PRINTER'S NO. 2555
No. 1955 Session of 2003
INTRODUCED BY FRANKEL, COSTA, DIVEN, PETRONE, PISTELLA, PRESTON,
READSHAW, WALKO, WHEATLEY, DeWEESE, VEON, D. EVANS, COHEN,
COY, STETLER, CURRY, MANN AND LaGROTTA, SEPTEMBER 9, 2003
REFERRED TO COMMITTEE ON FINANCE, SEPTEMBER 9, 2003
AN ACT
1 Amending the act of December 31, 1965 (P.L.1257, No.511),
2 entitled "An act empowering cities of the second class,
3 cities of the second class A, cities of the third class,
4 boroughs, towns, townships of the first class, townships of
5 the second class, school districts of the second class,
6 school districts of the third class and school districts of
7 the fourth class including independent school districts, to
8 levy, assess, collect or to provide for the levying,
9 assessment and collection of certain taxes subject to maximum
10 limitations for general revenue purposes; authorizing the
11 establishment of bureaus and the appointment and compensation
12 of officers, agencies and employes to assess and collect such
13 taxes; providing for joint collection of certain taxes,
14 prescribing certain definitions and other provisions for
15 taxes levied and assessed upon earned income, providing for
16 annual audits and for collection of delinquent taxes, and
17 permitting and requiring penalties to be imposed and
18 enforced, including penalties for disclosure of confidential
19 information, providing an appeal from the ordinance or
20 resolution levying such taxes to the court of quarter
21 sessions and to the Supreme Court and Superior Court,"
22 further providing for delegation of taxing powers and
23 restrictions thereon; and providing for second class city
24 payroll expense tax.
25 The General Assembly of the Commonwealth of Pennsylvania
26 hereby enacts as follows:
27 Section 1. Section 2 of the act of December 31, 1965
28 (P.L.1257, No.511), known as The Local Tax Enabling Act, amended
1 December 9, 2002 (P.L.1364, No.166), is amended to read:
2 Section 2. Delegation of Taxing Powers and Restrictions
3 Thereon.--The duly constituted authorities of the following
4 political subdivisions, cities of the second class, cities of
5 the second class A, cities of the third class, boroughs, towns,
6 townships of the first class, townships of the second class,
7 school districts of the second class, school districts of the
8 third class, and school districts of the fourth class, in all
9 cases including independent school districts, may, in their
10 discretion, by ordinance or resolution, for general revenue
11 purposes, levy, assess and collect or provide for the levying,
12 assessment and collection of such taxes as they shall determine
13 on persons, transactions, occupations, privileges, subjects and
14 personal property within the limits of such political
15 subdivisions, and upon the transfer of real property, or of any
16 interest in real property, situate within the political
17 subdivision levying and assessing the tax, regardless of where
18 the instruments making the transfers are made, executed or
19 delivered or where the actual settlements on such transfer take
20 place. The taxing authority may provide that the transferee
21 shall remain liable for any unpaid realty transfer taxes imposed
22 by virtue of this act. Each local taxing authority may, by
23 ordinance or resolution, exempt any person whose total income
24 from all sources is less than ten thousand dollars ($10,000) per
25 annum from the per capita or similar head tax, occupation tax
26 and occupational privilege tax, or earned income tax, or any
27 portion thereof, and may adopt regulations for the processing of
28 claims for exemptions. Such local authorities shall not have
29 authority by virtue of this act:
30 (1) To levy, assess and collect or provide for the levying,
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1 assessment and collection of any tax on the transfer of real
2 property when the transfer is by will or mortgage or the
3 intestate laws of this Commonwealth or on a transfer by the
4 owner of previously occupied residential premises to a builder
5 of new residential premises when such previously occupied
6 residential premises is taken in trade by such builder as part
7 of the consideration from the purchaser of a new previously
8 unoccupied single family residential premises or on a transfer
9 between corporations operating housing projects pursuant to the
10 housing and redevelopment assistance law and the shareholders
11 thereof, or on a transfer between nonprofit industrial
12 development agencies and industrial corporations purchasing from
13 them, or on transfer to or from nonprofit industrial development
14 agencies, or on a transfer between husband and wife, or on a
15 transfer between persons who were previously husband and wife
16 but who have since been divorced; provided such transfer is made
17 within three months of the date of the granting of the final
18 decree in divorce, or the decree of equitable distribution of
19 marital property, whichever is later, and the property or
20 interest therein, subject to such transfer, was acquired by the
21 husband and wife, or husband or wife, prior to the granting of
22 the final decree in divorce, or on a transfer between parent and
23 child or the spouse of such a child, or between parent and
24 trustee for the benefit of a child or the spouse of such child,
25 or on a transfer between a grandparent and grandchild or the
26 spouse of such grandchild, or on a transfer between brother and
27 sister or brother and brother or sister and sister or the spouse
28 of such brother or sister, or on a transfer to a conservancy
29 which possesses a tax-exempt status pursuant to section
30 501(c)(3) of the Internal Revenue Code, and which has as its
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1 primary purpose the preservation of land for historic,
2 recreational, scenic, agricultural or open space opportunities,
3 by and between a principal and straw party for the purpose of
4 placing a mortgage or ground rent upon the premises, or on a
5 correctional deed without consideration, or on a transfer to the
6 United States, the Commonwealth of Pennsylvania, or to any of
7 their instrumentalities, agencies or political subdivisions, by
8 gift, dedication or deed in lieu of condemnation, or deed of
9 confirmation in connection with condemnation proceedings, or
10 reconveyance by the condemning body of the property condemned to
11 the owner of record at the time of condemnation which
12 reconveyance may include property line adjustments provided said
13 reconveyance is made within one year from the date of
14 condemnation, leases, or on a conveyance to a trustee under a
15 recorded trust agreement for the express purpose of holding
16 title in trust as security for a debt contracted at the time of
17 the conveyance under which the trustee is not the lender and
18 requiring the trustee to make reconveyance to the grantor-
19 borrower upon the repayment of the debt, or a transfer within a
20 family from a sole proprietor family member to a family farm
21 corporation, or in any sheriff sale instituted by a mortgagee in
22 which the purchaser of said sheriff sale is the mortgagee who
23 instituted said sale, or on a privilege, transaction, subject,
24 occupation or personal property which is now or does hereafter
25 become subject to a State tax or license fee;
26 (2) To levy, assess or collect a tax on the gross receipts
27 from utility service of any person or company whose rates and
28 services are fixed and regulated by the Pennsylvania Public
29 Utility Commission or on any public utility services rendered by
30 any such person or company or on any privilege or transaction
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1 involving the rendering of any such public utility service;
2 (3) Except on sales of admission to places of amusement or
3 on sales or other transfers of title or possession of property,
4 to levy, assess or collect a tax on the privilege of employing
5 such tangible property as is now or does hereafter become
6 subject to a State tax; and for the purposes of this clause,
7 real property rented for camping purposes shall not be
8 considered a place of amusement.
9 (4) To levy, assess and collect a tax on goods and articles
10 manufactured in such political subdivision or on the by-products
11 of manufacture, or on minerals, timber, natural resources and
12 farm products produced in such political subdivision or on the
13 preparation or processing thereof for use or market, or on any
14 privilege, act or transaction related to the business of
15 manufacturing, the production, preparation or processing of
16 minerals, timber and natural resources, or farm products, by
17 manufacturers, by producers and by farmers with respect to the
18 goods, articles and products of their own manufacture,
19 production or growth, or on any privilege, act or transaction
20 relating to the business of processing by-products of
21 manufacture, or on the transportation, loading, unloading or
22 dumping or storage of such goods, articles, products or by-
23 products; except that local authorities may levy, assess and
24 collect taxes on the occupation, occupational privilege, per
25 capita and earned income or net profits of natural persons
26 engaged in the above activities whether doing business as
27 individual proprietorship or as members of partnerships or other
28 associations;
29 (5) To levy, assess or collect a tax on salaries, wages,
30 commissions, compensation and earned income of nonresidents of
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1 the political subdivisions: Provided, That this limitation (5)
2 shall apply only to school districts of the second, third and
3 fourth classes;
4 (6) To levy, assess or collect a tax on personal property
5 subject to taxation by counties or on personal property owned by
6 persons, associations and corporations specifically exempted by
7 law from taxation under the county personal property tax law:
8 Provided, That this limitation (6) shall not apply to cities of
9 the second class;
10 (7) To levy, assess or collect a tax on membership in or
11 membership dues, fees or assessment of charitable, religious,
12 beneficial or nonprofit organizations including but not limited
13 to sportsmens, recreational, golf and tennis clubs, girl and boy
14 scout troops and councils;
15 (8) To levy, assess or collect any tax on a mobilehome or
16 house trailer subject to a real property tax unless the same tax
17 is levied, assessed and collected on other real property in the
18 political subdivision.
19 (9) To levy, assess or collect any tax on individuals for
20 the privilege of engaging in an occupation (occupational
21 privilege tax) except that such a tax may be levied, assessed
22 and collected only by the political subdivision of the
23 taxpayer's place of employment.
24 [Payment] Except for cities of the second class, payment of
25 any occupational privilege tax to any political subdivision by
26 any person pursuant to an ordinance or resolution passed or
27 adopted under the authority of this act shall be limited to ten
28 dollars ($10) on each person for each calendar year. A city of
29 the second class may levy an occupational privilege tax of up to
30 fifty-two dollars ($52) on each person for each calendar year if
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1 the city has adopted an operating budget for the year. The
2 operating budget must have been approved by a financial review
3 board established pursuant to section 2.2(k) unless such a board
4 has been terminated in accordance with the provisions of section
5 2.2(k).
6 The situs of such tax shall be the place of employment, but,
7 in the event a person is engaged in more than one occupation, or
8 an occupation which requires his working in more than one
9 political subdivision during the calendar year, the priority of
10 claim to collect such occupational privilege tax shall be in the
11 following order: first, the political subdivision in which a
12 person maintains his principal office or is principally
13 employed; second, the political subdivision in which the person
14 resides and works, if such a tax is levied by that political
15 subdivision; third, the political subdivision in which a person
16 is employed and which imposes the tax nearest in miles to the
17 person's home. The place of employment shall be determined as of
18 the day the taxpayer first becomes subject to the tax during the
19 calendar year.
20 [It] Except with regard to any occupational privilege tax
21 imposed by a city of the second class, it is the intent of this
22 provision that no person shall pay more than ten dollars ($10)
23 in any calendar year as an occupational privilege tax
24 irrespective of the number of political subdivisions within
25 which such person may be employed within any given calendar
26 year. No individual subject to an occupational privilege tax
27 imposed and collected by a city of the second class and also
28 subject to an occupational privilege tax imposed by another
29 political subdivision shall pay more than fifty-two dollars
30 ($52) in any calendar year to all political subdivisions
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1 imposing an occupational privilege tax.
2 In case of dispute, a tax receipt of the taxing authority for
3 that calendar year declaring that the taxpayer has made prior
4 payment [which] constitutes prima facie certification of payment
5 to all other political subdivisions.
6 (10) To levy, assess or collect a tax on admissions to
7 motion picture theatres: Provided, That this limitation (10)
8 shall not apply to cities of the second class.
9 (11) To levy, assess or collect a tax on the construction of
10 or improvement to residential dwellings or upon the application
11 for or issuance of permits for the construction of or
12 improvements to residential dwellings.
13 (12) To levy, assess and collect a mercantile or business
14 privilege tax on gross receipts or part thereof which are: (i)
15 discounts allowed to purchasers as cash discounts for prompt
16 payment of their bills; (ii) charges advanced by a seller for
17 freight, delivery or other transportation for the purchaser in
18 accordance with the terms of a contract of sale; (iii) received
19 upon the sale of an article of personal property which was
20 acquired by the seller as a trade-in to the extent that the
21 gross receipts in the sale of the article taken in trade does
22 not exceed the amount of trade-in allowance made in acquiring
23 such article; (iv) refunds, credits or allowances given to a
24 purchaser on account of defects in goods sold or merchandise
25 returned; (v) Pennsylvania sales tax; (vi) based on the value of
26 exchanges or transfers between one seller and another seller who
27 transfers property with the understanding that property of an
28 identical description will be returned at a subsequent date;
29 however, when sellers engaged in similar lines of business
30 exchange property and one of them makes payment to the other in
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1 addition to the property exchanged, the additional payment
2 received may be included in the gross receipts of the seller
3 receiving such additional cash payments; (vii) of sellers from
4 sales to other sellers in the same line where the seller
5 transfers the title or possession at the same price for which
6 the seller acquired the merchandise; or (viii) transfers between
7 one department, branch or division of a corporation or other
8 business entity of goods, wares and merchandise to another
9 department, branch or division of the same corporation or
10 business entity and which are recorded on the books to reflect
11 such interdepartmental transactions.
12 (13) To levy, assess or collect an amusement or admissions
13 tax on membership, membership dues, fees or assessments,
14 donations, contributions or monetary charges of any character
15 whatsoever paid by the general public, or a limited or selected
16 number thereof, for such persons to enter into any place,
17 indoors or outdoors, to engage in any activities, the
18 predominant purpose or nature of which is exercise, fitness,
19 health maintenance, improvement or rehabilitation, health or
20 nutrition education, or weight control.
21 Section 2. The act is amended by adding a section to read:
22 Section 2.2. Second Class City Payroll Expense Tax.--(a) In
23 addition to those taxing powers enumerated in section 2, cities
24 of the second class shall have the authority to levy and collect
25 a payroll expense tax pursuant to this section.
26 (b) For the tax year 2003, and annually thereafter, if
27 authorized by council and if the city has an operating budget
28 for that year and, if a board exists, the budget has been
29 approved by the board, every city shall have authority to levy
30 and collect a tax as provided by subsection (c). This tax shall
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1 be in addition to any other tax a city is empowered to levy and
2 collect under any existing law, including a business privilege
3 or mercantile tax on gross receipts as authorized by section 2.
4 The taxes, additions and penalties collected under the
5 provisions of this section shall be used by the city for general
6 revenue purposes of the city. Upon the levying and collection of
7 the tax authorized by this section, the rate of any business
8 privilege, institution and service privilege or mercantile tax
9 on gross receipts as imposed by a city pursuant to this act
10 shall be at least one mill less than the rate of tax that was in
11 effect immediately prior to the effective date of this section,
12 if the rate of that tax was greater than one mill. The rate
13 reduction for the business privilege, institution or service
14 privilege or mercantile tax imposed pursuant to this act shall
15 take effect prospectively and shall not require the refund of
16 amounts paid prior to the effective date of this section.
17 (c) (1) Notwithstanding any contrary provision of law of
18 this Commonwealth, including the provisions of this act and the
19 act of March 4, 1971 (P.L.6, No.2), known as the "Tax Reform
20 Code of 1971," beginning with the tax year 2003, and annually
21 thereafter, if authorized and levied pursuant to this section,
22 every employer shall pay an annual tax on the employer's payroll
23 expense attributable to the city. The tax imposed shall be
24 subject only to any rate limitations and exemptions or
25 exclusions as provided by this section and shall not be subject
26 to rate limitations, exemptions or exclusions as otherwise
27 provided by any law of this Commonwealth.
28 (2) For tax measurement years beginning during the period
29 from January 1, 2002, to and including December 31, 2002, the
30 rate of the tax imposed pursuant to this section may not exceed
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1 two hundred twenty-five thousandths percent of the employer's
2 payroll expense attributable to the city. For tax measurement
3 years beginning on and after January 1, 2003, the rate of the
4 tax imposed pursuant to this section may not exceed forty-five
5 hundredths percent of the employer's payroll expense
6 attributable to the city.
7 (3) Any tax imposed pursuant to this section shall not apply
8 to any person unless the person is doing business within a city
9 imposing the tax. A person is doing business within a city, for
10 purposes of this section, if the person engages, hires, employs
11 or contracts with one or more individuals as employe or if one
12 or more individuals earns profits for or relating to the
13 performance of work or rendering of services in whole or in part
14 within the city and, in addition, either maintains a fixed place
15 of business within the city, owns or leases real property within
16 the city for purposes of such business, maintains a stock of
17 tangible personal property in the city for sale in the ordinary
18 course of such business, conducts continuous solicitation within
19 the city related to such business or utilizes the streets of the
20 city in connection with the operation of such business other
21 than transportation through the city.
22 (d) (1) For purposes of computation of the tax imposed
23 pursuant to subsection (c), the payroll expense attributable to
24 the city shall be determined by applying an apportionment factor
25 to total payroll expense based on that portion of payroll
26 expense which the total number of days an employe, partner,
27 member, shareholder or other individual works within the city
28 bears to the total number of days such employe or person works
29 within and outside of the city.
30 (2) The collector shall prescribe regulations providing for
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1 use of alternative forms of apportionment of payroll expense in
2 addition to paragraph (1).
3 (3) In determining payroll expense attributable to the city,
4 an employer may exclude one hundred thousand dollars ($100,000)
5 from the aggregate amount of payroll expense after the
6 apportionment of payroll expense to the city pursuant to
7 paragraph (1) or (2).
8 (e) (1) Every tax year in which an employer incurs payroll
9 expense shall be subject to the tax imposed pursuant to
10 subsection (c). Every employer subject to the payment of the tax
11 shall compute the employer's taxable payroll expense using the
12 tax measurement year beginning in the tax base year.
13 (2) Every employer who does not have a tax measurement year
14 ending in the tax year in which the employer first incurs
15 payroll expenses shall file a return and pay any estimated tax
16 due pursuant to subsection (g)(1), but shall not be required to
17 file a final return until the next tax year.
18 (3) Every employer terminating its activities and no longer
19 incurring payroll expenses during the tax year shall compute the
20 employer's payroll expenses using the period that begins on the
21 beginning date of the tax measurement year ending in the tax
22 year and ends on the date payroll expense is no longer incurred.
23 (4) The collector shall prescribe regulations to ensure that
24 every employer with a change in tax measurement year, including
25 an employer that may have multiple tax measurement years within
26 a tax year, shall pay the tax imposed by this section for all
27 periods in which payroll expense is incurred.
28 (f) (1) Every person subject to the tax imposed pursuant to
29 this section shall file a return made upon a form as required by
30 the collector. Every employer making a return shall certify the
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1 correctness thereof.
2 (2) Every employer subject to the tax imposed and authorized
3 by this section shall file an annual return at such time and in
4 such manner as provided for by council. Such provisions may
5 permit reasonable extensions of time for filing returns,
6 provided an estimated return is filed on or before the due date
7 and is filed in the manner and paid in the amount prescribed by
8 the collector. No penalties shall be imposed for underestimates
9 of tax owed provided the estimated payments are made as
10 prescribed by the collector.
11 (g) (1) An employer subject to the tax imposed by this
12 section shall make quarterly estimated tax payments in such
13 manner as provided by regulations prescribed by the collector
14 either in equal quarterly installments based upon the prior
15 year's tax liability or in quarterly installments based on the
16 amount of payroll expenses arising in such quarter, and upon
17 making the return shall pay the amount of tax shown as due to
18 the collector less any estimated tax payments paid for the tax
19 year.
20 (2) The ordinance levying the tax authorized by this section
21 shall provide for its collection. The taxes shall be collected
22 in accordance with all provisions, restrictions, limitations,
23 rights of notice and appeal as are applicable to other taxes
24 imposed for city purposes.
25 (h) In addition to any other additions, penalties or
26 enforcement proceedings provided for by ordinance for the
27 collection and enforcement of taxes:
28 (1) Any employer who wilfully makes any false or untrue
29 statement on the employer's return commits a misdemeanor of the
30 second degree and shall, upon conviction, be sentenced to pay a
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1 fine of not more than two thousand dollars ($2,000) or to
2 imprisonment for not more than two years, or both.
3 (2) Any person who wilfully fails or refuses to appear
4 before the collector in person with the employer's books,
5 records or accounts for examination when required under the
6 provisions of this section or of an ordinance to do so, or who
7 wilfully refuses to permit inspection of the books, records or
8 accounts of any employer in the person's custody or control when
9 the right to make such inspection by the collector is requested,
10 commits a misdemeanor and shall, upon conviction, be sentenced
11 to pay a fine of not more than five hundred dollars ($500) or to
12 imprisonment for not more than six months, or both.
13 (3) Any employer who wilfully fails or refuses to file a
14 return required by this section commits a misdemeanor of the
15 third degree and shall, upon conviction, be sentenced to pay a
16 fine of not more than one thousand dollars ($1,000) or to
17 imprisonment for not more than one year, or both.
18 (i) Notwithstanding anything contained in any law to the
19 contrary, and except when specifically authorized by the General
20 Assembly, the council may not levy, assess or collect, for city
21 purposes, any tax based on or measured by payroll expense if the
22 city already provides for the imposition, levy and collection of
23 the tax imposed and authorized by this section.
24 (j) This section shall apply to tax measurement years
25 beginning on and after January 1, 2002.
26 (k) (1) There is hereby established an independent board
27 for each city, exercising public powers of the city as an agency
28 and instrumentality thereof. The exercise by the board of the
29 powers and duties conferred by this subsection is hereby
30 declared to be and shall for all purposes be deemed and held to
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1 be the performance of an essential public function.
2 (2) The powers and duties of the board shall be exercised by
3 a governing body composed of nine members:
4 (i) two members shall be appointed by the Governor;
5 (ii) one member shall be appointed by the President pro
6 tempore of the Senate, one member shall be appointed by the
7 Minority Leader of the Senate, one member shall be appointed by
8 the Speaker of the House of Representatives and one member shall
9 be appointed by the Minority Leader of the House of
10 Representatives; and
11 (iii) one member shall be appointed by the mayor.
12 (3) The Secretary of the Budget of the Commonwealth and the
13 director of finance of the city shall serve as ex officio
14 members of the board. The ex officio members may not vote, shall
15 not be counted for purposes of establishing a quorum and may
16 designate in writing a representative of their respective
17 offices to attend meetings of the board on their behalf.
18 (4) (i) A member shall reside in this Commonwealth and,
19 except for the Secretary of the Budget, must either be a
20 resident of the city, own a business in the city or be primarily
21 employed in the city, and shall possess substantial experience
22 in finance or management.
23 (ii) Except for the Secretary of the Budget of the
24 Commonwealth or the director of finance of the city, a member
25 may not seek or hold elective office or any other position as a
26 public official within this Commonwealth.
27 (5) The board and its members shall be subject to the act of
28 June 21, 1957 (P.L.390, No.212), referred to as the Right-to-
29 Know Law, the act of July 19, 1957 (P.L.1017, No.451), known as
30 the "State Adverse Interest Act," and 65 Pa.C.S. Chs. 7
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1 (relating to open meetings) and 11 (relating to ethics standards
2 and financial disclosure), Provided, however, that,
3 notwithstanding the provisions of the "State Adverse Interest
4 Act," the Secretary of the Budget of the Commonwealth and the
5 director of finance of the city or their designees shall, while
6 serving as ex officio members of the board, also serve in their
7 official capacities with respect to the negotiation and
8 execution of agreements between a city and the board.
9 (6) Appointing authorities shall appoint the initial members
10 of the board within thirty days of the effective date of this
11 section. The term of an appointed member shall be four years,
12 provided, that the member's term shall continue until his or her
13 replacement is appointed. Appointed board members shall serve at
14 the pleasure of the respective appointing authority. No
15 appointed board member shall serve more than two consecutive
16 terms.
17 (7) If a vacancy occurs within the appointed membership of
18 the board, the appointing authority who originally appointed the
19 member whose seat has become vacant shall appoint a successor
20 member within thirty days of the vacancy. A member so appointed
21 shall serve the unexpired portion of the term.
22 (8) The director of finance of the city shall convene the
23 initial organizational meeting of the board within thirty days
24 of the appointment of at least five of the initial voting
25 members of the board.
26 (9) The members shall elect from among themselves a
27 chairperson, vice chairperson and secretary.
28 (10) The board shall meet as frequently as it deems
29 appropriate.
30 (11) When voting to approve or disapprove a five-year plan
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1 or an annual operating budget, all members appointed to the
2 board shall be required to be present to constitute a quorum and
3 a super-majority vote of the board shall be required. A super-
4 majority means affirmative votes of one member more than a
5 majority of the voting members appointed to the board. For all
6 other purposes of conducting the business of the board, a
7 majority of the full board shall constitute a quorum and a
8 majority vote of the members present shall be required to take
9 action.
10 (12) A member shall not receive compensation. A member may
11 be reimbursed for necessary and reasonable expenditures the
12 member makes in order to carry out board responsibilities.
13 (13) Upon request of the board, the city shall provide up to
14 one hundred thousand dollars ($100,000) per year to cover its
15 reasonable and necessary expenses, including costs incurred for
16 consultants engaged by the board to carry out its duties.
17 (14) A board established pursuant to this subsection shall
18 exist for a term of at least seven years. If, after seven years,
19 a city has had annual operating budgets approved by the board
20 and five-year financial plans approved by the board for at least
21 the three immediately preceding years, the Secretary of
22 Community and Economic Development shall certify that the board
23 is no longer needed, and the provisions of this subsection will
24 no longer be in effect ninety days following that certification.
25 Upon termination of a board, records and documents of the board
26 shall be transferred to the director of finance of the city.
27 (l) The board shall have the following powers and duties:
28 (1) It shall annually review and approve or disapprove five-
29 year plans prepared by a city that will be used in the
30 development of annual operating and capital budgets for the
20030H1955B2555 - 17 -
1 subsequent year, as provided in subsection (n).
2 (2) It shall annually review and approve or disapprove
3 annual operating budgets adopted by a city as provided in
4 subsection (o).
5 (3) It may engage consultants as necessary to fulfill its
6 responsibilities under this subsection.
7 (m) On or before October 1 of each year, the mayor shall
8 submit to the board a five-year plan, which sets forth the
9 following:
10 (1) a forecast of revenues and expenditures for the
11 principal operating fund of the city for five fiscal years that
12 shall include the current fiscal year and the four subsequent
13 fiscal years;
14 (2) documentation for all revenue projections and budgetary
15 assumptions; and
16 (3) a statement outlining the city's goals and objectives
17 relative to the five-year plan.
18 (n) (1) The board shall review and approve or disapprove
19 the five-year plan within thirty days of its submission to the
20 board, based on a determination by the board as to whether the
21 plan has been prepared using sound budgetary practices. If the
22 board does not approve or disapprove the five-year plan within
23 such thirty-day period, the board shall be deemed to have
24 approved the plan.
25 (2) If the board disapproves a five-year plan submitted by
26 the mayor, the board must do so in writing, stating specific
27 recommendations for corrective actions to be taken by the city.
28 (3) If the board disapproves a proposed five-year plan, the
29 mayor shall submit a revised five-year plan to the board for
30 review within fifteen days. The board shall then vote to approve
20030H1955B2555 - 18 -
1 or disapprove the revised five-year plan within fifteen days. If
2 the board does not approve or disapprove the revised five-year
3 plan within such fifteen-day period, the board shall be deemed
4 to have approved the revised plan.
5 (4) After approval by the board of a five-year plan under
6 this subsection, any determination by a board of arbitration
7 established under the provisions of the act of June 24, 1968
8 (P.L.237, No.111), referred to as the Policemen and Firemen
9 Collective Bargaining Act, involving an increase in wages or
10 fringe benefits to city employes, in addition to considering any
11 standard or factor required to be considered by applicable law,
12 shall give substantial weight to the following:
13 (i) The assumptions regarding wages and fringe benefits for
14 those city employes that were used to prepare the approved five-
15 year plan.
16 (ii) The financial ability of the city to pay the cost of
17 increases in wages or fringe benefits without adversely
18 affecting levels of service.
19 (o) (1) On or before December 31 of each year, the mayor
20 shall submit to the board an operating budget and a capital
21 budget, following their review and approval by council.
22 (2) The board shall review and may approve or disapprove the
23 annual operating budget of a city within thirty days of approval
24 by council based on a determination by the board as to whether:
25 (A) the operating budget has been prepared using sound
26 budgetary practices; and
27 (B) the operating and capital budgets are substantially
28 consistent with the approved five-year plan.
29 If the board does not approve or disapprove the annual operating
30 budget within such thirty-day period, the board shall be deemed
20030H1955B2555 - 19 -
1 to have approved the operating budget.
2 (3) If the board disapproves the annual operating budget,
3 the board must do so in writing, stating specific
4 recommendations for corrective action to be taken by the city.
5 (4) If the board disapproves the annual operating budget,
6 the mayor shall, following review and approval by the council or
7 other legislative governing body of the city, submit a revised
8 budget to the board for review. The board shall then vote to
9 approve or disapprove the revised operating budget within
10 fifteen days. If the board does not approve or disapprove the
11 revised operating budget within such fifteen-day period, the
12 board shall be deemed to have approved the revised operating
13 budget. If at any point during the year the city adopts a
14 revised operating budget, it shall submit it to the board for
15 approval in accordance with this paragraph. If at any point
16 during the year, the city adopts a revised capital budget that
17 would require operating expenditures different than are included
18 in the approved five-year plan, the city shall submit a revised
19 five-year plan to the board for its approval in accordance with
20 the procedures in subsection (n).
21 (p) (1) Neither the occupational privilege tax of up to
22 fifty-two dollars ($52) authorized to be imposed by cities of
23 the second class nor the payroll expense tax authorized by this
24 section may be levied or assessed in a city for the 2003 tax
25 year unless the financial review board established pursuant to
26 this subsection certifies that the city has implemented
27 expenditure reductions provided by the annual operating budget
28 for the year 2003 which was adopted by the city prior to the
29 effective date of this section.
30 (2) For the 2004 tax year and thereafter, neither the
20030H1955B2555 - 20 -
1 occupational privilege tax of up to fifty-two dollars ($52)
2 authorized to be imposed by cities of the second class nor the
3 payroll expense tax authorized by this section may be levied or
4 assessed by a city unless the city previously satisfied the
5 requirements of paragraph (1) and, during any year in which a
6 financial review board that has been established pursuant to
7 this section exists, the board has approved the annual operating
8 budget for the year as provided by this section.
9 (q) (1) Any tax imposed pursuant to this act shall be
10 subject to 53 Pa.C.S. Ch. 84 Subch. C (relating to local
11 taxpayers bill of rights).
12 (2) Notwithstanding any provisions of law to the contrary,
13 including 53 Pa.C.S. Pt. III Subpt. E (relating to home rule and
14 optional plan government), the provisions of this act, including
15 any limitations on tax rates or requirements to reduce tax rates
16 applicable to both residents and nonresidents, shall apply to
17 any city imposing a tax authorized by this act.
18 (r) The following words and phrases when used in this
19 section shall have the meanings given to them in this subsection
20 unless the context clearly indicates otherwise:
21 "Board" means a financial review board of a city established
22 under subsection (k).
23 "Charity" means an institution of purely public charity under
24 the act of November 26, 1997 (P.L.508, No.55), known as the
25 "Institutions of Purely Public Charity Act."
26 "City" means a city of the second class as defined in the act
27 of June 25, 1895 (P.L.275, No.188), entitled "An act dividing
28 the cities of this State into three classes with respect to
29 their population, and designating the mode of ascertaining and
30 changing the classification thereof in accordance therewith."
20030H1955B2555 - 21 -
1 "Collector" means the receiver of taxes in a city.
2 "Compensation" means salaries, wages, commissions, bonuses
3 and incentive payments, whether based on profits or otherwise,
4 fees, tips and similar remuneration and profits for services
5 rendered, whether directly or through an agent and whether in
6 cash or in property. The term "compensation" shall not mean or
7 include:
8 (1) periodic payments for sickness and disability other than
9 regular wages received during a period of sickness or
10 disability;
11 (2) disability, retirement or other payments arising under
12 workmen's compensation acts, occupational disease acts and
13 similar legislation by any government;
14 (3) payments commonly recognized as old age or retirement
15 benefits paid to persons retired from service after reaching a
16 specific age or after a stated period of employment;
17 (4) payments commonly known as public assistance, or
18 unemployment compensation payments by any governmental agency;
19 (5) payments to reimburse actual expenses;
20 (6) payments made by employers or labor unions, including
21 payments made pursuant to a cafeteria plan qualifying under
22 section 125 of the Internal Revenue Code of 1986 (Public Law 99-
23 514, 26 U.S.C. § 1 et seq.), for employe benefit programs
24 covering hospitalization, sickness, disability or death,
25 supplemental unemployment benefits or strike benefits, provided
26 that the program does not discriminate in favor of highly
27 compensated individuals as to eligibility to participate,
28 payments or program benefits;
29 (7) any compensation received by United States servicemen
30 serving in a combat zone;
20030H1955B2555 - 22 -
1 (8) payments received by a foster parent for in-home care of
2 foster children from an agency of the Commonwealth or a
3 political subdivision thereof or an organization exempt from
4 Federal tax under section 501(c)(3) of the Internal Revenue Code
5 of 1954 (68A Stat. 3, 26 U.S.C. § 1 et seq.) that is licensed by
6 the Commonwealth or a political subdivision thereof as a
7 placement agency;
8 (9) payments made by employers or labor unions for employe
9 benefit programs covering Social Security or retirement; or
10 (10) personal use of an employer's owned or leased property
11 or of employer-provided services.
12 "Council" means the legislative governing body of a city.
13 "Employer" means any individual, sole proprietor,
14 partnership, limited partnership, association, corporation, S
15 corporation, estate or trust, including a financial employer, a
16 manufacturer and a regulated employer. The term "employer" does
17 not include a charity. Whenever used in any provision of this
18 section that prescribes or imposes a penalty, the term
19 "employer," as applied to associations, shall mean the partners
20 or members thereof, and as applied to corporations, the officers
21 thereof, responsible for the reporting and payment of taxes,
22 provided that such individuals shall not be subject to penalties
23 if they discharged their duties with respect to reporting and
24 payment of taxes with reasonable care, prudence and diligence.
25 The term does not include:
26 (1) the Federal Government, the Commonwealth, any political
27 subdivision or any authority created and organized under and
28 pursuant to the law of this Commonwealth, any state other than
29 this Commonwealth, any local government of a state other than
30 this Commonwealth, any authority or governmental entity created
20030H1955B2555 - 23 -
1 and organized by the law of any state other than this
2 Commonwealth or any government of a nation other than the United
3 States; or
4 (2) any insurance company, association or exchange or any
5 fraternal, benefit or beneficial society of another state for
6 which such other state, by reason of the tax imposed by this
7 act, subjects insurance companies, associations or exchanges or
8 fraternal, benefit or beneficial societies of this Commonwealth
9 to additional or further taxes, fines, penalties or license
10 fees.
11 "Financial employer" means any employer that is not a
12 regulated employer but is: a bank; a private bank or banker; a
13 building and loan association; a savings and loan association; a
14 credit union; a savings bank; a bank and trust company; a trust
15 company; any employer that is a regulated financial services
16 institution; an investment company registered as such with the
17 Federal Securities and Exchange Commission; a holding company; a
18 person registered under the act of December 5, 1972 (P.L.1280,
19 No.284), known as the "Pennsylvania Securities Act of 1972,"
20 including traders; a dealer and broker in money, credits,
21 commercial paper, bonds, notes, securities and stocks and
22 monetary metals; or a factor and commission merchant.
23 "Five-year plan" means a five-year financial plan of a city.
24 "Internal Revenue Code" means the Internal Revenue Code of
25 1986 (Public Law 99-514, 26 U.S.C. § 1 et seq.).
26 "Manufacturer" means a person whose business is the sale of
27 goods, commodities, wares or merchandise of its own manufacture,
28 growth or production, including processors.
29 "Mayor" means a mayor of a city.
30 "Payroll expense" means compensation paid to a person and
20030H1955B2555 - 24 -
1 profits earned by an employer.
2 "Person" means a corporation, partnership, business trust,
3 other association, estate, trust, foundation or natural person.
4 "Profits" means net earnings from self-employment as defined
5 by section 1402 of the Internal Revenue Code of 1986 (Public Law
6 99-514, 26 U.S.C. § 1 et seq.).
7 "Regulated employer" means an employer subject to tax
8 pursuant to Article VII, VIII, IX or XV of the act of March 4,
9 1971 (P.L.6, No.2), known as the "Tax Reform Code of 1971," a
10 public utility operating under the laws, rules and regulations
11 administered by the Pennsylvania Public Utility Commission, all
12 or a portion of the activities of which is to furnish or supply
13 service or services at the rates specified in its tariffs, an
14 employer which is a health maintenance organization as defined
15 in the act of December 29, 1972 (P.L.1701, No.364), known as the
16 "Health Maintenance Organization Act," an employer which is a
17 preferred provider organization as defined in section 630 of the
18 act of May 17, 1921 (P.L.682, No.284), known as "The Insurance
19 Company Law of 1921," and 31 Pa. Code § 152.2 (relating to
20 definitions), or an employer licensed under the act of April 12,
21 1951 (P.L.90, No.21), known as the "Liquor Code."
22 "S corporation" means any person with a valid election in
23 effect under Subchapter S of Chapter 1 of the Internal Revenue
24 Code of 1986 (Public Law 99-514, 26 U.S.C. § 1 et seq.).
25 "Sound budgetary practices" means the preparation and
26 adoption of structurally balanced budgets utilizing generally
27 accepted governmental accounting practices consistent with five-
28 year plans based upon reasonable revenue estimates prepared by
29 an independent entity approved by the board and maintaining
30 financial reserves consistent with the levels recommended by
20030H1955B2555 - 25 -
1 national organizations such as the Government Finance Officers
2 Association. Sound budgetary practices do not include reliance
3 upon the receipt of funds from other governmental entities for
4 which significant changes in existing laws or policies are
5 required and have not been adopted, substantial changes in
6 collective bargaining agreements which have not been approved by
7 the city and any relevant bargaining units, the use of capital
8 funds to pay for non-capital items or items which will require
9 maintenance or operating expenses not included in the five-year
10 plans approved by the board or the execution of multi-year
11 contracts or collective bargaining agreements inconsistent with
12 five-year plans approved by the board.
13 "Tax base year" means the twelve-month period immediately
14 preceding the tax year.
15 "Tax measurement year" means the fiscal or calendar year by
16 which the employer keeps its books and records for Federal tax
17 purposes.
18 "Tax year" means a twelve-month period from January 1 to
19 December 31.
20 Section 3. This act shall take effect immediately.
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