1Amending the act of March 4, 1971 (P.L.6, No.2), entitled "An
2act relating to tax reform and State taxation by codifying
3and enumerating certain subjects of taxation and imposing
4taxes thereon; providing procedures for the payment,
5collection, administration and enforcement thereof; providing
6for tax credits in certain cases; conferring powers and
7imposing duties upon the Department of Revenue, certain
8employers, fiduciaries, individuals, persons, corporations
9and other entities; prescribing crimes, offenses and
10penalties," providing for a long-term care tax credit.

11The General Assembly of the Commonwealth of Pennsylvania
12hereby enacts as follows:

13Section 1.  The act of March 4, 1971 (P.L.6, No.2), known as
14the Tax Reform Code of 1971, is amended by adding an article to
15read:

16ARTICLE XVII-J

17LONG-TERM CARE INSURANCE TAX CREDIT

18Section 1701-J.  Scope of article.

19This article relates to long-term care insurance tax credits.

20Section 1702-J.  Definitions.

21The following words and phrases when used in this article

1shall have the meanings given to them in this section unless the
2context clearly indicates otherwise:

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

4"Long-term care insurance."  An insurance policy, offered to 
5an employee by an employer, to provide coverage when long-term 
6care is needed, including chronic illness or disability and 
7expenses for a nursing home, an assisted living facility, home 
8care, a visiting nurse, a home health aide, a friendly visitor 
9program, home-delivered meals, chore services, adult day-care 
10centers or respite services.

11"Long-term care insurance expenses."  Expenses associated 
12with providing long-term care insurance.

13"Qualified tax liability."  The liability for taxes imposed 
14under Article III, IV or VI. The term shall include the 
15liability for taxes imposed under Article III on an owner of a 
16pass-through entity.

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

18(1)  A partnership, limited partnership, limited
19liability company, business trust or other unincorporated
20entity that for Federal income tax purposes is taxable as a
21partnership.

22(2)  A Pennsylvania S corporation.

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

24"Small business."  An employer who, on at least 50% of its 
25working days during the taxable year, employed fewer than 100 
26people.

27"Tax credit."  The long-term care insurance tax credit 
28authorized under this article.

29"Taxpayer."  An entity subject to tax under Article III, IV 
30or VI. The term includes the shareholder, owner or member of a 

1pass-through entity that receives a tax credit.

2Section 1703-J.  Credit for long-term care insurance.

3(a)  Application.--A taxpayer who purchases long-term care
4insurance in a taxable year may apply for a tax credit as
5provided in this article. By September 15, a taxpayer must
6submit an application to the department for long-term care
7insurance expenses incurred in the taxable year that ended in
8the prior calendar year.

9(b)  Amount.--A taxpayer that is qualified under subsection
10(a) shall receive a tax credit for the taxable year in the
11amount of 20% of the long-term care insurance expenses incurred
12by the taxpayer during the taxable year.

13(c)  Notification.--By December 15 of the calendar year
14following the close of the taxable year during which the long-
15term care insurance expense was incurred, the department shall
16notify the taxpayer of the amount of the taxpayer's tax credit
17approved by the department.

18Section 1704-J.  Carryover, carryback, refund and assignment of
19credit.

20(a)  Credit.--If the taxpayer cannot use the entire amount of
21the tax credit for the taxable year in which the tax credit is
22first approved, the excess may be carried over to succeeding
23taxable years and used as a credit against the qualified tax
24liability of the taxpayer for those taxable years. Each time the
25tax credit is carried over to a succeeding taxable year, it is
26to be reduced by the amount that was used as a credit during the
27immediately preceding taxable year. The tax credit may be
28carried over and applied to succeeding taxable years for no more
29than 15 taxable years following the first taxable year for which
30the taxpayer was entitled to claim the credit.

1(b)  Application.--A tax credit approved by the department
2for long-term care insurance expenses in a taxable year first
3shall be applied against the taxpayer's qualified tax liability
4for the current taxable year as of the date on which the credit
5was approved before the tax credit is applied against any tax
6liability under subsection (a).

7(c)  Prohibition.--A taxpayer is not entitled to assign,
8carry back or obtain a refund of an unused tax credit.

9Section 1705-J.  Time limitations.

10A taxpayer shall not be entitled to a tax credit for long-
11term care insurance expenses incurred in taxable years ending
12after December 31, 2022.

13Section 1706-J.  Limitation on credits.

14(a)  Total.--The total amount of tax credits approved by the
15department shall not exceed $20,000,000 in any fiscal year. Of
16that amount, $5,000,000 shall be allocated exclusively for small
17businesses. If the total amounts allocated to either the group
18of applicants, exclusive of small businesses, or the group of
19small business applicants is not approved in any fiscal year,
20the unused portion shall become available for use by the other
21group of qualifying taxpayers.

22(b)  Proration among all applicants.--If the total amount of
23tax credits applied for by all applicants, exclusive of small
24businesses, exceeds the amount allocated for those credits, then
25the tax credit to be received by each applicant shall be
26prorated by the department among all applicants, exclusive of
27small businesses, who have qualified for the credit.

28(c)  Proration among small business applicants.--If the total
29amount of tax credits applied for by all small businesses
30exceeds the amount allocated for those credits, then the tax

1credit to be received by each small business applicant shall be
2prorated by the department among all small business applicants
3who have qualified for the credit.

4Section 1707-J.  Shareholder, owner or member pass-through.

5(a)  Pennsylvania S corporation shareholder.--If a
6Pennsylvania S corporation does not have an eligible tax
7liability against which the tax credit may be applied, a
8shareholder of the Pennsylvania S corporation shall be entitled
9to a tax credit equal to the tax credit determined for the
10Pennsylvania S corporation for the taxable year multiplied by
11the percentage of the Pennsylvania S corporation's distributive
12income to which the shareholder is entitled.

13(b)  Pass-through entity owner or member.--If a pass-through
14entity other than a Pennsylvania S corporation does not have an
15eligible tax liability against which the tax credit may be
16applied, an owner or member of the pass-through entity is
17entitled to a tax credit equal to the tax credit determined for
18the pass-through entity for the taxable year multiplied by the
19percentage of the pass-through entity's distributive income to
20which the owner or member is entitled.

21(c)  Additional credit.--The credit provided under subsection
22(a) or (b) shall be in addition to any tax credit to which a
23shareholder, owner or member of a pass-through entity is
24otherwise entitled under this article, except that a pass-
25through entity and a shareholder, owner or member of a pass-
26through entity may not claim a credit under this article for the
27same long-term care insurance expense.

28Section 1708-J.  Report to General Assembly.

29The secretary shall submit an annual report to the General
30Assembly indicating the effectiveness of the credit provided by

1this article no later than March 15 following the year in which
2the credits were approved. The report shall include the names of
3all taxpayers utilizing the credit as of the date of the report
4and the amount of credits approved and utilized by each
5taxpayer. Notwithstanding any law providing for the
6confidentiality of tax records, the information contained in the
7report shall be public information. The report may also include
8any recommendations for changes in the calculation or
9administration of the credit.

10Section 1709-J.  Termination.

11The department shall not approve a tax credit under this
12article for taxable years ending after December 31, 2022.

13Section 1710-J.  Regulations.

14The secretary shall promulgate regulations necessary for the
15implementation and administration of this article.

16Section 2.  The addition of Article XVII-J of the act shall
17apply to taxable years beginning after December 31, 2012.

18Section 3.  This act shall take effect in 60 days.