THE GENERAL ASSEMBLY OF PENNSYLVANIA

SENATE BILL

INTRODUCED BY SCHWANK, COSTA, KITCHEN, WASHINGTON, TARTAGLIONE, STACK, FONTANA, LEACH, ERICKSON, HUGHES, BREWSTER, FERLO, SOLOBAY, WILLIAMS, YUDICHAK, KASUNIC AND FARNESE, NOVEMBER 21, 2011

REFERRED TO FINANCE, NOVEMBER 21, 2011  

AN ACT

Amending the act of March 4, 1971 (P.L.6, No.2), entitled "An

act relating to tax reform and State taxation by codifying

and enumerating certain subjects of taxation and imposing

taxes thereon; providing procedures for the payment,

collection, administration and enforcement thereof; providing

for tax credits in certain cases; conferring powers and

imposing duties upon the Department of Revenue, certain

employers, fiduciaries, individuals, persons, corporations

and other entities; prescribing crimes, offenses and

penalties," providing for a tax credit for employer dependent

and child care.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  The act of March 4, 1971 (P.L.6, No.2), known as

the Tax Reform Code of 1971, is amended by adding an article to

read:

ARTICLE XVII-G

SMALL BUSINESS DEPENDENT AND

CHILD CARE TAX CREDIT

Section 1701-G.  Scope of article.

This article relates to small business dependent and child

care tax credits.

Section 1702-G.  Definitions.

The following words and phrases when used in this article

shall have the meanings given to them in this section unless the

context clearly indicates otherwise:

"Child care expense."  Expenses incurred by a small business

minus the employee's copayment to provide, or paid by a small

business to an employee or a third-party provider to provide,

care in lieu of parental care to an employee's child or children

under 12 years of age for that part of the 24-hour day when the

employee is engaged in the duties of employment. The term does

not include child care furnished in places of worship during

religious services.

"Department."  The Department of Revenue of the Commonwealth.

"Dependent care expense."  Expenses incurred by a small

business minus the employee's copayment to provide, or paid by a

small business to an employee or a third-party provider to

provide, care to qualified dependent persons for that part of

the 24-hour day when the employee is engaged in the duties of

employment. The term does not include dependent care services

furnished in places of worship during religious services.

"Employee copayment."  An amount equal to 10% of the total

annual cost of the dependent or child care expenses.

"Pass-through entity."  Any of the following:

(1)  A partnership, limited partnership, limited

liability company, business trust or other unincorporated

entity that for Federal income tax purposes is taxable as a

partnership.

(2)  A Pennsylvania S corporation.

"Qualified dependent person."  A disabled spouse, parent or

child of an employee who is not physically or mentally able to

care for himself or herself or any other person who is not

physically or mentally able to care for himself or herself and

whom the employee could claim as a dependent for Federal income

tax purposes.

"Qualified tax liability."  The liability for taxes imposed

under Article III, IV or VI. The term shall include the

liability for taxes imposed under Article III on an owner of a

pass-through entity.

"Secretary."  The Secretary of Revenue of the Commonwealth.

"Small business."  An employer who employs 50 or fewer

individuals.

"Tax credit."  The employer dependent and child care tax

credit authorized under this article.

"Taxpayer."  A small business subject to tax under Article

III, IV or VI. The term shall include the shareholder, owner or

member of a pass-through entity that receives a tax credit.

Section 1703-G.  Employer credit for dependent or child care.

(a)  Application.--A taxpayer who incurs dependent or child

care expense in a taxable year may apply for a tax credit as

provided under this article. By September 15 of each year, a

taxpayer must submit an application for the tax credit to the

department, which shall include expenses incurred by the

taxpayer for dependent or child care in the taxable year that

ended in the prior calendar year.

(b)  Amount.--A taxpayer that is qualified under subsection

(a) shall receive a tax credit for the taxable year in the

amount of 20% of the dependent or child care expense.

(c)  Notification.--By December 15 of the calendar year

following the close of the taxable year during which the

dependent or child care expense was incurred, the department

shall notify the taxpayer of the amount of the taxpayer's tax

credit approved by the department.

Section 1704-G.  Carryover, carryback, refund and assignment of

credit.

(a)  Carryover.--If the taxpayer cannot use the entire amount

of the tax credit for the taxable year in which the tax credit

is first approved, the excess may be carried over to succeeding

taxable years and used as a credit against the qualified tax

liability of the taxpayer for those taxable years. Each time

that the tax credit is carried over to a succeeding taxable

year, it shall be reduced by the amount that was used as a

credit during the immediately preceding taxable year. The tax

credit may be carried over and applied to succeeding taxable

years for no more than 15 taxable years following the first

taxable year for which the taxpayer was entitled to claim the

credit.

(b)  Application.--An employer child care tax credit approved

by the department for dependent or child care expense in a

taxable year first shall be applied against the taxpayer's

qualified tax liability for the current taxable year as of the

date on which the credit was approved before the tax credit is

applied against any tax liability under subsection (a).

(c)  Unused credit.--A taxpayer shall not be entitled to

assign, carry back or obtain a refund of an unused tax credit.

Section 1705-G.  Limitation on credits.

(a)  Total amount.--The total amount of dependent and child

care tax credits approved by the department may not exceed

$5,000,000 in any fiscal year.

(b)  Proration among applicants.--If the total amount of tax

credits applied for by all taxpayers exceeds the amount

allocated for those credits, the tax credit to be received by

each applicant shall be prorated by the department among all

applicants who have qualified for the credit.

Section 1706-G.  Shareholder, owner or member pass-through.

(a)  Shareholder credit.--If a Pennsylvania S corporation

does not have an eligible tax liability against which the tax

credit may be applied, a shareholder of the Pennsylvania S

corporation is entitled to a tax credit equal to the tax credit

determined for the Pennsylvania S corporation for the taxable

year multiplied by the percentage of the Pennsylvania S

corporation's distributive income to which the shareholder is

entitled.

(b)  Pass-through entity credit.--If a pass-through entity

other than a Pennsylvania S corporation does not have an

eligible tax liability against which the tax credit may be

applied, an owner or member of the pass-through entity is

entitled to a tax credit equal to the tax credit determined for

the pass-through entity for the taxable year multiplied by the

percentage of the pass-through entities' distributive income to

which the owner or member is entitled.

(c)  Credit cumulation.--The credit provided under subsection

(a) or (b) shall be in addition to any tax credit to which a

shareholder, owner or member of a pass-through entity is

otherwise entitled under this article, except that a pass-

through entity and a shareholder, owner or member of a pass-

through entity may not claim a credit under this article for the

same child day care expense.

Section 1707-G.  Report to General Assembly.

The secretary shall submit an annual report to the General

Assembly indicating the effectiveness of the credit provided

under this article no later than March 15 following the year in

which the credits were approved. The report shall include the

names of all taxpayers utilizing the credit as of the date of

the report and the amount of credits approved and utilized by

each taxpayer. Notwithstanding any law providing for the

confidentiality of tax records, the information contained in the

report shall be public information. The report may include any

recommendations for changes in the calculation or administration

of the credit.

Section 1708-G.  Regulations.

The secretary shall promulgate regulations necessary for the

implementation and administration of this article.

Section 2.  The addition of Article XVII-G of the act shall

apply to taxable years beginning after December 31, 2011.

Section 3.  This act shall take effect in 60 days.