SENATE AMENDED

 

PRIOR PRINTER'S NOS. 784, 2590, 3345

PRINTER'S NO.  3559

  

THE GENERAL ASSEMBLY OF PENNSYLVANIA

  

HOUSE BILL

 

No.

761

Session of

2011

  

  

INTRODUCED BY CUTLER, MIRABITO, BAKER, BOYD, CLYMER, COX, DENLINGER, FLECK, FREEMAN, GILLEN, GINGRICH, GODSHALL, GRELL, HARHART, HENNESSEY, HICKERNELL, HUTCHINSON, KAUFFMAN, KORTZ, LAWRENCE, LONGIETTI, MARSHALL, METZGAR, MILLER, MOUL, PICKETT, PYLE, REICHLEY, ROAE, ROSS, STERN, SWANGER, TOEPEL, VULAKOVICH, WATSON, QUINN, FARRY, BEAR, ROCK, CALTAGIRONE, SAINATO, MILLARD, M. K. KELLER AND GIBBONS, FEBRUARY 23, 2011

  

  

SENATOR CORMAN, APPROPRIATIONS, IN SENATE, RE-REPORTED AS AMENDED, MAY 21, 2012   

  

  

  

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," in personal income tax, further providing for

<--

11

classes of income and for income tax returns; in realty

12

transfer tax, further providing for definitions, for excluded

13

transactions and for acquired company, for documents relating

<--

14

to associations or corporations and members, partners,

15

stockholders or shareholders thereof and for acquired

16

company; and, in inheritance tax, further providing for

17

transfers not subject to tax.

18

The General Assembly of the Commonwealth of Pennsylvania

19

hereby enacts as follows:

20

Section 1.  The definitions of "association," "corporation,"

<--

21

"family farm corporation" and "family farm partnership" in

22

section 1101-C of the act of March 4, 1971 (P.L.6, No.2), known

 


1

as the Tax Reform Code of 1971, amended July 2, 1986 (P.L.318,

2

No.77) and April 23, 1998 (P.L.239, No.45), are amended to read:

3

Section 1101-C.  Definitions.--The following words when used

4

in this article shall have the meanings ascribed to them in this

5

section:

6

"Association."  A partnership, limited partnership, limited

7

liability partnership or any other form of unincorporated

8

enterprise, owned or conducted by two or more persons other than

9

a private trust or decedent's estate.

10

"Corporation."  A corporation, limited liability company, 

11

joint-stock association, business trust or banking institution

12

which is organized under the laws of this Commonwealth, the

13

United States, or any other state, territory, or foreign

14

country, or dependency.

15

* * *

16

"Family farm [corporation.] business."  A corporation or

17

association of which at least seventy-five per cent of its

18

assets are devoted to the business of agriculture and at least

19

seventy-five per cent of each class of stock of the corporation 

20

or interest in the association is continuously owned by members

21

of the same family.  The business of agriculture shall include

22

the leasing to members of the same family or the leasing to a

23

corporation or association owned by members of the same family 

24

of property which is directly and principally used for

25

agricultural purposes. The business of agriculture shall not be

26

deemed to include:

27

(1)  Recreational activities such as, but not limited to,

28

hunting, fishing, camping, skiing, show competition or racing;

29

(2)  The raising, breeding or training of game animals or

30

game birds, fish, cats, dogs or pets or animals intended for use

- 2 -

 


1

in sporting or recreational activities;

2

(3)  Fur farming;

3

(4)  Stockyard and slaughterhouse operations; or

4

(5)  Manufacturing or processing operations of any kind.

5

["Family farm partnership."  A  partnership of which at least

6

seventy-five per cent of its assets are devoted to the business

7

of agriculture and at least seventy-five per cent of the

8

interests in the  partnership are continuously owned by members

9

of the same family. The business of agriculture shall include

10

the leasing to members of the same family of property which is

11

directly and principally used for agricultural purposes. The

12

business of agriculture shall not be deemed to include:

13

(1)  recreational activities such as, but not limited to,

14

hunting, fishing, camping, skiing, show competition or racing;

15

(2)  the raising, breeding or training of game animals or

16

game birds, fish, cats, dogs or pets or animals intended for use

17

in sporting or recreational activities;

18

(3)  fur farming;

19

(4)  stockyard and slaughterhouse operations; or

20

(5)  manufacturing or processing operations of any kind.]

21

* * *

22

Section 2.   sections 1102-C.3(19), (19.1) and (20) and 1102-

23

c.5 of the act, amended or added July 2, 1986 (P.L.318, No.77)

24

and June 16, 1994 (P.L.279, No.48), are amended to read:

25

Section 1102-C.3.  Excluded Transactions.--The tax imposed by

26

section 1102-C shall not be imposed upon:

27

* * *

28

(19)  A transfer of real estate devoted to the business of

29

agriculture to a family farm [corporation] business by a member

30

of the same family which directly owns at least seventy-five per

- 3 -

 


1

cent of each class of the stock thereof or interest therein.

2

[(19.1)  A transfer of real estate devoted to the business of

3

agriculture to a family farm partnership by a member of the same

4

family, which family directly owns at least seventy-five per

5

cent of the interests in the partnership.]

6

(20)  A transfer between members of the same family of an

7

ownership interest in a real estate company[,] or family farm

8

[corporation or family farm partnership which] business that 

9

owns real estate.

10

* * *

11

Section 1102-C.5.  Acquired Company.--(a)  A real estate

12

company is an acquired company upon a change in the ownership

13

interest in the company, however effected, if the change:

14

(1)  does not affect the continuity of the company; and

15

(2)  of itself or together with prior changes has the effect

16

of transferring, directly or indirectly, ninety per cent or more

17

of the total ownership interest in the company within a period

18

of three years.

19

(b)  [With respect to real estate acquired after February 16,

20

1986, a family farm corporation is an acquired company when,

21

because of voluntary or involuntary dissolution, it ceases to be

22

a family farm corporation or when, because of issuance or

23

transfer of stock or because of acquisition or transfer of

24

assets that are devoted to the business of agriculture, it fails

25

to meet the minimum requirements of a family farm corporation

26

under this act.

27

(b.1)  A family farm partnership is an acquired company when,

28

because of voluntary or involuntary dissolution, it ceases to be

29

a family farm partnership or when, because of transfer of

30

partnership interests or because of acquisition or transfer of

- 4 -

 


1

assets that are devoted to the business of agriculture, it fails

2

to meet the minimum requirements of a family farm partnership 

3

under this act.] A family farm business is an acquired company

4

when, because of voluntary or involuntary dissolution, it ceases

5

to be a family farm business, or when, because of the issuance

6

or transfer of stock in the corporation or transfer of interests

7

in the association or because of an acquisition or transfer of

8

assets that are devoted to the business of agriculture, it fails

9

to meet the minimum requirements of a family farm business under

10

this act.

11

(c)  Within thirty days after becoming an acquired company,

12

the company shall present a declaration of acquisition with the

13

recorder of each county in which it holds real estate for the

14

affixation of documentary stamps and recording. Such declaration

15

shall set forth the value of real estate holdings of the

16

acquired company in such county.

17

Section 3.  This act shall apply retroactively to

18

transactions occurring after December 31, 2008.

19

Section 4.  The provisions of 61 Pa. Code 91.222 (relating to

20

family farm corporation) are abrogated.

21

Section 5.  This act shall take effect immediately.

22

Section 1.  The definitions of "association," "family farm

<--

23

corporation" and "family farm partnership" in section 1101-C of

24

the act of March 4, 1971 (P.L.6, No.2), known as the Tax Reform

25

Code of 1971, amended July 2, 1986 (P.L.318, No.77) and April

26

23, 1998 (P.L.239, No.45), are amended and the section is

27

amended by adding a definition to read:

28

Section 1.  Section 303(a.7) of the act of March 4, 1971

<--

29

(P.L.6, No.2), known as the Tax Reform Code of 1971, added July

30

6, 2006 (P.L.319, No.67), is amended to read:

- 5 -

 


1

Section 303.  Classes of Income.--* * *

2

(a.7)  The following shall apply:

3

(1)  An amount paid as a contribution into a qualified

4

tuition program under Chapter 3 of the act of April 3, 1992

5

(P.L.28, No.11), known as the "Tuition Account Programs and

6

College Savings Bond Act," shall be deductible from taxable

7

income on the annual personal income tax return. The amount paid

8

as a contribution to a qualified tuition program allowable as a

9

deduction under this subsection shall be subject to an annual

10

limitation not to exceed the threshold for exclusion from gifts

11

as provided in section 2503(b) of the Internal Revenue Code of

12

1986, as amended, per designated beneficiary. The deduction

13

shall not result in taxable income being less than zero.

14

(2)  (i)  The following shall not be subject to tax under

15

this article:

16

(A)  Any amount distributed from a qualified tuition program

17

that is excludable from tax under section 529(c)(3)(B) of the

18

Internal Revenue Code of 1986, as amended.

19

(B)  Any rollover that is excludable from tax under section

20

529(c)(3)(C) of the Internal Revenue Code of 1986, as amended.

21

The exception under this clause does not apply to a rollover

22

from a qualified tuition program under Chapter 3 of the "Tuition

23

Account Programs and College Savings Bond Act."

24

(C)  Undistributed earnings on a qualified tuition program.

25

(ii)  A change in designated beneficiaries under section

26

529(c)(3)(C) of the Internal Revenue Code of 1986, as amended,

27

shall not constitute a taxable event under this article.

28

(3)  Any amount distributed from a qualified tuition program  

29

that is not described under paragraph (2) shall be taxable under

30

this article.

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1

(4)  For purposes of this subsection:

2

(i)  The term "designated beneficiary" shall have the same

3

meaning as provided in section 529(e)(1) of the Internal Revenue

4

Code of 1986, as amended.

5

(ii)  The term "qualified tuition program" shall have the

6

same meaning as provided in section 529(b)(1) of the Internal

7

Revenue Code of 1986, as amended.

8

* * *

9

Section 1.1.  Section 331(e) of the act, repealed and added

10

August 31, 1971 (P.L.362, No.93), is amended and the section is

11

amended by adding subsections to read:

12

Section 331.  Returns of Married Individuals, Deceased or

13

Disabled Individuals and Fiduciaries.--* * *

14

(e)  [The] Except as provided under subsections (e.1) and

15

(e.2), the final return for any deceased individual shall be

16

made and filed by his executor, administrator, or other [person] 

17

personal representative charged with his property.

18

(e.1)  (1)  A surviving spouse may file a joint return for

19

the year in which his or her spouse died if the joint return

20

could have been filed if both spouses were living for the entire

21

taxable year.

22

(2)  If a personal representative, executor or administrator

23

is appointed on behalf of the deceased spouse before the tax

24

return is filed, the surviving spouse may not file a joint

25

return without the consent of the fiduciary. Both the fiduciary

26

and the surviving spouse must sign the joint return. The

27

surviving spouse may file a joint return with the deceased

28

spouse if the deceased spouse did not previously file a return

29

for that taxable year and if a personal representative, executor

30

or administrator has not been appointed by the time the joint

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1

return is made or before the due date for filing the return of

2

the surviving spouse, including extensions. If the surviving

3

spouse properly files a joint return under this paragraph, the

4

fiduciary may supersede the surviving spouse by filing a

5

separate return for the decedent within one year after the due

6

date, including extensions. Any joint return improperly filed by

7

the surviving spouse or disaffirmed by the fiduciary shall be

8

treated as a separate return of the survivor. The surviving

9

spouse shall be required to file an amended return.

10

(e.2)  If both taxpayers die during the same tax year, a

11

joint final return may be filed if a joint return could have

12

been filed had both spouses lived for the entire taxable year

13

and with the consent of the personal representatives, executors

14

or administrators of both deceased spouses under subsection

15

(e.1) by the due date, including extensions, of the joint tax

16

return. Both fiduciaries must sign the joint return.

17

* * *

18

Section 1.2.  The definitions of "association," "family farm

19

corporation" and "family farm partnership" in section 1101-C of

20

the act, amended July 2, 1986 (P.L.318, No.77) and April 23,

21

1998 (P.L.239, No.45), are amended and the section is amended by

22

adding a definition to read:

23

Section 1101-C.  Definitions.--The following words when used

24

in this article shall have the meanings ascribed to them in this

25

section:

26

"Association."  A general partnership, limited partnership,

27

limited liability partnership or any other form of

28

unincorporated enterprise, owned or conducted by two or more

29

persons other than a private trust or decedent's estate.

30

* * *

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1

["Family farm corporation."  A corporation of which at least

2

seventy-five per cent of its assets are devoted to the business

3

of agriculture and at least seventy-five per cent of each class

4

of stock of the corporation is continuously owned by members of

5

the same family. The business of agriculture shall include the

6

leasing to members of the same family of property which is

7

directly and principally used for agricultural purposes. The

8

business of agriculture shall not be deemed to include:

9

(1)  Recreational activities such as, but not limited to,

10

hunting, fishing, camping, skiing, show competition or racing;

11

(2)  The raising, breeding or training of game animals or

12

game birds, fish, cats, dogs or pets or animals intended for use

13

in sporting or recreational activities;

14

(3)  Fur farming;

15

(4)  Stockyard and slaughterhouse operations; or

16

(5)  Manufacturing or processing operations of any kind.

17

"Family farm partnership."  A partnership of which at least

18

seventy-five per cent of its assets are devoted to the business

19

of agriculture and at least seventy-five per cent of the

20

interests in the partnership are continuously owned by members

21

of the same family. The business of agriculture shall include

22

the leasing to members of the same family of property which is

23

directly and principally used for agricultural purposes. The

24

business of agriculture shall not be deemed to include:

25

(1)  recreational activities such as, but not limited to,

26

hunting, fishing, camping, skiing, show competition or racing;

27

(2)  the raising, breeding or training of game animals or

28

game birds, fish, cats, dogs or pets or animals intended for use

29

in sporting or recreational activities;

30

(3)  fur farming;

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1

(4)  stockyard and slaughterhouse operations; or

2

(5)  manufacturing or processing operations of any kind.]

3

"Family farm business."  A corporation or association of

4

which at least seventy-five per cent of its assets are devoted

5

to the business of agriculture and at least seventy-five per

6

cent of each class of stock of the corporation or the interests

7

in the association is continuously owned by members of the same

8

family. The business of agriculture shall include the leasing to

9

members of the same family or the leasing to a corporation or

10

association owned by members of the same family of property

11

which is directly and principally used for agricultural

12

purposes. The business of agriculture shall not be deemed to

13

include:

14

(1)  recreational activities such as, but not limited to,

15

hunting, fishing, camping, skiing, show competition or racing;

16

(2)  the raising, breeding or training of game animals or

17

game birds, fish, cats, dogs or pets or animals intended for use

18

in sporting or recreational activities;

19

(3)  fur farming;

20

(4)  stockyard and slaughterhouse operations; or

21

(5)  manufacturing or processing operations of any kind.

22

* * *

23

Section 2.  Section 1102-C.3(19), (19.1) and (20) of the act,

24

amended or added July 2, 1986 (P.L.318, No.77) and June 16, 1994

25

(P.L.279, No.48), are amended to read:

26

Section 1102-C.3.  Excluded Transactions.--The tax imposed by

27

section 1102-C shall not be imposed upon:

28

* * *

29

(19)  A transfer of real estate devoted to the business of

30

agriculture to a family farm [corporation] business by:

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1

(i)  a member of the same family which directly owns at least

2

seventy-five per cent of [each class of the stock thereof] the

3

interests in that family farm business; or

4

(ii)  a family farm business, which family directly owns at

5

least seventy-five per cent of the interests in that family farm

6

business.

7

[(19.1)  A transfer of real estate devoted to the business of

8

agriculture to a family farm partnership by a member of the same

9

family, which family directly owns at least seventy-five per

10

cent of the interests in the partnership.]

11

(20)  A transfer between members of the same family of an

12

ownership interest in a real estate company[,] or family farm

13

[corporation or family farm partnership which] business that 

14

owns real estate.

15

* * *

16

Section 3.  Section 1102-C.4 of the act, added July 2, 1986

17

(P.L.318, No.77), is amended to read:

18

Section 1102-C.4.  Documents Relating to Associations or

19

Corporations and Members, Partners, Stockholders or Shareholders

20

Thereof.--Except as otherwise provided in [section] sections 

21

1102-C.3 and 1102-C.5, documents which make, confirm or evidence

22

any transfer or devise of title to real estate between

23

associations or corporations and the members, partners,

24

shareholders or stockholders thereof are fully taxable. For the

25

purposes of this article, corporations and associations are

26

entities separate from their members, partners, stockholders or

27

shareholders.

28

Section 4.  Section 1102-C.5 of the act, amended or added

29

July 2, 1986 (P.L.318, No.77) and June 16, 1994 (P.L.279,

30

No.48), is amended to read:

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1

Section 1102-C.5.  Acquired Company.--(a)  A real estate

2

company is an acquired company upon a change in the ownership

3

interest in the company, however effected, if the change:

4

(1)  does not affect the continuity of the company; and

5

(2)  of itself or together with prior changes has the effect

6

of transferring, directly or indirectly, ninety per cent or more

7

of the total ownership interest in the company within a period

8

of three years.

9

[(b)  With respect to real estate acquired after February 16,

10

1986, a family farm corporation is an acquired company when,

11

because of voluntary or involuntary dissolution, it ceases to be

12

a family farm corporation or when, because of issuance or

13

transfer of stock or because of acquisition or transfer of

14

assets that are devoted to the business of agriculture, it fails

15

to meet the minimum requirements of a family farm corporation

16

under this act.

17

(b.1)  A family farm partnership is an acquired company when,

18

because of voluntary or involuntary dissolution, it ceases to be

19

a family farm partnership or when, because of transfer of

20

partnership interests or because of acquisition or transfer of

21

assets that are devoted to the business of agriculture, it fails

22

to meet the minimum requirements of a family farm partnership 

23

under this act.]

24

(b.2)  A family farm business is an acquired company when,

25

because of voluntary or involuntary dissolution, it ceases to be

26

a family farm business or when, because of the issuance or

27

transfer of stock in the corporation or transfer of interests in

28

the association or because of acquisition or transfer of assets

29

that are devoted to the business of agriculture, it fails to

30

meet the minimum requirements of a family farm business under

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1

this article.

2

(b.3)  The conveyance of assets held by one family farm

3

business to another family farm business shall not be considered

4

a transfer of assets under this article if the same individuals

5

hold at least fifty per cent of the ownership interest in each

6

family farm business.

7

(c)  Within thirty days after becoming an acquired company,

8

the company shall present a declaration of acquisition with the

9

recorder of each county in which it holds real estate for the

10

affixation of documentary stamps and recording. Such declaration

11

shall set forth the value of real estate holdings of the

12

acquired company in such county.

13

Section 5.  Section 2102 of the act is amended by adding

14

definitions to read:

15

Section 2102.  Definitions.--The following words, terms and

16

phrases, when used in this article, shall have the meanings

17

ascribed to them in this section, except where the context

18

clearly indicates a different meaning:

19

* * *

20

"Business of agriculture."  The term shall include the

21

leasing to members of the same family or the leasing to a

22

corporation or association owned by members of the same family

23

of property which is directly and principally used for

24

agricultural purposes. The business of agriculture shall not be

25

deemed to include:

26

(1)  recreational activities such as, but not limited to,

27

hunting, fishing, camping, skiing, show competition or racing;

28

(2)  the raising, breeding or training of game animals or

29

game birds, fish, cats, dogs or pets or animals intended for use

30

in sporting or recreational activities;

- 13 -

 


1

(3)  fur farming;

2

(4)  stockyard and slaughterhouse operations; or

3

(5)  manufacturing or processing operations of any kind.

4

* * *

5

"Members of the same family."  Any individual, such

6

individual's brothers and sisters, the brothers and sisters of

7

such individual's parents and grandparents, the ancestors and

8

lineal descendents of any of the foregoing, a spouse of any of

9

the foregoing and the estate of any of the foregoing.

10

Individuals related by the half blood or legal adoption shall be

11

treated as if they were related by the whole blood.

12

* * *

13

Section 6.  Section 2111 of the act is amended by adding a

14

subsection to read:

15

Section 2111.  Transfers Not Subject to Tax.--* * *

16

(s)  A transfer of real estate devoted to the business of

17

agriculture between members of the same family, provided that

18

after the transfer the real estate continues to be devoted to

19

the business of agriculture for a period of seven years beyond

20

the transferor's date of death and the real estate derives a

21

yearly gross income of at least two thousand dollars ($2,000),

22

provided that:

23

(1)  Any tract of land under this article which is no longer

24

devoted to the business of agriculture within seven years beyond

25

the transferor's date of death shall be subject to inheritance

26

tax due the Commonwealth under section 2107, in the amount that

27

would have been paid or payable on the basis of valuation

28

authorized under section 2121 for nonexempt transfers of

29

property, plus interest thereon accruing as of the transferor's

30

date of death, at the rate established in section 2143.

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1

(2)  Any tax imposed under section 2107 shall be a lien in

2

favor of the Commonwealth upon the property no longer being

3

devoted to agricultural use, collectible in the manner provided

4

for by law for the collection of delinquent real estate taxes,

5

as well as the personal obligation of the owner of the property

6

at the time of the change of use.

7

(3)  Every owner of real estate exempt under this subsection

8

shall certify to the department on an annual basis that the land

9

qualifies for this exemption and shall notify the department

10

within thirty days of any transaction or occurrence causing the

11

real estate to fail to qualify for the exemption. Each year the

12

department shall inform all owners of their obligation to

13

provide an annual certification under this subclause. This

14

certification and notification shall be completed in the form

15

and manner as provided by the department.

16

Section 7.  A reference in any law to the former definition

17

of "family farm corporation" or "family farm partnership" in

18

section 1101-C of the act shall be deemed to be references to a

19

"family farm business" under section 1101-C of the act.

20

Section 7.1.  The amendment of section 303(a.7) of the act

<--

21

shall not apply to contributions or rollovers made prior to

22

January 1, 2013.

23

Section 7.2.  The amendment of section 331(e) of the act

24

shall apply to taxable years beginning after December 31, 2011.

25

Section 8.  The amendment of Article XXI of the act shall

26

apply to the estates of decedents dying after December 31, 2011.

27

Section 9.  The amendment of Article XI-C of the act shall be

28

retroactive to any document made, executed, delivered, accepted

29

or presented for recording on or after July 1, 2010.

30

Section 10.  The provisions of 61 Pa. Code § 91.222 (relating

- 15 -

 


1

to acquired family farm partnership) are abrogated.

2

Section 11.  This act shall take effect immediately.

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