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,"<- in corporate net income, further providing for 
11definitions and for imposition of tax. <-in sales tax, further 
12providing FOR DEFINITIONS, FOR CREDIT AGAINST TAX AND for 
13local receivers of use tax; in personal income tax, further 
14providing for definitions, FOR CLASSES OF INCOME and for 
15taxability of partners; providing for tax treatment 
16determined at partnership level and for tax imposed at 
17partnership level; further providing for income of a 
18Pennsylvania S corporation, for income taxes imposed by other 
19states, for general rule, for return of Pennsylvania S 
20corporation and for requirements concerning returns, notices, 
21records and statements; in corporate net income tax, further 
22providing for definitions, for imposition of tax and for 
23reports and payment of tax; and, in realty transfer tax, 
24further providing for definitions, for imposition and for 
25acquired company; further providing for coal waste removal 
26and ultraclean fuels tax credit; AND, in inheritance tax, 

1further providing for exemption for poverty.

2The General Assembly of the Commonwealth of Pennsylvania
3hereby enacts as follows:

<-4Section 1. Section 401(3)4(c) of the act of March 4, 1971
5(P.L.6, No.2), known as the Tax Reform Code of 1971, amended
6October 9, 2009 (P.L.451, No.48), is amended, clause (3)1 is
7amended by adding a phrase and the section is amended by adding
8clauses to read:

9Section 401. Definitions.--The following words, terms, and
10phrases, when used in this article, shall have the meaning
11ascribed to them in this section, except where the context
12clearly indicates a different meaning:

13* * *

14(3) "Taxable income." 1. * * *

15(t) (1) Except as provided in paragraph (2), (3) or (4) for
16taxable years beginning after December 31, 2013, no deduction
17shall be allowed for an intangible expense or cost, or an
18interest expense or cost, paid, accrued or incurred directly or
19indirectly in connection with one or more transactions with an
20affiliated entity. In calculating taxable income under this
21paragraph, when the taxpayer is engaged in one or more
22transactions with an affiliated entity that was subject to tax
23in this Commonwealth or another state or possession of the
24United States on a tax base that included the intangible expense
25or cost, or the interest expense or cost, paid, accrued or
26incurred by the taxpayer, the taxpayer shall receive a credit
27against tax due in this Commonwealth in an amount equal to the
28apportionment factor of the taxpayer in this Commonwealth
29multiplied by the greater of the following:

30(A) the tax liability of the affiliated entity with respect

1to the portion of its income representing the intangible expense
2or cost, or the interest expense or cost, paid, accrued or
3incurred by the taxpayer; or

4(B) the tax liability that would have been paid by the
5affiliated entity under subparagraph (A) if that tax liability
6had not been offset by a credit.

7The credit issued under this paragraph shall not exceed the
8taxpayer's liability in this Commonwealth attributable to the
9net income taxed as a result of the adjustment required by this
10paragraph.

11(2) The adjustment required by paragraph (1) shall not apply
12to a transaction that was directly related to a valid business
13purpose.

14(3) The adjustment required by paragraph (1) shall not apply
15to a transaction between a taxpayer and an affiliated entity
16domiciled in a foreign nation which has in force a comprehensive
17income tax treaty with the United States providing for the
18allocation of all categories of income subject to taxation, or
19the withholding of tax, on royalties, licenses, fees and
20interest for the prevention of double taxation of the respective
21nations' residents and the sharing of information.

22(4) The adjustment required by paragraph (1) shall not apply
23to a transaction where an affiliated entity directly or
24indirectly paid, accrued or incurred a payment to a person who
25is not an affiliated entity, if the payment is paid, accrued or
26incurred on the intangible expense or cost, or interest expense
27or cost, and is equal to or less than the taxpayer's
28proportional share of the transaction. The taxpayer's
29proportional share shall be based on relative sales, assets,
30liabilities or another reasonable method.

1* * *

24. * * *

3(c) (1) The net loss deduction shall be the lesser of:

4(A) (I) For taxable years beginning before January 1, 2007,
5two million dollars ($2,000,000);

6(II) For taxable years beginning after December 31, 2006,
7the greater of twelve and one-half per cent of taxable income as
8determined under subclause 1 or, if applicable, subclause 2 or
9three million dollars ($3,000,000);

10(III) For taxable years beginning after December 31, 2008,
11the greater of fifteen per cent of taxable income as determined
12under subclause 1 or, if applicable, subclause 2 or three
13million dollars ($3,000,000);

14(IV) For taxable years beginning after December 31, 2009,
15the greater of twenty per cent of taxable income as determined
16under subclause 1 or, if applicable, subclause 2 or three
17million dollars ($3,000,000); [or]

18(V) For taxable years beginning after December 31, 2014, the
19greater of twenty-nine per cent of taxable income as determined
20under subclause 1 or, if applicable, subclause 2 or four million
21dollars ($4,000,000);

22(VI) For taxable years beginning after December 31, 2015,
23the greater of thirty-eight per cent of taxable income as
24determined under subclause 1 or, if applicable, subclause 2 or
25five million dollars ($5,000,000);

26(VII) For taxable years beginning after December 31, 2016,
27the greater of forty-seven per cent of taxable income as
28determined under subclause 1 or, if applicable, subclause 2 or
29six million dollars ($6,000,000);

30(VIII) For taxable years beginning after December 31, 2017,

1the greater of fifty-six per cent of taxable income as
2determined under subclause 1 or, if applicable, subclause 2 or
3seven million dollars ($7,000,000);

4(IX) For taxable years beginning after December 31, 2018,
5the greater of sixty-four per cent of taxable income as
6determined under subclause 1 or, if applicable, subclause 2 or
7eight million dollars ($8,000,000);

8(X) For taxable years beginning after December 31, 2019, the
9greater of seventy-three per cent of taxable income as
10determined under subclause 1 or, if applicable, subclause 2 or
11nine million dollars ($9,000,000);

12(XI) For taxable years beginning after December 31, 2020,
13the greater of eighty-two per cent of taxable income as
14determined under subclause 1 or, if applicable, subclause 2 or
15ten million dollars ($10,000,000);

16(XII) For taxable years beginning after December 31, 2021,
17the greater of ninety-one per cent of taxable income as
18determined under subclause 1 or, if applicable, subclause 2 or
19eleven million dollars ($11,000,000);

20(XIII) For taxable years beginning after December 31, 2022,
21taxable income as determined under subclause 1 or, if
22applicable, subclause 2; or

23(B) The amount of the net loss or losses which may be
24carried over to the taxable year or taxable income as determined
25under subclause 1 or, if applicable, subclause 2.

26(1.1) In no event shall the net loss deduction include more
27than five hundred thousand dollars ($500,000), in the aggregate,
28of net losses from taxable years 1988 through 1994.

29(2) (A) A net loss for a taxable year may only be carried
30over pursuant to the following schedule:

20130HB0440PN1575 -5-
1Taxable Year	Carryover
21981	1 taxable year
31982	2 taxable years
41983-1987	3 taxable years
51988 6 7 8	2 taxable years plus 1 taxable year starting with the 1995 taxable year
91989 10 11 12	1 taxable year plus 2 taxable years starting with the 1995 taxable year
131990-1993 14 15	3 taxable years starting with the 1995 taxable year
161994	1 taxable year
171995-1997	10 taxable years
181998 and thereafter	20 taxable years

19(B) The earliest net loss shall be carried over to the
20earliest taxable year to which it may be carried under this
21schedule. The total net loss deduction allowed in any taxable
22year shall not exceed:

23(I) Two million dollars ($2,000,000) for taxable years
24beginning before January 1, 2007.

25(II) The greater of twelve and one-half per cent of the
26taxable income as determined under subclause 1 or, if
27applicable, subclause 2 or three million dollars ($3,000,000)
28for taxable years beginning after December 31, 2006.

29(III) The greater of fifteen per cent of the taxable income
30as determined under subclause 1 or, if applicable, subclause 2

1or three million dollars ($3,000,000) for taxable years
2beginning after December 31, 2008.

3(IV) The greater of twenty per cent of the taxable income as
4determined under subclause 1 or, if applicable, subclause 2 or
5three million dollars ($3,000,000) for taxable years beginning
6after December 31, 2009.

7(V) The greater of twenty-nine per cent of taxable income as
8determined under subclause 1 or, if applicable, subclause 2 or
9four million dollars ($4,000,000) for taxable years beginning
10after December 31, 2014.

11(VI) The greater of thirty-eight per cent of taxable income
12as determined under subclause 1 or, if applicable, subclause 2
13or five million dollars ($5,000,000) for taxable years beginning
14after December 31, 2015.

15(VII) The greater of forty-seven per cent of taxable income
16as determined under subclause 1 or, if applicable, subclause 2
17or six million dollars ($6,000,000) for taxable years beginning
18after December 31, 2016.

19(VIII) The greater of fifty-six per cent of taxable income
20as determined under subclause 1 or, if applicable, subclause 2
21or seven million dollars ($7,000,000) for taxable years
22beginning after December 31, 2017.

23(IX) The greater of sixty-four per cent of taxable income as
24determined under subclause 1 or, if applicable, subclause 2 or
25eight million dollars ($8,000,000) for taxable years beginning
26after December 31, 2018.

27(X) The greater of seventy-three per cent of taxable income
28as determined under subclause 1 or, if applicable, subclause 2
29or nine million dollars ($9,000,000) for taxable years beginning
30after December 31, 2019.

1(XI) The greater of eighty-two per cent of taxable income as
2determined under subclause 1 or, if applicable, subclause 2 or
3ten million dollars ($10,000,000) for taxable years beginning
4after December 31, 2020.

5(XII) The greater of ninety-one per cent of taxable income
6as determined under subclause 1 or, if applicable, subclause 2
7or eleven million dollars ($11,000,000) for taxable years
8beginning after December 31, 2021.

9(XIII) For taxable years beginning after December 31, 2022,
10taxable income as determined under subclause 1 or, if
11applicable, subclause 2.

12* * *

13(8) "Intangible expense or cost." Royalties, licenses or
14fees paid for the acquisition, use, maintenance, management,
15ownership, sale, exchange or other disposition of patents,
16patent applications, trade names, trademarks, service marks,
17copyrights, mask works or other similar expenses or costs.

18(9) "Interest expense or cost." A deduction allowed under
19section 163 of the Internal Revenue Code of 1986 (26 U.S.C. §
20163) to the extent that such deduction is directly related to an
21intangible expense or cost.

22(10) "Affiliated entity." A person with a relationship to
23the taxpayer during all or any portion of the taxable year that
24is any of the following:

25(i) a stockholder who is an individual, or a member of the
26stockholder's family as set forth in section 318 of the Internal
27Revenue Code of 1986 (26 U.S.C. § 318), if the stockholder and
28the members of the stockholder's family own, directly,
29indirectly, beneficially or constructively, in the aggregate,
30more than fifty per cent of the value of the taxpayer's

1outstanding stock;

2(ii) a stockholder, or a stockholder's partnership, limited
3liability company, estate, trust or corporation, if the
4stockholder and the stockholder's partnerships, limited
5liability companies, estates, trusts and corporations own
6directly, indirectly, beneficially or constructively, in the
7aggregate, more than fifty per cent of the value of the
8taxpayer's outstanding stock;

9(iii) a corporation, or a party related to the corporation
10in a manner that would require an attribution of stock from the
11corporation to the party or from the party to the corporation
12under the attribution rules of the Internal Revenue Code of
131986, if the taxpayer owns, directly, indirectly, beneficially
14or constructively, more than fifty per cent of the value of the
15corporation's outstanding stock. The attribution rules of
16section 318 of the Internal Revenue Code of 1986 shall apply for
17purposes of determining whether the ownership requirements of
18this definition have been met;

19(iv) a component member as defined in section 1563(b) of the
20Internal Revenue Code of 1986 (26 U.S.C. § 1563(b)); or

21(v) a person to or from whom there is attribution of stock
22ownership in accordance with section 1563(e) of the Internal
23Revenue Code of 1986.

24(11) "Valid business purpose." A purpose, other than the
25avoidance or reduction of taxation, which alone or in
26combination with other purposes constitute the primary
27motivation for a business activity or transaction. A transaction
28done at arm's length terms shall be presumed to be directly
29related to a valid business purpose.

30Section 2. Section 402(b) of the act, amended June 29, 2002 

1(P.L.559, No.89), is amended to read:

2Section 402. Imposition of Tax.--* * *

3(b) The annual rate of tax on corporate net income imposed
4by subsection (a) for taxable years beginning for the calendar
5year or fiscal year on or after the dates set forth shall be as
6follows:

7Taxable Year	Tax Rate
8[January 1, 1995, and each 9taxable year thereafter	9.99%]
10January 1, 1995, and each 11taxable year through December 1231, 2013	9.99%
13January 1, 2014, through 14December 31, 2014	9.75%
15January 1, 2015, through 16December 31, 2015	9.25%
17January 1, 2016, through 18December 31, 2016	8.75%
19January 1, 2017, through 20December 31, 2017	8.25%
21January 1, 2018, through 22December 31, 2018	7.75%
23January 1, 2019, and each 24taxable year thereafter	6.99%

25* * *

26Section 3. This act shall take effect immediately.

27Section 1. Se<-ctions 201(ddd) and 206 of the act of March 4,
281971 (P.L.6, No.2), known as the Tax Reform Code of 1971,
29amended or added December 23, 2003 (P.L.250, No.46), are amended
30to read:

1Section 201. Definitions.--The following words, terms and
2phrases when used in this Article II shall have the meaning
3ascribed to them in this section, except where the context
4clearly indicates a different meaning:

5* * *

6[(ddd) "Call center." The physical location in this
7Commonwealth:

8(1) where at least one hundred and fifty employes are
9employed to initiate or answer telephone calls;

10(2) where there are at least two hundred telephone lines;
11and

12(3) which utilizes an automated call distribution system for
13customer telephone calls in one or more of the following
14activities:

15(A) customer service and support;

16(B) technical assistance;

17(C) help desk service;

18(D) providing information;

19(E) conducting surveys;

20(F) revenue collections; or

21(G) receiving orders or reservations.

22For purposes of this clause, a physical location may include
23multiple buildings utilized by a taxpayer located within this
24Commonwealth.]

25Section 206. Credit Against Tax.--(a) A credit against the
26tax imposed by section 202 shall be granted with respect to
27tangible personal property or services purchased for use outside
28the Commonwealth equal to the tax paid to another state by
29reason of the imposition by such other state of a tax similar to
30the tax imposed by this article: Provided, however, That no such

1credit shall be granted unless such other state grants
2substantially similar tax relief by reason of the payment of tax
3under this article or under the Tax Act of 1963 for Education.

4[(b) A credit against the tax imposed by section 202 on
5telecommunications services shall be granted to a call center
6for gross receipts tax paid by a telephone company on the
7receipts derived from the sale of incoming and outgoing
8interstate telecommunications services to the call center under
9section 1101(a)(2). The following apply:

10(1) A telephone company, upon request, shall notify a call
11center of the amount of gross receipts tax paid by the telephone
12company on the receipts derived from the sale of incoming and
13outgoing interstate telecommunications services to the call
14center.

15(2) A call center that is eligible for the credit in this
16subsection may apply for a tax credit as set forth in this
17subsection.

18(3) By February 15, a taxpayer must submit an application to
19the department for gross receipts tax paid on the receipts
20derived from the sale of incoming and outgoing interstate
21telecommunications services incurred in the prior calendar year.

22(4) By April 15 of the calendar year following the close of
23the calendar year during which the gross receipts tax was
24incurred, the department shall notify the applicant of the
25amount of the applicant's tax credit approved by the department.

26(5) The total amount of tax credits provided for in this
27subsection and approved by the department shall not exceed
28thirty million dollars ($30,000,000) in any fiscal year. If the
29total amount of tax credits applied for by all applicants
30exceeds the amount allocated for those credits, then the credit

1to be received by each applicant shall be determined as follows:

2(i) Divide:

3(A) the tax credit applied for by the applicant; by

4(B) the total of all tax credits applied for by all
5applicants.

6(ii) Multiply:

7(A) the quotient under subparagraph (i); by

8(B) the amount allocated for all tax credits.]

9Section 1.1. Section 226 of the act is repealed:

10[Section 226. Local Receivers of Use Tax.--Beginning on and 
11after the effective date of this article, in every county, 
12except in counties of the first class, the county treasurer is 
13hereby authorized to receive use tax due and payable under the 
14provisions of this article from any person other than a 
15licensee. The receiving of such taxes shall be pursuant to rules 
16and regulations promulgated by the department and upon forms 
17furnished by the department. Each county treasurer shall remit 
18to the department all use taxes received under the authority of 
19this section minus the costs of administering this provision not 
20to exceed one per cent of the amount of use taxes received, 
21which amount shall be retained in lieu of any commission 
22otherwise allowable by law for the collection of such tax.]

23Section 2. Section 301(n.1), (o.3) and (t) of the act,
24amended or added August 31, 1971 (P.L.362, No.93) and July 6,
252006 (P.L.319, No.67), are amended and the section is amended by
26adding subsections to read:

27Section 301. Definitions.--Any reference in this article to
28the Internal Revenue Code of 1986 shall mean the Internal
29Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. § 1 et seq.),
30as amended to January 1, 1997, unless the reference contains the

1phrase "as amended" and refers to no other date, in which case
2the reference shall be to the Internal Revenue Code of 1986 as
3it exists as of the time of application of this article. The
4following words, terms and phrases when used in this article
5shall have the meaning ascribed to them in this section except
6where the context clearly indicates a different meaning:

7* * *

8(d.2) "Corporate item" means an item, including income, gain
9or loss, deduction or credit determined at the Pennsylvania S
10corporation level, which is required to be taken into account
11for a Pennsylvania S corporation's taxable year.

12* * *

13(n.2) "Partnership item" means an item, including income,
14gain or loss, deduction or credit determined at the partnership
15level, which is required to be taken into account for a
16partnership's taxable year.

17[(n.1)] (n.3) "Pennsylvania S corporation" means any small
18corporation as defined in section 301(s.2) which does not have a
19valid election under section 307 in effect. A qualified
20Subchapter S subsidiary owned by a Pennsylvania S corporation
21shall be treated as a Pennsylvania S corporation without regard
22to whether an election under section 307 has been made with
23respect to the subsidiary.

24* * *

25(o.3) "Publicly traded partnership" means an entity defined
26under section 7704 of the Internal Revenue Code of 1986 (Public
27Law 99-514, 26 U.S.C. § 7704) with equity securities registered
28with the Securities and Exchange Commission under section 12 of
29the Securities Exchange Act of 1934 (48 Stat. 881, 15 U.S.C. §
3078a).

1[(o.3)] (o.4) "Qualified Subchapter S subsidiary" means a
2domestic or foreign corporation which for Federal income tax
3purposes is treated as a qualified Subchapter S subsidiary, as
4defined in section 1361(b)(3)(B) of the Internal Revenue Code of
51986 (Public Law 99-514, 26 U.S.C. § 1361), as amended to
6January 1, 2005.

7* * *

8(t) "State" means, except as provided under section 314(a),
9any state or commonwealth of the United States, the District of
10Columbia, the Commonwealth of Puerto Rico, any territory or
11possession of the United States and any foreign country.

12* * *

13Section 2.1. Section 303(a)(2) of the act, added August 31,
141971 (P.L.362, No.93), is amended and subsection (a)(3) is
15amended by adding a subparagraph to read:

16Section 303. Classes of Income.--(a) The classes of income
17referred to above are as follows:

18* * *

19(2) Net profits. The net income from the operation of a
20business, profession, or other activity, after provision for all
21costs and expenses incurred in the conduct thereof, determined
22either on a cash or accrual basis in accordance with accepted
23accounting principles and practices but without deduction of
24taxes based on income. For purposes of calculating net income 
25under this paragraph, to the extent a taxpayer properly deducts 
26an amount under section 195(b)(1)(A) of the Internal Revenue 
27Code of 1986 (26 U.S.C. § 195(b)(1)(A)), as amended, and the 
28regulations promulgated under section 195(b)(1)(A) of the 
29Internal Revenue Code of 1986, the taxpayer shall be permitted a 
30deduction in equal amount in the same taxable year.

1(3) Net gains or income from disposition of property. Net
2gains or net income, less net losses, derived from the sale,
3exchange or other disposition of property, including real
4property, tangible personal property, intangible personal
5property or obligations issued on or after the effective date of
6this amendatory act by the Commonwealth; any public authority,
7commission, board or other agency created by the Commonwealth;
8any political subdivision of the Commonwealth or any public
9authority created by any such political subdivision; or by the
10Federal Government as determined in accordance with accepted
11accounting principles and practices. For the purpose of this
12article:

13* * *

14(viii) The term "net gains or net income, less net losses"
15shall not include gain or loss from the exchange of property
16which is not recognized for Federal income tax purposes under
17section 1031 of the Internal Revenue Code of 1986 (26 U.S.C. §
181031), as amended, and the regulations promulgated under section
191031 of the Internal Revenue Code of 1986. For purposes of
20determining basis under subparagraph (i), section 1031(d) of the
21Internal Revenue Code of 1986 (26 U.S.C. § 1031(d)), as amended,
22and the regulations promulgated under section 1031 of the
23Internal Revenue Code of 1986 shall apply.

24* * *

25Section 3. Section 306 of the act, amended June 22, 2001
26(P.L.353, No.23), is amended to read:

27Section 306. Taxability of Partners.--[A] Except as provided 
28under section 306.2, a partnership as an entity shall not be
29subject to the tax imposed by this article, but the income or
30gain of a member of a partnership in respect of said partnership

1shall be subject to the tax and the tax shall be imposed on his
2share, whether or not distributed, of the income or gain
3received by the partnership for its taxable year ending within
4or with the member's taxable year.

5Section 4. The act is amended by adding sections to read:

6Section 306.1. Tax Treatment Determined at Partnership
7Level.--The classification or character of a partnership item
8shall be determined at the partnership level. This section shall
9not prohibit the department from adjusting a partner's return.

10Section 306.2. Tax Imposed at Partnership Level.--(a) A
11partnership underreporting reportable income by more than one
12million dollars ($1,000,000) shall be jointly liable with each
13partner for any part of a deficiency resulting from the
14treatment of a partnership item by a partner on that partner's
15return in a manner that is consistent with the treatment of that
16partnership item on the partnership return. If the tax is paid
17by the partner, the department may not collect the tax from the
18partnership. If the tax is paid by the partnership, the
19department may not collect the tax from a partner.

20(b) Subsection (a) shall apply to the following
21partnerships:

22(1) A partnership which has eleven or more individual
23partners.

24(2) A partnership which has at least one partner which is a
25corporation, limited liability company, partnership or trust.

26(3) A partnership which has only individual partners and
27which elects to be subject to this subsection. The election must
28be included on the partnership return to be filed with the
29department.

30(c) This section shall not apply to a publicly traded

1partnership.

2(d) Nothing under this section shall require one partner to
3be liable for the payment of a tax liability of another partner.

4(e) Appeals involving a deficiency assessed under this
5section may only be pursued by the partnership and a
6reassessment or settlement of tax liability shall be binding on
7the partners.

8Section 5. Section 307.8(a) of the act, amended May 7, 1997
9(P.L.85, No.7), is amended and the section is amended by adding
10a subsection to read:

11Section 307.8. Income of a Pennsylvania S Corporation.--(a)
12A Pennsylvania S corporation shall not be subject to the tax
13imposed by this article, except as provided under subsection 
14(f), but the shareholders of the Pennsylvania S corporation
15shall be subject to the tax imposed under this article as
16provided in this article.

17* * *

18(f) (1) A Pennsylvania S corporation underreporting
19reportable income by more than one million dollars ($1,000,000)
20shall be jointly liable with each shareholder for any part of a
21deficiency resulting from the treatment of a corporate item by
22any shareholder on the shareholder's return in a manner that is
23consistent with the treatment of the corporate item on the
24return of the Pennsylvania S corporation. If the tax is paid by
25the shareholder, it may not be be collected from the
26corporation.

27(2) Paragraph (1) shall apply to the following Pennsylvania
28S corporations:

29(i) A Pennsylvania S corporation which has eleven or more
30shareholders.

1(ii) A Pennsylvania S corporation which elects to be subject
2to this subsection. The election must be included on the
3Pennsylvania S corporation return to be filed with the
4department.

5(3) Nothing under this section shall require one shareholder
6to be liable for the payment of a tax liability of another
7shareholder.

8(4) Appeals involving the deficiency assessed under this
9section may be filed only by the Pennsylvania S corporation and
10a reassessment or settlement of tax liability shall be binding
11on the shareholders.

12Section 6. Section 314(a) of the act, amended December 23,
131983 (P.L.370, No.90), is amended to read:

14Section 314. Income Taxes Imposed by Other States.--(a) A
15resident taxpayer before allowance of any credit under section
16312 shall be allowed a credit against the tax otherwise due
17under this article for the amount of any income tax, wage tax or
18tax on or measured by gross or net earned or unearned income
19imposed on him or on a Pennsylvania S corporation in which he is
20a shareholder, to the extent of his pro rata share thereof
21determined in accordance with section 307.9, by another state
22with respect to income which is also subject to tax under this
23article. For purposes of this subsection and notwithstanding 
24section 301(t), the term "state" shall only include a state of 
25the United States, the District of Columbia, the Commonwealth of 
26Puerto Rico and any territory or possession of the United 
27States.

28* * *

29Section 7. Section 324 of the act, amended June 22, 2001
30(P.L.353, No.23), is amended to read:

1Section 324. General Rule.--(a) When a partnership, estate, 
2trust or Pennsylvania S corporation receives income from sources
3within this Commonwealth for any taxable year and any portion of
4the income is allocable to a nonresident partner, beneficiary,
5member or shareholder thereof, the partnership, estate, trust or
6Pennsylvania S corporation shall pay a withholding tax under
7this section at the time and in the manner prescribed by the
8department; however, notwithstanding any other provision of this
9article, all such withholding tax shall be paid over on or
10before the fifteenth day of the fourth month following the end
11of the taxable year.

12(b) This section shall not apply to any publicly traded
13partnership as defined under section 7704 of the Internal
14Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. § 7704) with
15equity securities registered with the Securities and Exchange
16Commission under section 12 of the Securities Exchange Act of
171934 (48 Stat. 881, 15 U.S.C. § 78a).

18Section 8. Section 330.1 of the act, amended or added
19December 23, 1983 (P.L.370, No.90) and July 13, 1987 (P.L.325,
20No.59), is amended to read:

21Section 330.1. Return of Pennsylvania S Corporation.--(a)
22Every Pennsylvania S corporation shall make a return for each
23taxable year, stating specifically all items of gross income and
24deductions, the names and addresses of all persons owning stock
25in the corporation at any time during the taxable year, the
26number of shares of stock owned by each shareholder at all times
27during the taxable year, the amount of money and other property
28distributed by the corporation during the taxable year to each
29shareholder, the date of each distribution, each shareholder's
30pro rata share of each item of the corporation for the taxable

1year and such other information as the department may require.

2(b) The return shall be filed on or before thirty days after
3the date when the corporation's Federal income tax return is
4due.

5(c) Every Pennsylvania S corporation shall also submit to
6the department a true copy of the income tax return filed with
7the Federal Government at the time the return required under
8subsection (a) is filed.

9(d) Each Pennsylvania S corporation required to file a
10return under subsection (a) for a taxable year shall, on or
11before the day on which the return for the taxable year was
12filed, furnish to each person who is a shareholder at any time
13during the taxable year a copy of one or both of the following
14showing their share of income and any other information as may
15be required by the department:

16(1) The Resident Schedule of Shareholder/Partner/Beneficiary
17Pass Through Income, Loss and Credits (Schedule RK-1) form.

18(2) The Nonresident Schedule of
19Shareholder/Partner/Beneficiary Pass Through Income, Loss and
20Credits (Schedule NRK-1) form.

21Section 9. Section 335 of the act, amended or added August 
2231, 1971 (P.L.362, No.93), December 23, 2003 (P.L.250, No.46)
23and July 2, 2012 (P.L.751, No.85), is amended to read:

24Section 335. Requirements Concerning Returns, Notices,
25Records and Statements.--(a) The department may prescribe by
26regulation for the keeping of records, the content and form of
27returns, declarations, statements and other documents and the
28filing of copies of Federal income tax returns and
29determinations. The department may require any person, by
30regulation or notice served upon such person, to make such

1returns, render such statements, or keep such records, as the
2department may deem sufficient to show whether or not such
3person is liable for tax under this article.

4(b) (1) When required by regulations prescribed by the
5department:

6(i) Any person required under the authority of this article
7to make a return, declaration, statement, or other document
8shall include in such return, declaration, statement or other
9document such identifying number as may be prescribed for
10securing proper identification of such person.

11(ii) Any person with respect to whom a return, declaration,
12statement, or other document is required under the authority of
13this article to make a return, declaration, statement, or other
14document with respect to another person, shall request from such
15other person, and shall include in any such return, declaration,
16statement, or other document, such identifying number as may be
17prescribed for securing proper identification of such other
18person.

19(2) For purposes of this section, the department is
20authorized to require such information as may be necessary to
21assign an identifying number to any person.

22(c) (1) Every partnership, estate or trust having a
23resident partner or a resident beneficiary or every partnership, 
24estate or trust having any income derived from sources within
25this Commonwealth shall make a return for the taxable year
26setting forth all items of income, loss and deduction, and such
27other pertinent information as the department may by regulations
28prescribe. Such return shall be filed on or before the fifteenth
29day of the fourth month following the close of each taxable
30year. For purposes of this subsection, "taxable year" means year

1or period which would be a taxable year of the partnership if it
2were subject to tax under this article.

3(2) Every partnership, estate or trust required to file a
4return under paragraph (1) shall also file with the department a
5true copy of the income tax return filed with the Federal
6Government at the time the return required under paragraph (1)
7is filed.

8(3) Every partnership, estate or trust required to file a
9return under paragraph (1) for any taxable year shall, on or
10before the day the return is filed, furnish to each partner or
11nominee for another person or to each beneficiary to whom the
12income or gains of the estate or trust is taxable, a copy of one
13or both of the following showing their share of income and any
14other information as may be required by the department:

15(i) The Resident Schedule of Shareholder/Partner/Beneficiary
16Pass Through Income, Loss and Credits (Schedule RK-1) form.

17(ii) The Nonresident Schedule of
18Shareholder/Partner/Beneficiary Pass Through Income, Loss and
19Credits (Schedule NRK-1) form.

20(4) Failure to file a timely return as required under
21paragraph (2) and failure to furnish a copy of the returns
22required under paragraph (3) shall result in a penalty of fifty
23dollars ($50) for each individual return or individual copy
24required.

25(d) The department may prescribe regulations requiring
26returns of information to be made and filed on or before
27February 28 of each year as to the payment or crediting in any
28calendar year of amounts of ten dollars ($10) or more to any
29taxpayer. Such returns may be required of any person, including
30lessees or mortgagors of real or personal property, fiduciaries,

1employers and all officers and employes of this Commonwealth, or
2of any municipal corporation or political subdivision of this
3Commonwealth having the control, receipt, custody, disposal or
4payment of interest, rents, salaries, wages, premiums,
5annuities, compensations, remunerations, emoluments or other
6fixed or determinable gains, profits or income, except interest
7coupons payable to bearer. A duplicate of the statement as to
8tax withheld on compensation required to be furnished by an
9employer to an employe, shall constitute the return of
10information required to be made under this section with respect
11to such compensation.

12(e) Any person who is required to make a form W-2G return to
13the Secretary of the Treasury of the United States in regard to
14taxable gambling or lottery winnings from sources within this
15Commonwealth shall file a copy of the form with the department
16by March 1 of each year or, if filed electronically, by March 31
17of each year.

18(f) The following apply:

19(1) Any person who:

20(i) makes payments of income from sources within this
21Commonwealth;

22(ii) makes payments of nonemploye compensation or payments
23under an oil and gas lease under subparagraph (i) to a resident
24or nonresident individual, an entity treated as a partnership
25for tax purposes or a single member limited liability company;
26and

27(iii) is required to make a form 1099-MISC return to the
28Secretary of the Treasury of the United States with respect to
29the payments shall file a copy of form 1099-MISC with the
30department and send a copy of form 1099-MISC to the payee by the

1Federal filing deadline each year.

2(2) If the payor is required to perform electronic filing
3for Pennsylvania employer withholding purposes, the form 1099-
4MISC shall be filed electronically with the department.

5(g) (1) Every estate, trust, Pennsylvania S Corporation or
6partnership, other than a publicly traded partnership, shall
7maintain at the end of the entity's taxable year an accurate
8list of partners, members, beneficiaries or shareholders. The
9list shall include the name, current address and tax
10identification number of all existing partners, members,
11beneficiaries or shareholders and of all partners, members,
12beneficiaries or shareholders, who were admitted or who withdrew
13during the taxable year, including the date of withdrawal and
14admittance.

15(2) If the entity under paragraph (1) does not maintain an
16accurate list as required, the tax, penalty and interest with
17respect to the entity shall be considered the tax, penalty and
18interest of the partnership, estate, trust or Pennsylvania S
19Corporation and of the general partner, tax matters partner,
20corporate officer or trustee.

21Section 10. Section 401(3)1 and 2(a)(17) of the act, amended
22September 9, 1971 (P.L.437, No.105), are amended, clause (3)1 is
23amended by adding a phrase, subclause 2(a) is amended by adding
24a paragraph, paragraphs (3)4(c)(1)(A) and 2(B) are amended by
25adding subparagraphs and the section is amended by adding
26clauses to read:

27Section 401. Definitions.--The following words, terms, and
28phrases, when used in this article, shall have the meaning
29ascribed to them in this section, except where the context
30clearly indicates a different meaning:

1* * *

2(3) "Taxable income." 1. * * *

3(t) (1) Except as provided in paragraph (2), (3) or (4) for
4taxable years beginning after December 31, 2014, and in addition
5to any authority the department has on the effective date of
6this paragraph to deny a deduction related to a fraudulent or
7sham transaction, no deduction shall be allowed for an
8intangible expense or cost, or an interest expense or cost,
9paid, accrued or incurred directly or indirectly in connection
10with one or more transactions with an affiliated entity. In
11calculating taxable income under this paragraph, when the
12taxpayer is engaged in one or more transactions with an
13affiliated entity that was subject to tax in this Commonwealth
14or another state or possession of the United States on a tax
15base that included the intangible expense or cost, or the
16interest expense or cost, paid, accrued or incurred by the
17taxpayer, the taxpayer shall receive a credit against tax due in
18this Commonwealth in an amount equal to the apportionment factor
19of the taxpayer in this Commonwealth multiplied by the greater
20of the following:

21(A) the tax liability of the affiliated entity with respect
22to the portion of its income representing the intangible expense
23or cost, or the interest expense or cost, paid, accrued or
24incurred by the taxpayer; or

25(B) the tax liability that would have been paid by the
26affiliated entity under subparagraph (A) if that tax liability
27had not been offset by a credit.

28The credit issued under this paragraph shall not exceed the
29taxpayer's liability in this Commonwealth attributable to the
30net income taxed as a result of the adjustment required by this

1paragraph.

2(2) The adjustment required by paragraph (1) shall not apply
3to a transaction that was directly related to a valid business
4purpose.

5(3) The adjustment required by paragraph (1) shall not apply
6to a transaction between a taxpayer and an affiliated entity
7domiciled in a foreign nation which has in force a comprehensive
8income tax treaty with the United States providing for the
9allocation of all categories of income subject to taxation, or
10the withholding of tax, on royalties, licenses, fees and
11interest for the prevention of double taxation of the respective
12nations' residents and the sharing of information.

13(4) The adjustment required by paragraph (1) shall not apply 
14to a transaction where an affiliated entity directly or 
15indirectly paid, accrued or incurred a payment to a person who 
16is not an affiliated entity, if the payment is paid, accrued or 
17incurred on the intangible expense or cost, or interest expense 
18or cost, and is equal to or less than the taxpayer's 
19proportional share of the transaction. The taxpayer's 
20proportional share shall be based on relative sales, assets, 
21liabilities or another reasonable method.

222. In case the entire business of any corporation, other
23than a corporation engaged in doing business as a regulated
24investment company as defined by the Internal Revenue Code of
251986, is not transacted within this Commonwealth, the tax
26imposed by this article shall be based upon such portion of the
27taxable income of such corporation for the fiscal or calendar
28year, as defined in subclause 1 hereof, and may be determined as
29follows:

30(a) Division of Income.

1* * *

2(16.1) Sales, other than sales under paragraphs (16) and
3(17), are in this State as follows:

4(A) The sale, lease, rental or other use of real property,
5if the real property is located in this State. If real property
6is located both in and outside this State, the sale is in this
7State based upon the percentage of total assessed value of the
8real property located in this State.

9(B) (I) The rental, lease or licensing of tangible personal
10property, if the customer first obtained possession of the
11tangible personal property in this State.

12(II) If the tangible personal property is subsequently taken
13out of this State, the taxpayer may use a reasonably determined
14estimate of usage in this State to determine the extent of sale
15in this State.

16(C) (I) The sale of service, if the service is delivered to
17a location in this State. If the service is delivered both to a
18location in and outside this State, the sale is in this State
19based upon the percentage of total value of the service
20delivered to a location in this State.

21(II) If the state or states of assignment under subparagraph
22(I) cannot be determined for a customer who is an individual
23that is not a sole proprietor, a service is deemed to be
24delivered at the customer's billing address.

25(III) If the state or states of assignment under
26subparagraph (I) cannot be determined for a customer, except for
27a customer under subparagraph (II), a service is deemed to be
28delivered at the location from which the services were ordered
29in the customer's regular course of operations. If the location
30from which the services were ordered in the customer's regular

1course of operations cannot be determined, a service is deemed
2to be delivered at the customer's billing address.

3(17) Sales, other than sales [of tangible personal property] 
4under paragraphs (16) and (16.1), are in this State if:

5(A) The income-producing activity is performed in this
6State; or

7(B) The income-producing activity is performed both in and
8outside this State and a greater proportion of the income-
9producing activity is performed in this State than in any other
10state, based on costs of performance.

11* * *

124. * * *

13(c) (1) The net loss deduction shall be the lesser of:

14(A) * * *

15(V) For taxable years beginning after December 31, 2013, the
16greater of twenty-five per cent of taxable income as determined
17under subclause 1 or, if applicable, subclause 2 or four million
18dollars ($4,000,000);

19(VI) For taxable years beginning after December 31, 2014,
20the greater of thirty per cent of taxable income as determined
21under subclause 1 or, if applicable, subclause 2 or five million
22dollars ($5,000,000); or

23* * *

24(2) * * *

25(B) The earliest net loss shall be carried over to the
26earliest taxable year to which it may be carried under this
27schedule. The total net loss deduction allowed in any taxable
28year shall not exceed:

29* * *

30(V) The greater of twenty-five per cent of taxable income as

1determined under subclause 1 or, if applicable, subclause 2 or
2four million dollars ($4,000,000) for taxable years beginning
3after December 31, 2013.

4(VI) The greater of thirty per cent of taxable income as
5determined under subclause 1 or, if applicable, subclause 2 or
6five million dollars ($5,000,000) for taxable years beginning
7after December 31, 2014.

8* * *

9(8) "Intangible expense or cost." Royalties, licenses or
10fees paid for the acquisition, use, maintenance, management,
11ownership, sale, exchange or other disposition of patents,
12patent applications, trade names, trademarks, service marks,
13copyrights, mask works or other similar expenses or costs.

14(9) "Interest expense or cost." A deduction allowed under
15section 163 of the Internal Revenue Code of 1986 (26 U.S.C. §
16163) to the extent that such deduction is directly related to an
17intangible expense or cost.

18(10) "Affiliated entity." A person with a relationship to 
19the taxpayer during all or any portion of the taxable year that 
20is any of the following:

21(i) a stockholder who is an individual, or a member of the 
22stockholder's family as set forth in section 318 of the Internal 
23Revenue Code of 1986 (26 U.S.C. § 318), if the stockholder and 
24the members of the stockholder's family own, directly, 
25indirectly, beneficially or constructively, in the aggregate, 
26more than fifty per cent of the value of the taxpayer's 
27outstanding stock;

28(ii) a stockholder, or a stockholder's partnership, limited 
29liability company, estate, trust or corporation, if the 
30stockholder and the stockholder's partnerships, limited 

1liability companies, estates, trusts and corporations own 
2directly, indirectly, beneficially or constructively, in the 
3aggregate, more than fifty per cent of the value of the 
4taxpayer's outstanding stock;

5(iii) a corporation, or a party related to the corporation 
6in a manner that would require an attribution of stock from the 
7corporation to the party or from the party to the corporation 
8under the attribution rules of the Internal Revenue Code of 
91986, if the taxpayer owns, directly, indirectly, beneficially 
10or constructively, more than fifty per cent of the value of the 
11corporation's outstanding stock. The attribution rules of 
12section 318 of the Internal Revenue Code of 1986 shall apply for 
13purposes of determining whether the ownership requirements of 
14this definition have been met;

15(iv) a component member as defined in section 1563(b) of the
16Internal Revenue Code of 1986 (26 U.S.C. § 1563(b)); or

17(v) a person to or from whom there is attribution of stock
18ownership in accordance with section 1563(e) of the Internal
19Revenue Code of 1986.

20(11) "Valid business purpose." A purpose, other than the
21avoidance or reduction of taxation, which alone or in
22combination with other purposes constitute the primary
23motivation for a business activity or transaction. A transaction
24done at arm's length terms shall be presumed to be directly
25related to a valid business purpose.

26Section 11. Section 402(b) of the act, amended June 29, 2002
27(P.L.559, No.89), is amended to read:

28Section 402. Imposition of Tax.--* * *

29(b) The annual rate of tax on corporate net income imposed
30by subsection (a) for taxable years beginning for the calendar

1year or fiscal year on or after the dates set forth shall be as
2follows:

3Taxable Year	Tax Rate
4January 1, 1995[, and 5each taxable year 6thereafter] to  7December 31, 2014	9.99%
8January 1, 2015, to 9December 31, 2015	9.89%
10January 1, 2016, to 11December 31, 2016	9.69%
12January 1, 2017, to 13December 31, 2017	9.49%
14January 1, 2018, to 15December 31, 2018	9.29%
16January 1, 2019, to 17December 31, 2019	8.96%
18January 1, 2020, to 19December 31, 2020	8.63%
20January 1, 2021, to 21December 31, 2021	8.3%
22January 1, 2022, to 23December 31, 2022	7.97%
24January 1, 2023, to 25December 31, 2023	7.64%
26January 1, 2024, to 27December 31, 2024	7.31%
28January 1, 2025, and 29each taxable year 30thereafter	6.99%

1* * *

2Section 12. Section 403(d) of the act, amended October 18,
32006 (P.L.1149, No.119), is amended to read:

4Section 403. Reports and Payment of Tax.--* * *

5(d) If the officers of any corporation shall neglect, or
6refuse to make any report as herein required, or shall knowingly
7make any false report, [the following percentages of the amount
8of the tax shall be added by the department to the tax
9determined to be due on the first one thousand dollars ($1,000)
10of tax ten per cent, on the next four thousand dollars ($4,000)
11five per cent, and on everything in excess of five thousand
12dollars ($5,000) one per cent, no such] a penalty of five 
13hundred dollars ($500) plus an additional one per cent for every 
14dollar of tax determined to be due in excess of twenty-five 
15thousand dollars ($25,000) shall be added to the tax determined 
16to be due. No amounts added to the tax shall bear any interest
17whatsoever.

18* * *

19Section 12.1. The definitions of "document," "real estate"
20and "real estate company" in section 1101-C of the act, amended
21July 2, 1986 (P.L.318, No.77), are amended to read:

22Section 1101-C. Definitions.--The following words when used
23in this article shall have the meanings ascribed to them in this
24section:

25* * *

26"Document." Any deed, instrument or writing which conveys,
27transfers, devises, vests, confirms or evidences any transfer or
28devise of title to real estate in this Commonwealth, but does
29not include wills, mortgages, deeds of trust or other
30instruments of like character given as security for a debt and

1deeds of release thereof to the debtor, land contracts whereby
2the legal title does not pass to the grantee until the total
3consideration specified in the contract has been paid or any
4cancellation thereof unless the consideration is payable over a
5period of time exceeding thirty years or instruments which
6solely grant, vest or confirm a public utility easement.
7"Document" shall also include a declaration of acquisition
8required to be presented for recording under section 1102-C.5 of
9this article.

10* * *

11"Real estate."

12(1) Any lands, tenements or hereditaments [within this
13Commonwealth], including, without limitation, buildings,
14structures, fixtures, mines, minerals, oil, gas, quarries,
15spaces with or without upper or lower boundaries, trees and
16other improvements, immovables or interests which by custom,
17usage or law pass with a conveyance of land, but excluding
18permanently attached machinery and equipment in an industrial
19plant.

20(2) A condominium unit.

21(3) A tenant-stockholder's interest in a cooperative housing
22corporation, trust or association under a proprietary lease or
23occupancy agreement.

24"Real estate company." A corporation or association which
25[is] meets any of the following:

26(1) Is  primarily engaged in the business of holding,
27selling or leasing real estate ninety per cent or more of the
28ownership interest in which is held by thirty-five or fewer
29persons and which:

30[(1)] (i) derives sixty per cent or more of its annual gross

1receipts from the ownership or disposition of real estate; or

2[(2)] (ii) holds real estate, the value of which comprises
3[ninety] fifty per cent or more of the value of its entire
4tangible asset holdings exclusive of tangible assets which are
5freely transferable and actively traded on an established
6market.

7(2) Owns a direct or indirect interest in a real estate
8company. An indirect ownership interest is an interest in a
9corporation or association whose purpose is the ownership of a
10real estate company either by itself or as part of a tiered
11structure of corporations or associations.

12* * *

13Section 12.2. Section 1102-C of the act, amended July 2,
141986 (P.L.318, No.77), is amended to read:

15Section 1102-C. Imposition of Tax.--Every person who makes,
16executes, delivers, accepts or presents for recording any
17document or in whose behalf any document is made, executed,
18delivered, accepted or presented for recording, shall be subject
19to pay for and in respect to the transaction or any part
20thereof, or for or in respect of the vellum parchment or paper
21upon which such document is written or printed, a State tax at
22the rate of one per cent of the value of the real estate within 
23this Commonwealth represented by such document, which State tax
24shall be payable at the earlier of the time the document is
25presented for recording or within thirty days of acceptance of
26such document or within thirty days of becoming an acquired
27company.

28Section 12.3. Section 1102-C.5(a) of the act, amended July
292, 2012 (P.L.751, No.85), is amended to read:

30Section 1102-C.5. Acquired Company.--(a) A real estate

1company is an acquired company upon a change in the ownership
2interest in the company, however effected, if the change:

3(1) does not affect the continuity of the company; and

4(2) of itself or together with prior changes has the effect
5of transferring, directly or indirectly, ninety per cent or more
6of the total ownership interest in the company within a period
7of three years.

8(3) For the purposes of paragraph (2), a transfer occurs
9within a period of three years of another transfer or transfers
10if, during the period[:

11(i) the transferring party provides a legally binding
12commitment, enforceable at a future date, to execute the
13transfer;

14(ii) the terms of the transfer are fixed and not subject to
15negotiation; and

16(iii) the transferring party receives full consideration, in
17any form, in exchange for the transfer.], the transferring party 
18provides the transferee a legally binding commitment or option, 
19enforceable at a future date, to execute the transfer.

20* * *

21Section 12.4. Article XVIII-A of the act, added May 12, 1999
22(P.L.26, No.4), is repealed:

23[ARTICLE XVIII-A

24COAL WASTE REMOVAL AND ULTRACLEAN FUELS

25TAX CREDIT

26Section 1801-A. Short Title.--This article shall be known
27and may be cited as the "Coal Waste Removal and Ultraclean Fuels
28Act."

29Section 1802-A. Definitions.--The following words, terms and
30phrases, when used in this article, shall have the meanings

1ascribed to them in this section, except where the context
2clearly indicates a different meaning:

3"Department" means the Department of Revenue of the
4Commonwealth.

5"Developer" means the owner-operator of a facility, as
6defined in this section, or the operator of the facility that
7has sold the facility in new condition to a third party from
8whom that operator has simultaneously leased back the facility
9for a minimum period of twelve years.

10"Facility" includes all plant and equipment purchased or
11constructed by or on behalf of the developer which is used
12within this Commonwealth by the developer to produce one or more
13qualified fuels.

14"Internal Revenue Code" means the Internal Revenue Code of
151986 (Public Law 99-514, 26 U.S.C. § 1 et seq.).

16"Qualified fuels" means those fuels produced from
17nontraditional coal culm and silt feedstocks as defined in
18section 29(c) of the Internal Revenue Code of 1986 (Public Law
1999-514, 26 U.S.C. § 29(c)).

20"Qualifying property" means tangible personal property and
21other forms of tangible property which qualify for investment
22tax credit treatment and which meet all of the following
23requirements:

24(1) Be acquired through a purchase, as defined under section
25179(d)(2) of the Internal Revenue Code (26 U.S.C. § 179(d)(2)),
26or constructed by the developer for its own use.

27(2) Be depreciable under section 167 of the Internal Revenue
28Code (26 U.S.C. § 167).

29(3) Have a useful life of greater than or equal to four
30years.

1(4) Be located within this Commonwealth.

2(5) Be used by the developer in the production of qualified
3fuels.

4(6) Be acquired by purchase or constructed on or after
5January 1, 2000, and before January 1, 2013.

6(7) Not be the subject of any tax credit otherwise available
7to the developer under this act.

8"Tax credit base" means only the cost or other basis of
9qualifying property that is properly transferred to the
10facility's basis for depreciation for Federal income tax
11purposes between January 1, 2000, and December 31, 2012.

12Section 1803-A. Investment Tax Credits Program.--(a) A
13developer of a new facility for the production of one or more
14qualified fuels shall be allowed an investment tax credit
15against the taxes imposed under Articles II, IV and VI of this
16act. The amount of the credit shall be computed as a percentage
17applied to the cost or other basis for Federal income tax
18purposes of qualifying property.

19(b) (1) The investment tax credit shall be computed as
20fifteen per cent of the tax credit base.

21(2) The maximum investment tax credit available for
22application, whether claimed by one or more taxpayers, shall not
23exceed fifteen per cent of the capital cost of the facility.

24(3) Any amount of allowable investment tax credit not used
25in the tax year for which the credit was claimed can be carried
26forward by the claiming taxpayer to succeeding years until the
27full amount of allowable credit has been used.

28(c) (1) The developer, upon notice to the department as
29specified by the department, may sell or assign, in whole or in
30part, any investment tax credit afforded under this section to

1one or more taxpayers if no claim for allowance of such credit
2has been filed.

3(2) A taxpayer recipient by purchase or assignment of any
4portion of the developer's investment tax credit under paragraph
5(1) shall initially claim such credit, upon notice to the
6department of the derivative basis of the credit in compliance
7with procedures specified by the department, for the tax year in
8which the purchase or assignment is made, but in no event
9subsequent to the filing of an income tax return for the year
102012.

11(3) Any taxpayer who acquires any portion of the developer's
12investment tax credit by sale or assignment for value and
13without notice by the developer of any irregularity or
14invalidity shall not suffer any disallowance of the credit or
15the imposition of any adjustment or fraud penalty attributable
16to conduct by the developer.

17(d) (1) If prior to the expiration of any qualifying
18property's useful life, as used to calculate depreciation for
19Federal income tax purposes, the developer, upon mandatory
20notice to the department in compliance with procedures specified
21by the department, disposes of any qualifying property, in a
22transaction other than a sale-leaseback transaction, upon which
23the department has previously allowed an investment tax credit
24claimed by any taxpayer, a portion of all such credit shall be
25recaptured and added to the developer's tax liability for the
26tax year in which the qualifying property is disposed.

27(2) The portion of the investment tax credit previously
28allowed, which is subject to recapture from the developer, shall
29be equal to a fraction whose numerator is the number of years
30remaining to fully depreciate for Federal income tax purposes

1the qualifying property disposed and whose denominator is the
2total number of years over which the property otherwise would
3have been subject to depreciation by the developer.

4(3) In calculating the recapture percentage, the year of
5disposition of the qualifying property is considered a year of
6remaining depreciation.

7(e) The department shall verify the validity of any claim
8for allowance of any investment tax credit afforded under this
9section and, in the case of a fraudulent claim, may assess
10against the developer a penalty of one hundred and twenty-five
11per cent of the credit improperly claimed.

12(f) The tax credits authorized by this section shall not
13exceed eighteen million dollars ($18,000,000) in the aggregate
14during any year.

15Section 1804-A. Contract Required.--(a) In order for a
16developer to claim investment tax credits under this article,
17the developer must enter into a contract with the Commonwealth
18that provides as follows:

19(1) The term of the contract shall be twenty-five years,
20beginning with the first tax year in which the investment tax
21credits are claimed.

22(2) The developer shall make periodic payments to the
23Commonwealth, which payments may not exceed in the aggregate
24forty-six million eight hundred thousand dollars ($46,800,000)
25over the term of the contract.

26(3) The periodic payments shall occur every five years and
27each payment shall be nine million three hundred sixty thousand
28dollars ($9,360,000), except as provided in paragraphs (4), (5)
29and (6).

30(4) For the first five-year period, the amount specified in

1paragraph (3) shall be reduced by:

2(i) An amount equal to the business losses of the developer,
3if any, relating to the facility that are sustained in the first
4and second years of the contract, provided such amount does not
5exceed three million seven hundred forty-four thousand dollars
6($3,744,000) for both years.

7(ii) Allowable offsets identified in subsection (b),
8provided that such offsets do not exceed nine million three
9hundred sixty thousand dollars ($9,360,000).

10(5) For the remaining five-year periods, the amount
11specified in paragraph (3) shall be reduced by the amount of
12allowable offsets identified in subsection (b), provided that
13such offsets do not exceed nine million three hundred sixty
14thousand dollars ($9,360,000) during any five-year period.

15(6) To the extent the amount of allowable offsets during any
16five-year period exceeds nine million three hundred sixty
17thousand dollars ($9,360,000), the excess may be carried over
18and added to the allowable offsets taken in the following five-
19year period, provided that the excess is applied first.

20(b) For purposes of this section, "allowable offset"
21includes all of the following:

22(1) An amount equal to the corporate net income tax, capital
23stock and franchise tax and personal income tax related to the
24construction, ownership and operation of the facility.

25(2) An amount equal to all personal income tax withheld from
26the developer's employes.

27(3) An amount equal to all sales and use tax related to the
28operation and construction of the facility.

29(4) The amount paid by the developer of any new tax enacted
30by the Commonwealth following the effective date of this

1article.

2Section 1805-A. Requirements.--Tax credits authorized by
3this article shall not be granted unless the developer has
4obtained an investment tax credit from the Federal Government or
5an investment by a person other than an agency or
6instrumentality of the Commonwealth, or any combination thereof,
7in an amount equal to or greater than the tax credit granted by
8this article.]

9Section 13. Section 2112 of the act, amended or added August
104, 1991 (P.L.97, No.22), June 16, 1994 (P.L.279, No.48) and June
1130, 1995 (P.L.139, No.21), is repealed:

12[Section 2112. Exemption for Poverty.--(a) The General
13Assembly, in recognition of the powers contained in section 2(b)
14(ii) of Article VIII of the Constitution of Pennsylvania which
15provides therein for the establishing as a class or classes of
16subjects of taxation the property or privileges of persons who
17because of poverty are determined to be in need of special tax
18provisions or tax exemptions, hereby declares as its legislative
19intent and purpose to implement such powers under such
20Constitutional provision by establishing a tax exemption as
21hereinafter provided in this section.

22(b) The General Assembly, having determined that there are
23persons within this Commonwealth the value of whose incomes and
24estates are such that the imposition of an inheritance tax under
25this article would cause them hardship and economic burden and
26having further determined that poverty is a relative concept
27inextricably joined with the ability to maintain assets
28inherited upon the death of a spouse, deems it to be a matter of
29public policy to provide an exemption from taxation for
30transfers of property to or for the use of that class of persons

1hereinafter designated in order to relieve their hardship and
2economic burden.

3(c) Any claim for a tax exemption hereunder shall be
4determined in accordance with the following:

5(1) The transferee is the spouse of the decedent at the date
6of death of the decedent.

7(2) The value of the estate of the decedent does not exceed
8two hundred thousand dollars ($200,000) after reduction for
9actual liabilities of the decedent as evidenced by a written
10agreement.

11(3) The average of the joint exemption income of the
12decedent and the transferee for the three taxable years, as
13defined in Article III, immediately preceding the date of death
14of the decedent does not exceed forty thousand dollars
15($40,000).

16(d) Notwithstanding any other provision of this article,
17transfers of property to or for the use of any eligible
18transferee who meets the standards of eligibility established by
19this section as the test for poverty shall be deemed a separate
20class subject to taxation and, as such, shall be entitled to the
21benefit of the following exemptions from taxation on transfers
22of property as a credit against the tax imposed by this article:

23(1) For decedents dying on or after January 1, 1992, and
24before January 1, 1993, the lesser of:

25(i) Two per cent of the taxable value of the property of the
26decedent transferred to or for the use of the transferee.

27(ii) Two per cent of one hundred thousand dollars ($100,000)
28of the taxable value of the property of the decedent transferred
29to or for the use of the transferee.

30(2) For decedents dying on or after January 1, 1993, and

1before January 1, 1994, the lesser of:

2(i) Four per cent of the taxable value of the property of
3the decedent transferred to or for the use of the transferee.

4(ii) Four per cent of one hundred thousand dollars
5($100,000) of the taxable value of the property of the decedent
6transferred to or for the use of the transferee.

7(3) For decedents dying on or after January 1, 1994, and
8before January 1, 1995, the lesser of:

9(i) Six per cent of the taxable value of the property of the
10decedent transferred to or for the use of the transferee.

11(ii) Six per cent of one hundred thousand dollars ($100,000)
12of the taxable value of the property of the decedent transferred
13to or for the use of the transferee.

14(e) For nonresident decedents, the credit provided in this
15section shall bear the same ratio as that of the decedent's
16estate in this Commonwealth bears to the decedent's total estate
17without regard to situs.

18(f) The credit provided in this section shall not be greater
19than the tax imposed.

20(g) This section shall not apply to the estates of decedents
21dying on or after January 1, 1995.]

22Section 14. The following shall apply:

23(1) A tax credit may not be granted under section 206(b)
24of the act after June 30, 2013.

25(2) The amendment or addition of the following
26provisions of the act shall apply to tax years beginning
27after December 31, 2013:

28(i) Section 301(d.2), (n.1), (n.2), (o.3) and (t).

29(ii) Section 303(a)(2).

30(iii) Section 306.

1(iv) Section 306.1.

2(v) Section 306.2.

3(vi) Section 307.8(a) and (f).

4(vii) Section 314(a).

5(viii) Section 324.

6(ix) Section 330.1.

7(x) Section 335.

8(xi) Section 401(3)1(t), 2(a)(16.1) and (17) and
9(8), (9), (10) and (11) and 4(c)(1)(A)(V) and (VI) and
102(B)(V) and (VI).

11(xii) Section 402(b).

12(xiii) Section 403(d).

13(3) The addition of section 303(a)(3)(viii) shall apply
14to tax years beginning after December 31, 2015.

15Section 15. This act shall take effect as follows:

16(1) The following shall take effect January 1, 2014, or
17immediately, whichever is later:

18(i) The amendment of the definitions of "document," 
19"real estate" and "real estate company" in section 1101-C 
20of the act.

21(ii) The amendment of sections 1102-C and 
221102-C.5(a) of the act.

23(2) The remainder of this act shall take effect
24immediately.