PRINTER'S NO. 42
No. 37 Special Session No. 1 of 2007-2008
INTRODUCED BY PYLE, SOLOBAY, S. H. SMITH, ADOLPH, ARGALL,
BASTIAN, BELFANTI, BENNINGHOFF, BEYER, BOBACK, BOYD, BROOKS,
CALTAGIRONE, CAPPELLI, CAUSER, CLYMER, COX, CUTLER, DALEY,
DENLINGER, ELLIS, J. EVANS, EVERETT, FAIRCHILD, FLECK,
FREEMAN, GABIG, GEIST, GEORGE, GINGRICH, GOODMAN, GRELL,
HALUSKA, HARPER, HARRIS, HELM, HENNESSEY, HERSHEY, HESS,
HICKERNELL, HORNAMAN, HUTCHINSON, KAUFFMAN, M. KELLER,
KILLION, KING, KOTIK, LEACH, LONGIETTI, MAHONEY, MAJOR,
MANTZ, MARKOSEK, MARSHALL, MARSICO, McILHATTAN, MENSCH,
METCALFE, MILLARD, R. MILLER, MOUL, MOYER, MURT, MUSTIO,
NAILOR, NICKOL, M. O'BRIEN, O'NEILL, PAYNE, PEIFER, PERRY,
PETRARCA, PHILLIPS, PICKETT, QUIGLEY, RAMALEY, RAPP, RAYMOND,
READSHAW, REED, REICHLEY, ROAE, ROCK, ROHRER, ROSS, SAYLOR,
SCAVELLO, SCHRODER, SIPTROTH, SONNEY, STAIRS, STERN,
R. STEVENSON, SWANGER, J. TAYLOR, THOMAS, TRUE, TURZAI,
VEREB, VULAKOVICH, WATSON, YEWCIC, YOUNGBLOOD AND YUDICHAK,
OCTOBER 26, 2007
REFERRED TO COMMITTEE ON FINANCE, OCTOBER 26, 2007
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," establishing the Pennsylvania Coal and Air
11 Quality Improvement Tax Credit.
12 The General Assembly of the Commonwealth of Pennsylvania
13 hereby enacts as follows:
14 Section 1. The act of March 4, 1971 (P.L.6, No.2), known as
15 the Tax Reform Code of 1971, is amended by adding an article to
1 read:
2 ARTICLE XVIII-C
3 PENNSYLVANIA COAL AND AIR QUALITY IMPROVEMENT
4 TAX CREDIT
5 Section 1801-C. Definitions.
6 The following words and phrases when used in this article
7 shall have the meanings given to them in this section unless the
8 context clearly indicates otherwise:
9 "Compliance facility." Property that is designed,
10 constructed or installed, and used at a coal-fired or waste
11 coal-fired electric generating facility for the primary purpose
12 of complying with acid rain control requirements under Title IV
13 of the Clean Air Act Amendments of 1990 (Public Law 101-549, 42
14 U.S.C. § 7651 et seq.) or that controls or limits emissions of
15 sulphur or nitrogen compounds or mercury resulting from the
16 combustion of coal through the removal or reduction of those
17 compounds before, during or after the combustion of the coal,
18 but before the combustion products are emitted into the
19 atmosphere. The term includes, but is not limited to, the
20 following:
21 (1) A facility that removes sulfur compounds from coal
22 before the combustion of the coal and is located off the
23 premises of an electric generating facility where the coal
24 processed by the facility that removes sulfur compounds from
25 coal is burned.
26 (2) Modifications to an electric generating facility
27 where such property is constructed or installed that are
28 necessary to accommodate the construction or installation,
29 and operation of such property.
30 (3) A by-product disposal facility that exclusively
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1 disposes of wastes produced by such property and other coal
2 combustion by-products produced by the generating unit in or
3 to which such property is incorporated or connected
4 regardless of whether the by-product disposal facility is
5 located on the same premises as such property or generating
6 unit that produces the wastes disposed of at such property.
7 (4) A facility or equipment that is acquired,
8 constructed or installed, and used at a coal-fired electric
9 generating facility exclusively for the purpose of handling
10 the by-products produced by the first facility or other coal
11 combustion by-products produced by the generating unit in or
12 to which the first facility is incorporated or connected.
13 (5) A flue gas desulfurization system that is connected
14 to a coal-fired electric generating unit.
15 (6) A selective catalytic reduction system that is
16 connected to a coal-fired electric generation unit and used
17 to reduce the level of nitrogen oxide emissions.
18 (7) Low nitrogen oxide burners that are used to reduce
19 the level of nitrogen oxide emissions.
20 (8) An activated carbon injection system or other
21 similar system designed to reduce the level of mercury
22 emissions.
23 (9) A facility or equipment acquired, constructed or
24 installed, and used, at a coal-fired electric generating unit
25 primarily for the purpose of handling the by-products
26 produced by such facility or other coal combustion by-
27 products produced by the generating unit in or to which such
28 facility is incorporated or connected.
29 "Department." The Department of Revenue of the Commonwealth.
30 "Pass-through entity." A partnership as defined in section
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1 301(n.0) or a Pennsylvania S corporation as defined in section
2 301(n.1).
3 "Pennsylvania coal." Coal mined from coal deposits located
4 in or waste coal recovered within this Commonwealth.
5 "Pennsylvania qualified coal expense." The cost to purchase
6 Pennsylvania qualified coal that is delivered to coal-fired
7 electric generating units or the handling cost incurred to
8 recover waste coal for use in a waste coal-fired electric
9 generating unit. For purposes of this definition, the handling
10 cost does not include transportation costs.
11 "Qualified tax liability." The liability for taxes imposed
12 under Article III, IV or VI. The term shall not include any tax
13 withheld by an employer from an employee under Article III.
14 "Secretary." The Secretary of Revenue of the Commonwealth.
15 "Taxpayer." An entity subject to tax under Article III, IV
16 or VI. The term shall include the shareholder of a Pennsylvania
17 S corporation that receives a research and development tax
18 credit.
19 "Waste coal facility." A facility that utilizes coal
20 previously disposed or abandoned prior to July 31, 1982, or
21 disposed of thereafter in a permitted coal refuse disposal site
22 or classified as waste coal.
23 Section 1802-C. Establishment of program.
24 (a) General rule.--A qualified entity shall receive the tax
25 credit authorized under section 1803-C.
26 (b) Administration and regulations.--The department shall
27 administer this article and cooperate with the Department of
28 Environmental Protection. The Department of Environmental
29 Protection and the Pennsylvania Public Utility Commission shall
30 provide assistance to the department in identifying compliance
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1 facilities and providing other information that may be necessary
2 to ensure the proper administration of this article.
3 Section 1803-C. Credit for Pennsylvania qualified coal
4 expenses.
5 (a) General rule.--A taxpayer who incurs Pennsylvania
6 qualified coal expense in a calendar year may apply for a tax
7 credit as provided in this article. By September 15 of each
8 calendar year a taxpayer must submit an application to the
9 department for Pennsylvania qualified coal expense incurred in
10 the calendar year that ended in the prior calendar year.
11 (b) Amount.--A taxpayer that is qualified under subsection
12 (a) shall receive a tax credit for the calendar year in the
13 amount of $3 per ton for each ton of Pennsylvania qualified coal
14 expense.
15 (c) Notification to taxpayer.--By December 15 of the
16 calendar year following the close of the calendar year during
17 which the Pennsylvania qualified coal expense was incurred, the
18 department shall notify the taxpayer of the amount of the
19 taxpayer's tax credit approved by the department.
20 Section 1804-C. Carryover, carryback, refund and assignment of
21 credit.
22 (a) General rule.--If the taxpayer cannot use the entire
23 amount of the tax credit for the taxable year in which the tax
24 credit is first approved, then the excess may be carried over to
25 succeeding taxable years and used as a credit against the
26 qualified tax liability of the taxpayer for those taxable years.
27 Each time that the tax credit is carried over to a succeeding
28 taxable year, it is to be reduced by the amount that was used as
29 a credit during the immediately preceding taxable year. The tax
30 credit provided by this article may be carried over and applied
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1 to succeeding taxable years for no more than 15 taxable years
2 following the first taxable year for which the taxpayer was
3 entitled to claim the credit.
4 (b) Application.--A tax credit approved by the department
5 for Pennsylvania qualified coal expense in a calendar year first
6 shall be applied against the taxpayer's qualified tax liability
7 for the current taxable year as of the date on which the credit
8 was approved before the tax credit is applied against any tax
9 liability under subsection (a).
10 (c) Restriction.--A taxpayer is not entitled to carry back
11 or obtain a refund of an unused tax credit.
12 Section 1805-C. Determination of Pennsylvania qualified coal
13 expense.
14 In prescribing standards for determining which qualified coal
15 expenses are considered Pennsylvania qualified coal expense for
16 purposes of computing the credit provided by this article, the
17 department may consider:
18 (1) The location where the coal deposits are mined.
19 (2) The residence or business location of the person or
20 persons where the qualifying entity is located.
21 (3) The location and the characteristics of the
22 compliance facility.
23 (4) Other factors that the department determines are
24 relevant for the determination.
25 Section 1806-C. Time limitation.
26 A taxpayer is not entitled to a tax credit for expenses
27 incurred in calendar years beginning after December 31, 2015.
28 Section 1807-C. Limitation on credits.
29 (a) General rule.--The total amount of credits approved by
30 the department shall not exceed $30,000,000 in any fiscal year.
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1 (b) Calculation.--If the total amount of tax credits applied
2 for by all taxpayers exceeds the amount allocated for those
3 credits, then the tax credit to be received by each applicant
4 shall be the product of the allocated amount multiplied by the
5 quotient of the tax credit applied for by the applicant divided
6 by the total of all tax credits applied for by all applicants,
7 the algebraic equivalent of which is:
8 taxpayer's tax credit = amount allocated for those credits X
9 tax credit applied for by the applicant/total of all
10 tax credits applied for by all applicants.
11 Section 1808-C. Pass-through entity.
12 (a) General rule.--If a pass-through entity has any unused
13 tax credit under section 1804-C, the entity may elect, in
14 writing, according to the department's procedures, to transfer
15 all or a portion of the credit to shareholders, members or
16 partners in proportion to the shares of the entity's
17 distributive income to which the shareholder, member or partner
18 is entitled.
19 (b) Independent from other tax credits.--The tax credit
20 provided under subsection (a) is in addition to any tax credit
21 to which a shareholder, member or partner of a pass-through
22 entity is otherwise entitled under this article. However, a
23 pass-through entity and a shareholder, member or partner of a
24 pass-through entity may not claim a credit under this article
25 for the same qualified coal expense.
26 (c) Claim of tax credit.--A shareholder, member or partner
27 of a pass-through entity to whom credit is transferred under
28 subsection (a) must immediately claim the credit in the taxable
29 year in which the transfer is made. The shareholder, member or
30 partner may not carry forward, carry back, obtain a refund of or
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1 sell or assign the credit.
2 Section 1809-C. Termination.
3 The department shall not approve a tax credit under this
4 article for calendar years ending after December 31, 2015.
5 Section 1810-C. Report.
6 The department shall annually make a report to the
7 Environmental Resources and Energy Committee of the Senate and
8 the Environmental Resources and Energy Committee of the House of
9 Representatives on the activities undertaken pursuant to this
10 article including, but not limited to:
11 (1) The number and amount of tax credits provided.
12 (2) The number and description of the business entities
13 receiving the tax credits.
14 (3) The amount of coal on which the tax credits were
15 provided against.
16 Section 1811-C. Regulations.
17 The secretary shall promulgate regulations necessary for the
18 implementation and administration of this article.
19 Section 1812-C. Applicability.
20 This article shall apply to Pennsylvania qualified coal
21 expenses on or after January 1, 2007.
22 Section 2. This act shall take effect in 60 days.
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