date, and other transfers
12 to the property's depreciable basis on or after January 1, 1998,
13 up to and including December 31, 2004.
14 (c) A taxpayer shall not make a claim for any such credit
15 until the filing of the 1998 corporate net income tax return.
16 The department shall verify the validity of any claims and may
17 assess a twenty-five per cent penalty against the tax otherwise
18 due in the case of a fraudulent claim.
19 (d) Manufacturing means any stage of operation from the
20 handling of raw material or components on the production
21 activity site to the conversion of the raw materials into
22 products suitable for use and ready for delivery or storage, or
23 which provides a new form, new quality or new combinations to
24 matter which already has undergone some process by use of
25 machinery, tools, appliances or other similar equipment. The
26 property used in the production of goods shall include
27 machinery, equipment or other tangible property principally used
28 in the repair and service of other machinery, equipment or other
29 tangible property used principally for the production of goods.
30 (e) Research and development property means property which
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1 is used for purposes of research and development in the
2 experimental or laboratory sense. These purposes shall not be
3 deemed to include the ordinary testing or inspection of
4 materials or products for quality control, efficiency surveys,
5 management studies, consumer surveys, advertising, promotions,
6 or research in connection with literary, historical or similar
7 projects.
8 (f) Processing means processing as defined in section 601.
9 (g) Syngas means the end product obtained when carbonaceous
10 feedstock is processed through gasification and liquefaction to
11 remove commercial grade sulfur and carbon dioxide and then
12 processed through a hydrocarbon synthesis to yield gas, oil and
13 kerosene free of sulfur and aromatics.
14 (h) (1) The investment tax credit shall be based upon a
15 percentage being applied to the investment tax credit base. The
16 percentage with respect to property constructed, reconstructed
17 or acquired beginning 1998 shall be fifteen per cent to be taken
18 over a period of no more than five years, with the same amount
19 taken each year.
20 (2) Except as otherwise provided, the total investment tax
21 credit available for application against each year's tax
22 liabilities shall not exceed fifteen per cent of the capital
23 cost of the facility.
24 (3) With respect to depreciable property pursuant to section
25 167 of the Internal Revenue Code of 1986 which is disposed of or
26 ceases to be in qualified use prior to the end of the first
27 taxable year in which such property is eligible for the
28 investment tax credit, the amount of the credit available shall
29 be that portion calculated by the ratio of the months in which
30 the property was qualified in relation to the property's total
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1 months of useful life which is used for computing Federal
2 depreciation.
3 (4) If the taxpayer disposes of any property for which it
4 has taken investment tax credits prior to the completion of the
5 applicable cost recovery period used for Federal tax purposes, a
6 portion of the credit taken will be recaptured and added to the
7 tax liability for the taxable year in which such disposition is
8 made. The portion of the investment tax credit subject to
9 recapture is equal to the percentage which the number of years
10 remaining in the cost recovery period of the property bears to
11 the total years of cost recovery which could have been claimed
12 but for the disposition of the property. In calculating the
13 recapture percentage, the year of disposition is considered a
14 year of remaining cost recovery.
15 (5) Any amount of the investment tax credit not used in the
16 taxable year in which the credit was generated can be carried
17 forward to succeeding years until the full amount of allowable
18 credit has been used.
19 Section 2. This act shall apply to taxable years 1998
20 through 2004 for purchases made between January 1, 1998, and
21 December 31, 2004.
22 Section 3. This act shall take effect immediately.
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