PRINTER'S NO. 1310
No. 1108 Session of 2003
INTRODUCED BY LEWIS, CREIGHTON, SCAVELLO, COLEMAN, ARMSTRONG,
BIRMELIN, CAPPELLI, CIVERA, DALLY, GABIG, HARRIS, HERSHEY,
JAMES, LaGROTTA, LEH, McCALL, ROBERTS AND WATSON,
APRIL 9, 2003
REFERRED TO COMMITTEE ON FINANCE, APRIL 9, 2003
AN ACT
1 Providing for reduction and elimination of real property taxes;
2 establishing the School Property Tax Elimination Fund;
3 providing for distributions from the fund; imposing
4 additional sales and use tax and personal income tax; and
5 requiring the Joint State Government Commission to make
6 certain recommendations to the General Assembly.
7 The General Assembly of the Commonwealth of Pennsylvania
8 hereby enacts as follows:
9 Section 1. Short title.
10 This act shall be known and may be cited as the School
11 Property Tax Elimination Act.
12 Section 2. Definitions.
13 The following words and phrases when used in this act shall
14 have the meanings given to them in this section unless the
15 context clearly indicates otherwise:
16 "Base year." The first school district fiscal year beginning
17 after June 30, 2002.
18 "Department." The Department of Revenue of the Commonwealth.
19 "Enrollment factor." The average daily membership of a
1 school district divided by the average daily membership of the
2 school district for the base year.
3 "Fund." The School Property Tax Elimination Fund established
4 in section 4.
5 "Phase-out year one." The first school district fiscal year
6 beginning after June 30, 2003.
7 "Phase-out year two." The first school district fiscal year
8 beginning after June 30, 2004.
9 "Property tax billings." The school district real property
10 tax liability reflected on tax notices distributed with respect
11 to real property in the school district, without regard to
12 penalties, discounts or credits.
13 "School district." A school district as defined in section
14 102 of the act of March 10, 1949 (P.L.30, No.14), known as the
15 Public School Code of 1949.
16 "Secretary." The Secretary of Education of the Commonwealth.
17 "Tax expenditure." A tax expenditure as the term is used in
18 section 624 of the act of April 9, 1929 (P.L.177, No.175), known
19 as The Administrative Code of 1929.
20 Section 3. Real property tax reduction and elimination.
21 (a) First year reduction.--For phase-out year one, a school
22 district shall not issue or cause to be issued aggregate
23 property tax billings exceeding 50% of the school district's
24 base year property tax billings plus 2.5%. The millage of the
25 real property tax shall be adjusted to comply with this
26 subsection.
27 (b) Elimination.--For phase-out year two and each fiscal
28 year thereafter, a school district shall not be permitted to
29 levy, assess or collect real property taxes. This subsection
30 shall not apply to delinquent real property taxes levied or
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1 assessed prior to phase-out year two.
2 Section 4. School Property Tax Elimination Fund.
3 (a) Establishment.--
4 (1) There is hereby established in the State Treasury a
5 special fund to be known as the School Property Tax
6 Elimination Fund.
7 (2) The State Treasurer shall be custodian of the fund,
8 which shall be subject to the provisions of law applicable to
9 funds listed in section 302 of the act of April 9, 1929
10 (P.L.343, No.176), known as The Fiscal Code.
11 (3) To the extent provided by sections 6 and 7, taxes
12 imposed pursuant to this act shall be received by the
13 department and paid to the State Treasurer and, along with
14 interest and penalties and any refunds and credits paid,
15 shall be credited to the fund not less frequently than every
16 two weeks.
17 (4) During any period prior to the credit of moneys to
18 the fund, interest earned on moneys received by the
19 department and paid to the State Treasurer pursuant to this
20 act shall be deposited into the fund.
21 (5) All moneys in the fund, including, but not limited
22 to, moneys credited to the fund pursuant to this section,
23 prior year encumbrances and the interest earned thereon,
24 shall not lapse or be transferred to any other fund, but
25 shall remain in the fund and shall be used exclusively as
26 provided in this act.
27 (6) Pending their disbursement, moneys received on
28 behalf of or deposited into the fund shall be invested or
29 reinvested as are other funds in the custody of the State
30 Treasurer in the manner provided by law. All earnings
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1 received from the investment or deposit of such funds shall
2 be credited to the fund.
3 (7) The State Treasurer shall be authorized to borrow
4 moneys from the General Fund in the event that the moneys in
5 the fund are insufficient to make a distribution required
6 under section 5. Such borrowing shall be repaid to the
7 General Fund at the earliest practicable date.
8 (b) Limitations on fund.--Moneys deposited in or
9 appropriated to the fund shall be used solely as provided in
10 this act. School districts shall spend all distributions from
11 the fund for the purpose of phasing out school property taxes as
12 provided under this act.
13 Section 5. Distributions from the School Property Tax
14 Elimination Fund.
15 (a) Reports to Secretary of Education.--For phase-out year
16 one and each quarter thereafter, a school district shall provide
17 to the secretary a report of the following information in a form
18 acceptable to the secretary by the date provided by the
19 secretary:
20 (1) The school district's enrollment factor as of the
21 date set by the secretary.
22 (2) The school district's property tax billings for the
23 base year and any subsequent year.
24 (3) Any documentation required by the secretary.
25 (b) Eligibility for distributions.--
26 (1) A school district that does not submit a complete
27 and correct report under subsection (a) shall not be eligible
28 for distributions from the fund until such complete and
29 correct report is submitted.
30 (2) (i) Until a school district is in full compliance
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1 with the eligibility requirements of this act, the school
2 district shall not receive any State funding, under this
3 act or otherwise.
4 (ii) The secretary shall issue a certification to
5 the State Treasurer of any school district that is not in
6 such compliance and separate certification when such
7 school district comes into full compliance.
8 (c) Certification and distribution dates.--
9 (1) The secretary shall issue a certification regarding
10 a school district's eligibility for distributions from the
11 fund at least 30 days before the beginning of the school
12 district fiscal year or within 30 days of receipt of a
13 complete and correct report required under subsection (a),
14 whichever is later. On a quarterly basis, the secretary shall
15 also certify the amount of the distribution pursuant to
16 subsection (d) or (e), as applicable.
17 (2) The State Treasurer shall make distributions from
18 the fund to each eligible school district after certification
19 is made by the secretary as follows:
20 (i) By 30 days after certification, 10% of the
21 amount certified for the fiscal year.
22 (ii) By 120 days after certification, an additional
23 30% of the amount certified for the fiscal year.
24 (iii) By 210 days after certification, an additional
25 40% of the amount certified for the fiscal year.
26 (iv) By 300 days after certification, an additional
27 20% of the amount certified for the fiscal year.
28 (d) Distributions for phase-out year one.--The amount
29 distributed to each eligible school district for phase-out year
30 one shall be 50% of:
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1 (1) the school district's property tax billings for the
2 base year, increased by 2.5%; or
3 (2) the school district's property tax billings for the
4 base year multiplied by the enrollment factor, increased by
5 2.5%;
6 whichever is greater.
7 (e) Distributions for phase-out year two.--The amount
8 distributed to each eligible school district for phase-out year
9 two shall be:
10 (1) the school district's property tax billings for the
11 base year, increased by 5%; or
12 (2) the school district's property tax billings for the
13 base year multiplied by the enrollment factor, increased by
14 5%;
15 whichever is greater.
16 (f) Distributions for fiscal years after phase-out year
17 two.--For school district fiscal years beginning after phase-out
18 year two, the General Assembly shall annually appropriate moneys
19 from the School Property Tax Elimination Fund to continue the
20 distributions to school districts by the same formula in
21 subsection (e) but in each subsequent year, increasing the said
22 5% in subsection (e) by an additional 2.5% per year each year
23 thereafter.
24 Section 6. Additional sales and use tax imposed.
25 (a) Sales tax.--There is hereby imposed upon each separate
26 sale at retail of tangible personal property or services as
27 defined in Article II of the act of March 4, 1971 (P.L.6, No.2),
28 known as the Tax Reform Code of 1971, a tax on the purchase
29 price. The tax shall be collected by the vendor from the
30 purchaser and shall be paid over to the Commonwealth as provided
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1 in Article II of the Tax Reform Code of 1971.
2 (b) Use tax.--There is hereby imposed upon the use of
3 tangible personal property purchased at retail and on services
4 purchased at retail as defined in Article II of the Tax Reform
5 Code of 1971 a tax on the purchase price. The person who makes
6 the use shall pay over the tax to the Commonwealth. The use tax
7 imposed under this subsection shall not be paid over to the
8 Commonwealth by any person who has paid the tax imposed by
9 subsection (a) or has paid the tax imposed by this subsection to
10 the vendor with respect to the use.
11 (c) Hotel tax.--There is hereby imposed an excise tax on the
12 rent upon every occupancy of a room or rooms in a hotel as
13 defined in Article II of the Tax Reform Code of 1971. The tax
14 shall be collected by the operator or owner from the occupant
15 and paid over to the Commonwealth as provided in Article II of
16 the Tax Reform Code of 1971.
17 (d) Rate.--The tax imposed by subsections (a), (b) and (c)
18 shall be at the rate of 1%, which shall be computed as provided
19 in section 503(d)(2) of the act of June 5, 1991 (P.L.9, No.6),
20 known as the Pennsylvania Intergovernmental Cooperation
21 Authority Act for Cities of the First Class.
22 (e) Deposit of tax proceeds.--The department shall deposit
23 taxes collected under this section in the fund pursuant to the
24 provisions of section 4.
25 (f) Rules and regulations.--The rules and regulations
26 promulgated under Article II of the Tax Reform Code of 1971
27 shall be applicable to the taxes imposed by this section.
28 (g) Construction.--The tax imposed by this section shall be
29 in addition to any tax imposed by the Commonwealth pursuant to
30 Article II of the Tax Reform Code of 1971. The provisions of
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1 Article II of the Tax Reform Code of 1971 shall apply to the tax
2 imposed by this act.
3 Section 7. Additional personal income tax imposed.
4 (a) Personal income tax.--There is hereby imposed a tax upon
5 each class of income as defined in Article III of the act of
6 March 4, 1971 (P.L.6, No.2), known as the Tax Reform Code of
7 1971. The tax shall be collected and shall be paid over to the
8 Commonwealth as provided in Article III of the Tax Reform Code
9 of 1971.
10 (b) Rate.--The tax imposed by subsection (a) shall be at the
11 rate of 1.1%.
12 (c) Deposit of tax proceeds.--The department shall deposit
13 taxes collected under this section in the fund pursuant to the
14 provisions of section 4.
15 (d) Rules and regulations.--The rules and regulations
16 promulgated under Article III of the Tax Reform Code of 1971
17 shall be applicable to the tax imposed by this section.
18 (e) Construction.--The tax imposed by this section shall be
19 in addition to any tax imposed by the Commonwealth pursuant to
20 Article III of the Tax Reform Code of 1971. The provisions of
21 Article III of the Tax Reform Code of 1971 shall apply to the
22 tax imposed by this act.
23 Section 8. Commission to propose elimination or reduction of
24 tax expenditures.
25 (a) Recommendations.--The Joint State Government Commission
26 shall recommend to the General Assembly the elimination or
27 reductions of such tax expenditures as is necessary to yield
28 sufficient revenues for the funding of distributions under
29 section 5. In making recommendations, the Joint State Government
30 Commission shall consider the adequacy of revenues, equity in
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1 the distribution of the tax burden, economic efficiency and
2 administrative efficiency. The Joint State Government Commission
3 shall present to the Senate and the House of Representatives
4 draft legislation that may implement the recommendations
5 submitted under this subsection.
6 (b) Legislation.--The chair of the Appropriations Committee
7 of the Senate and the chair of the Appropriations Committee of
8 the House of Representatives shall each introduce the draft
9 legislation received under subsection (a) in bill form for
10 action by that chair's respective legislative body. The bill
11 shall provide for the transfer to the fund of any revenues
12 raised by the elimination or reduction of tax expenditures.
13 (c) Deadlines for recommendations and legislation.--The
14 following deadlines shall apply:
15 (1) The recommendations and draft legislation required
16 under subsection (a) shall be delivered to the President pro
17 tempore of the Senate, the chair of the Appropriations
18 Committee of the Senate, the Speaker of the House of
19 Representatives and the chair of the Appropriations Committee
20 of the House of Representatives within 90 days of the
21 effective date of this section.
22 (2) The legislation required under subsection (b) shall
23 be introduced within 30 days of the receipt of the
24 recommendations and draft legislation under subsection (a).
25 (d) Intent.--It is the intent of the General Assembly to
26 enact legislation to fully fund the phase-out of the school
27 district real property tax after receiving the report of the
28 Joint State Government Commission under this section.
29 Section 9. Limitation on unfunded mandates.
30 Until the termination of the fund, the Commonwealth may not
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1 impose upon or pass along a school district any part of the
2 total costs of new programs or services or increases in existing
3 programs or services, unless a specific appropriation is made
4 sufficient to pay, in the same budget year, the school district
5 for that purpose. The amount of State revenue paid to school
6 districts, taken as a group, shall not be reduced below that
7 amount in effect on the effective date of this act. Where costs
8 are transferred from one school district to another school
9 district, either by law or court order, any statutory limitation
10 or other such limitation, shall be adjusted and transferred
11 accordingly so the total costs are not increased as a result of
12 such transfer.
13 Section 10. Repeals.
14 All acts and parts of acts are repealed insofar as they are
15 inconsistent with this act.
16 Section 11. Effective date.
17 This act shall take effect as follows:
18 (1) Sections 6 and 7 shall take effect April 1, 2004.
19 (2) The remainder of this act shall take effect
20 immediately.
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