PRINTER'S NO. 681
No. 642 Session of 1999
INTRODUCED BY TRAVAGLIO, DeWEESE, BELARDI, COY, M. COHEN, GEIST,
STURLA, MARKOSEK, HUTCHINSON, PESCI, READSHAW, DeLUCA,
TRELLO, VAN HORNE, SAINATO, STEELMAN, MANDERINO, LEVDANSKY,
SEYFERT, McCALL, L. I. COHEN, BARRAR, BROWNE, WILT AND MUNDY,
MARCH 2, 1999
REFERRED TO COMMITTEE ON FINANCE, MARCH 2, 1999
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," eliminating the minimum capital stock and
11 franchise tax.
12 The General Assembly of the Commonwealth of Pennsylvania
13 hereby enacts as follows:
14 Section 1. Section 602 of the act of March 4, 1971 (P.L.6,
15 No.2), known as the Tax Reform Code of 1971, amended April 23,
16 1998 (P.L.239, No.45), is amended to read:
17 Section 602. Imposition of Tax.--(a) That every domestic
18 entity from which a report is required under section 601 hereof,
19 shall be subject to, and pay to the department annually, a tax
20 which is [the greater of (i) three hundred dollars ($300) or
21 (ii)] the amount computed at the rates provided in subsection
1 (h) upon each dollar of the capital stock value as defined in
2 section 601(a), except that any domestic entity or company
3 subject to the tax prescribed herein may elect to compute and
4 pay its tax under and in accordance with the provisions of
5 subsection (b) of this section 602: Provided, That, [except for
6 the imposition of the three hundred dollar ($300) minimum tax,]
7 the provisions of this section shall not apply to the taxation
8 of the capital stock of entities organized for manufacturing,
9 processing, research or development purposes, which is invested
10 in and actually and exclusively employed in carrying on
11 manufacturing, processing, research or development within the
12 State, except such entities as enjoy and exercise the right of
13 eminent domain, but every entity organized for the purpose of
14 manufacturing, processing, research or development except such
15 entities as enjoy and exercise the right of eminent domain shall
16 pay the State tax of [the greater of (i) three hundred dollars
17 ($300) or (ii)] the amount computed at the rates provided in
18 subsection (h) upon each dollar of the capital stock value as
19 defined in section 601(a), upon such proportion of its capital
20 stock, if any, as may be invested in any property or business
21 not strictly incident or appurtenant to the manufacturing,
22 processing, research or development business, in addition to the
23 local taxes assessed upon its property in the district where
24 located, it being the object of this provision to relieve from
25 State taxation[, except for imposition of the three hundred
26 dollar ($300) minimum tax under this section,] only so much of
27 the capital stock as is invested purely in the manufacturing,
28 processing, research or development plant and business: and
29 Provided further, That[, except for the imposition of the
30 minimum tax set forth in this section,] the provisions of this
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1 section shall not apply to the taxation of so much of the
2 capital stock value attributable to student loan assets owned or
3 held by an entity created for the securitization of student
4 loans or by a trustee on its behalf.
5 (b) (1) Every foreign entity from which a report is
6 required under section 601 hereof, shall be subject to and pay
7 to the department annually, a franchise tax which is [the
8 greater of (i) three hundred dollars ($300) or (ii)] the amount
9 computed at the rates provided in subsection (h) upon each
10 dollar of the capital stock value as defined in section 601(a),
11 upon a taxable value to be determined in the following manner.
12 The capital stock value shall be ascertained in the manner
13 prescribed in section 601(a) of this article. The taxable value
14 shall then be determined by employing the relevant apportionment
15 factors set forth in Article IV: Provided, That the
16 manufacturing, processing, research and development exemptions
17 contained under section 602(a) shall also apply to foreign
18 corporations and in determining the relevant apportionment
19 factors the numerator of the property, payroll, or sales factors
20 shall not include any property, payroll or sales attributable to
21 manufacturing, processing, research or development activities in
22 the Commonwealth: and Provided further, That[, except for the
23 imposition of the minimum tax set forth in this section,] the
24 provisions of this section shall not apply to the taxation of so
25 much of the capital stock value attributable to student loan
26 assets owned or held by an entity created for the securitization
27 of student loans or by a trustee on its behalf. Any foreign
28 corporation, joint-stock association, limited partnership or
29 company subject to the tax prescribed herein may elect to
30 compute and pay its tax under section 602(a): Provided, That any
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1 foreign corporation, joint-stock association, limited
2 partnership or company electing to compute and pay its tax under
3 section 602(a) shall be treated as if it were a domestic
4 corporation for the purpose of determining which of its assets
5 are exempt from taxation and for the purpose of determining the
6 proportion of the value of its capital stock which is subject to
7 taxation.
8 (2) The provisions of this article shall apply to the
9 taxation of entities organized for manufacturing, processing,
10 research or development purposes, but shall not apply to such
11 entities as enjoy and exercise the right of eminent domain.
12 (d) It shall be the duty of the treasurer or other officers
13 having charge of any domestic or foreign entity, upon which a
14 tax is imposed by this section, to transmit the amount of tax to
15 the department within the time prescribed by law: Provided, That
16 for the purposes of this act interest in limited partnerships or
17 joint-stock associations shall be deemed to be capital stock,
18 and taxable accordingly: Provided, further, That entities liable
19 to a tax under this section, shall not be required to pay any
20 further tax on the mortgages, bonds, and other securities owned
21 by them and in which the whole body of stockholders or members,
22 as such, have the entire equitable interest in remainder; but
23 entities owning or holding such securities as trustees,
24 executors, administrators, guardians, or in any other manner
25 than for the whole body of stockholders or members thereof as
26 sole equitable owners in remainder, shall return and pay the tax
27 imposed by this act upon all securities so owned or held by
28 them, as in the case of individuals.
29 (e) Any holding company subject to the capital stock tax or
30 the franchise tax imposed by this section may elect to compute
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1 the capital stock or franchise tax by applying the rate of tax
2 provided in subsection (h) to ten per cent of the capital stock
3 value as defined in section 601(a)[, but in no case shall the
4 tax so computed be less than three hundred dollars ($300)]. If
5 exercised, this election shall be in lieu of any other
6 apportionment or allocation to which such company would
7 otherwise be entitled.
8 (f) Every domestic corporation and every foreign corporation
9 (i) registered to do business in Pennsylvania; (ii) which
10 maintains an office in Pennsylvania; (iii) which has filed a
11 timely election to be taxed as a regulated investment company
12 with the Federal Government; and (iv) which duly qualifies to be
13 taxed as a regulated investment company under the provisions of
14 the Internal Revenue Code of 1954 as amended, shall be taxed as
15 a regulated investment company and shall be subject to the
16 capital stock or franchise tax imposed by section 602, in either
17 case for the privilege of having an office in Pennsylvania,
18 which tax shall be computed pursuant to the provisions of this
19 subsection in lieu of all other provisions of this section 602.
20 The tax shall be in an amount which is [the greater of three
21 hundred dollars ($300) or] the sum of the amounts determined
22 pursuant to clauses (1) and (2):
23 (1) The amount determined pursuant to this clause shall be
24 seventy-five dollars ($75) times that number which is the result
25 of dividing the net asset value of the regulated investment
26 company by one million, rounded to the nearest multiple of
27 seventy-five dollars ($75). Net asset value shall be determined
28 by adding the monthly net asset values as of the last day of
29 each month during the taxable period and dividing the total sum
30 by the number of months involved. Each such monthly net asset
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1 value shall be the actual market value of all assets owned
2 without any exemptions or exclusions, less all liabilities,
3 debts and other obligations.
4 (2) The amount determined pursuant to this clause shall be
5 the amount which is the result of multiplying the rate of
6 taxation applicable for purposes of the personal income tax
7 during the same taxable year times the apportioned undistributed
8 personal income tax income of the regulated investment company.
9 For the purposes of this clause:
10 (A) Personal income tax income shall mean income to the
11 extent enumerated and classified in section 303.
12 (B) Undistributed personal income tax income shall mean all
13 personal income tax income other than personal income tax income
14 undistributed on account of the capital stock or foreign
15 franchise tax, less all personal income tax income distributed
16 to shareholders. At the election of the company, income
17 distributed after the close of a taxable year, but deemed
18 distributed during the taxable year for Federal income tax
19 purposes, shall be deemed distributed during that year for
20 purposes of this clause. If a company in a taxable year has both
21 current income and income accumulated from a prior year,
22 distributions during the year shall be deemed to have been made
23 first from current income.
24 (C) Undistributed personal income tax income shall be
25 apportioned to Pennsylvania by a fraction, the numerator of
26 which is all income distributed during the taxable period to
27 shareholders who are resident individuals, estates or trusts and
28 the denominator of which is all income distributed during the
29 taxable period. Resident trusts shall not include charitable,
30 pension or profit-sharing, or retirement trusts.
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1 (D) Personal income tax income and other income of a company
2 shall each be deemed to be either distributed to shareholders or
3 undistributed in the proportion each category bears to all
4 income received by the company during the taxable year.
5 (g) In the event that a domestic or foreign entity is
6 required to file a report pursuant to section 601(b) on other
7 than an annual basis, the tax imposed by this section[,
8 including the three hundred dollar ($300) minimum tax,] shall be
9 prorated to reflect the portion of a taxable year for which the
10 report is filed by multiplying the tax liability by a fraction
11 equal to the number of days in the taxable year divided by three
12 hundred sixty-five days.
13 (h) The rate of tax for purposes of the capital stock and
14 franchise tax for taxable years beginning within the dates set
15 forth shall be as follows:
16 Taxable Year Regular Rate Surtax Total Rate
17 January 1, 1971, to
18 December 31, 1986 10 mills 0 10 mills
19 January 1, 1987, to
20 December 31, 1987 9 mills 0 9 mills
21 January 1, 1988, to
22 December 31, 1990 9.5 mills 0 9.5 mills
23 January 1, 1991, to
24 December 31, 1991 11 mills 2 mills 13 mills
25 January 1, 1992, to
26 December 31, 1997 11 mills 1.75 mills 12.75 mills
27 January 1, 1998, and
28 each year thereafter 11 mills .99 mills 11.99 mills
29 Section 2. The amendment of section 602 of the act shall be
30 applicable to the tax year beginning January 1, 1999, and each
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1 tax year thereafter.
2 Section 3. This act shall take effect immediately.
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