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

1The General Assembly of the Commonwealth of Pennsylvania
2hereby enacts as follows:

3Section 1. Sections 201(ddd) and 206 of the act of March 4,
41971 (P.L.6, No.2), known as the Tax Reform Code of 1971,
5amended or added December 23, 2003 (P.L.250, No.46), are amended
6to read:

7Section 201. Definitions.--The following words, terms and
8phrases when used in this Article II shall have the meaning
9ascribed to them in this section, except where the context
10clearly indicates a different meaning:

11* * *

12[(ddd) "Call center." The physical location in this
13Commonwealth:

14(1) where at least one hundred and fifty employes are
15employed to initiate or answer telephone calls;

16(2) where there are at least two hundred telephone lines;
17and

18(3) which utilizes an automated call distribution system for
19customer telephone calls in one or more of the following
20activities:

21(A) customer service and support;

22(B) technical assistance;

23(C) help desk service;

24(D) providing information;

25(E) conducting surveys;

26(F) revenue collections; or

27(G) receiving orders or reservations.

28For purposes of this clause, a physical location may include
29multiple buildings utilized by a taxpayer located within this
30Commonwealth.]

1Section 206. Credit Against Tax.--(a) A credit against the
2tax imposed by section 202 shall be granted with respect to
3tangible personal property or services purchased for use outside
4the Commonwealth equal to the tax paid to another state by
5reason of the imposition by such other state of a tax similar to
6the tax imposed by this article: Provided, however, That no such
7credit shall be granted unless such other state grants
8substantially similar tax relief by reason of the payment of tax
9under this article or under the Tax Act of 1963 for Education.

10[(b) A credit against the tax imposed by section 202 on
11telecommunications services shall be granted to a call center
12for gross receipts tax paid by a telephone company on the
13receipts derived from the sale of incoming and outgoing
14interstate telecommunications services to the call center under
15section 1101(a)(2). The following apply:

16(1) A telephone company, upon request, shall notify a call
17center of the amount of gross receipts tax paid by the telephone
18company on the receipts derived from the sale of incoming and
19outgoing interstate telecommunications services to the call
20center.

21(2) A call center that is eligible for the credit in this
22subsection may apply for a tax credit as set forth in this
23subsection.

24(3) By February 15, a taxpayer must submit an application to
25the department for gross receipts tax paid on the receipts
26derived from the sale of incoming and outgoing interstate
27telecommunications services incurred in the prior calendar year.

28(4) By April 15 of the calendar year following the close of
29the calendar year during which the gross receipts tax was
30incurred, the department shall notify the applicant of the

1amount of the applicant's tax credit approved by the department.

2(5) The total amount of tax credits provided for in this
3subsection and approved by the department shall not exceed
4thirty million dollars ($30,000,000) in any fiscal year. If the
5total amount of tax credits applied for by all applicants
6exceeds the amount allocated for those credits, then the credit
7to be received by each applicant shall be determined as follows:

8(i) Divide:

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

10(B) the total of all tax credits applied for by all
11applicants.

12(ii) Multiply:

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

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

15Section 1.1. Section 226 of the act is repealed:

16[Section 226. Local Receivers of Use Tax.--Beginning on and 
17after the effective date of this article, in every county, 
18except in counties of the first class, the county treasurer is 
19hereby authorized to receive use tax due and payable under the 
20provisions of this article from any person other than a 
21licensee. The receiving of such taxes shall be pursuant to rules 
22and regulations promulgated by the department and upon forms 
23furnished by the department. Each county treasurer shall remit 
24to the department all use taxes received under the authority of 
25this section minus the costs of administering this provision not 
26to exceed one per cent of the amount of use taxes received, 
27which amount shall be retained in lieu of any commission 
28otherwise allowable by law for the collection of such tax.]

<-29Section 2. Section 301(n.1), (o.3) and (t) of the act,
30amended or added August 31, 1971 (P.L.362, No.93) and July 6,

12006 (P.L.319, No.67), are amended and the section is amended by
2adding subsections to read:

<-3Section 2. Section 301(t) of the act, added August 31, 1971
4(P.L.362, No.93), is amended and the section is amended by
5adding subsections to read:

6Section 301. Definitions.--Any reference in this article to
7the Internal Revenue Code of 1986 shall mean the Internal
8Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. § 1 et seq.),
9as amended to January 1, 1997, unless the reference contains the
10phrase "as amended" and refers to no other date, in which case
11the reference shall be to the Internal Revenue Code of 1986 as
12it exists as of the time of application of this article. The
13following words, terms and phrases when used in this article
14shall have the meaning ascribed to them in this section except
15where the context clearly indicates a different meaning:

16* * *

17(d.2) "Corporate item" means an item, including income, gain
18or loss, deduction or credit determined at the Pennsylvania S
19corporation level, which is required to be taken into account
20for a Pennsylvania S corporation's taxable year.

21* * *

22(n.2) "Partnership item" means an item, including income,
23gain or loss, deduction or credit determined at the partnership
24level, which is required to be taken into account for a
25partnership's taxable year.

<-26[(n.1)] (n.3) "Pennsylvania S corporation" means any small
27corporation as defined in section 301(s.2) which does not have a
28valid election under section 307 in effect. A qualified
29Subchapter S subsidiary owned by a Pennsylvania S corporation
30shall be treated as a Pennsylvania S corporation without regard

1to whether an election under section 307 has been made with
2respect to the subsidiary.

3* * *

<-4(o.3) <-(o.4) "Publicly traded partnership" means an entity
5defined under section 7704 of the Internal Revenue Code of 1986
6(Public Law 99-514, 26 U.S.C. § 7704) with equity securities
7registered with the Securities and Exchange Commission under
8section 12 of the Securities Exchange Act of 1934 (48 Stat. 881,
915 U.S.C. § 78a).

<-10[(o.3)] (o.4) "Qualified Subchapter S subsidiary" means a
11domestic or foreign corporation which for Federal income tax
12purposes is treated as a qualified Subchapter S subsidiary, as
13defined in section 1361(b)(3)(B) of the Internal Revenue Code of
141986 (Public Law 99-514, 26 U.S.C. § 1361), as amended to
15January 1, 2005.

16* * *

17(t) "State" means, except as provided under section 314(a),
18any state or commonwealth of the United States, the District of
19Columbia, the Commonwealth of Puerto Rico, any territory or
20possession of the United States and any foreign country.

21* * *

22Section 2.1. Section 303(a)(2) of the act, added August 31,
231971 (P.L.362, No.93), is amended and subsection (a)(3) is
24amended by adding a subparagraph to read:

25Section 303. Classes of Income.--(a) The classes of income
26referred to above are as follows:

27* * *

28(2) Net profits. The net income from the operation of a
29business, profession, or other activity, after provision for all
30costs and expenses incurred in the conduct thereof, determined

1either on a cash or accrual basis in accordance with accepted
2accounting principles and practices but without deduction of
3taxes based on income. For purposes of calculating net income 
4under this paragraph, to the extent a taxpayer properly deducts 
5an amount under section 195(b)(1)(A) of the Internal Revenue 
6Code of 1986 (26 U.S.C. § 195(b)(1)(A)), as amended, and the 
7regulations promulgated under section 195(b)(1)(A) of the 
8Internal Revenue Code of 1986, the taxpayer shall be permitted a 
9deduction in equal amount in the same taxable year.

10(3) Net gains or income from disposition of property. Net
11gains or net income, less net losses, derived from the sale,
12exchange or other disposition of property, including real
13property, tangible personal property, intangible personal
14property or obligations issued on or after the effective date of
15this amendatory act by the Commonwealth; any public authority,
16commission, board or other agency created by the Commonwealth;
17any political subdivision of the Commonwealth or any public
18authority created by any such political subdivision; or by the
19Federal Government as determined in accordance with accepted
20accounting principles and practices. For the purpose of this
21article:

22* * *

23(viii) The term "net gains or net income, less net losses"
24shall not include gain or loss from the exchange of property
25which is not recognized for Federal income tax purposes under
26section 1031 of the Internal Revenue Code of 1986 (26 U.S.C. §
271031), as amended, and the regulations promulgated under section
281031 of the Internal Revenue Code of 1986. For purposes of
29determining basis under subparagraph (i), section 1031(d) of the
30Internal Revenue Code of 1986 (26 U.S.C. § 1031(d)), as amended,

1and the regulations promulgated under section 1031 of the
2Internal Revenue Code of 1986 shall apply.

3* * *

4Section 3. Section 306 of the act, amended June 22, 2001
5(P.L.353, No.23), is amended to read:

6Section 306. Taxability of Partners.--[A] Except as provided 
7under section 306.2, a partnership as an entity shall not be
8subject to the tax imposed by this article, but the income or
9gain of a member of a partnership in respect of said partnership
10shall be subject to the tax and the tax shall be imposed on his
11share, whether or not distributed, of the income or gain
12received by the partnership for its taxable year ending within
13or with the member's taxable year.

14Section 4. The act is amended by adding sections to read:

15Section 306.1. Tax Treatment Determined at Partnership
16Level.--The classification or character of a partnership item
17shall be determined at the partnership level. This section shall
18not prohibit the department from adjusting a partner's return.

19Section 306.2. Tax Imposed at Partnership Level.--(a) A
20partnership underreporting reportable income by more than one
21million dollars ($1,000,000) shall be jointly liable with each
22partner for any part of a deficiency resulting from the
23treatment of a partnership item by a partner on that partner's
24return in a manner that is consistent with the treatment of that
25partnership item on the partnership return. If the tax is paid
26by the partner, the department may not collect the tax from the
27partnership. If the tax is paid by the partnership, the
28department may not collect the tax from a partner.

29(b) Subsection (a) shall apply to the following
30partnerships:

1(1) A partnership which has eleven or more individual
2partners.

3(2) A partnership which has at least one partner which is a
4corporation, limited liability company, partnership or trust.

5(3) A partnership which has only individual partners and
6which elects to be subject to this subsection. The election must
7be included on the partnership return to be filed with the
8department.

9(c) This section shall not apply to a publicly traded
10partnership.

11(d) Nothing under this section shall require one partner to
12be liable for the payment of a tax liability of another partner.

13(e) Appeals involving a deficiency assessed under this
14section may only be pursued by the partnership and a
15reassessment or settlement of tax liability shall be binding on
16the partners.

17Section 5. Section 307.8(a) of the act, amended May 7, 1997
18(P.L.85, No.7), is amended and the section is amended by adding
19a subsection to read:

20Section 307.8. Income of a Pennsylvania S Corporation.--(a)
21A Pennsylvania S corporation shall not be subject to the tax
22imposed by this article, except as provided under subsection 
23(f), but the shareholders of the Pennsylvania S corporation
24shall be subject to the tax imposed under this article as
25provided in this article.

26* * *

27(f) (1) A Pennsylvania S corporation underreporting
28reportable income by more than one million dollars ($1,000,000)
29shall be jointly liable with each shareholder for any part of a
30deficiency resulting from the treatment of a corporate item by

1any shareholder on the shareholder's return in a manner that is
2consistent with the treatment of the corporate item on the
3return of the Pennsylvania S corporation. If the tax is paid by
4the shareholder, it may not be be collected from the
5corporation.

6(2) Paragraph (1) shall apply to the following Pennsylvania
7S corporations:

8(i) A Pennsylvania S corporation which has eleven or more
9shareholders.

10(ii) A Pennsylvania S corporation which elects to be subject
11to this subsection. The election must be included on the
12Pennsylvania S corporation return to be filed with the
13department.

14(3) Nothing under this section shall require one shareholder
15to be liable for the payment of a tax liability of another
16shareholder.

17(4) Appeals involving the deficiency assessed under this
18section may be filed only by the Pennsylvania S corporation and
19a reassessment or settlement of tax liability shall be binding
20on the shareholders.

21Section 6. Section 314(a) of the act, amended December 23,
221983 (P.L.370, No.90), is amended to read:

23Section 314. Income Taxes Imposed by Other States.--(a) A
24resident taxpayer before allowance of any credit under section
25312 shall be allowed a credit against the tax otherwise due
26under this article for the amount of any income tax, wage tax or
27tax on or measured by gross or net earned or unearned income
28imposed on him or on a Pennsylvania S corporation in which he is
29a shareholder, to the extent of his pro rata share thereof
30determined in accordance with section 307.9, by another state

1with respect to income which is also subject to tax under this
2article. For purposes of this subsection and notwithstanding 
3section 301(t), the term "state" shall only include a state of 
4the United States, the District of Columbia, the Commonwealth of 
5Puerto Rico and any territory or possession of the United 
6States.

7* * *

8Section 7. Section 324 of the act, amended June 22, 2001
9(P.L.353, No.23), is amended to read:

10Section 324. General Rule.--(a) When a partnership, estate, 
11trust or Pennsylvania S corporation receives income from sources
12within this Commonwealth for any taxable year and any portion of
13the income is allocable to a nonresident partner, beneficiary,
14member or shareholder thereof, the partnership, estate, trust or
15Pennsylvania S corporation shall pay a withholding tax under
16this section at the time and in the manner prescribed by the
17department; however, notwithstanding any other provision of this
18article, all such withholding tax shall be paid over on or
19before the fifteenth day of the fourth month following the end
20of the taxable year.

21(b) This section shall not apply to any publicly traded
22partnership as defined under section 7704 of the Internal
23Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. § 7704) with
24equity securities registered with the Securities and Exchange
25Commission under section 12 of the Securities Exchange Act of
261934 (48 Stat. 881, 15 U.S.C. § 78a).

27Section 8. Section 330.1 of the act, amended or added
28December 23, 1983 (P.L.370, No.90) and July 13, 1987 (P.L.325,
29No.59), is amended to read:

30Section 330.1. Return of Pennsylvania S Corporation.--(a)

1Every Pennsylvania S corporation shall make a return for each
2taxable year, stating specifically all items of gross income and
3deductions, the names and addresses of all persons owning stock
4in the corporation at any time during the taxable year, the
5number of shares of stock owned by each shareholder at all times
6during the taxable year, the amount of money and other property
7distributed by the corporation during the taxable year to each
8shareholder, the date of each distribution, each shareholder's
9pro rata share of each item of the corporation for the taxable
10year and such other information as the department may require.

11(b) The return shall be filed on or before thirty days after
12the date when the corporation's Federal income tax return is
13due.

14(c) Every Pennsylvania S corporation shall also submit to
15the department a true copy of the income tax return filed with
16the Federal Government at the time the return required under
17subsection (a) is filed.

18(d) Each Pennsylvania S corporation required to file a
19return under subsection (a) for a taxable year shall, on or
20before the day on which the return for the taxable year was
21filed, furnish to each person who is a shareholder at any time
22during the taxable year a copy of one or both of the following
23showing their share of income and any other information as may
24be required by the department:

25(1) The Resident Schedule of Shareholder/Partner/Beneficiary
26Pass Through Income, Loss and Credits (Schedule RK-1) form.

27(2) The Nonresident Schedule of
28Shareholder/Partner/Beneficiary Pass Through Income, Loss and
29Credits (Schedule NRK-1) form.

30Section 9. Section 335 of the act, amended or added August 

131, 1971 (P.L.362, No.93), December 23, 2003 (P.L.250, No.46)
2and July 2, 2012 (P.L.751, No.85), is amended to read:

3Section 335. Requirements Concerning Returns, Notices,
4Records and Statements.--(a) The department may prescribe by
5regulation for the keeping of records, the content and form of
6returns, declarations, statements and other documents and the
7filing of copies of Federal income tax returns and
8determinations. The department may require any person, by
9regulation or notice served upon such person, to make such
10returns, render such statements, or keep such records, as the
11department may deem sufficient to show whether or not such
12person is liable for tax under this article.

13(b) (1) When required by regulations prescribed by the
14department:

15(i) Any person required under the authority of this article
16to make a return, declaration, statement, or other document
17shall include in such return, declaration, statement or other
18document such identifying number as may be prescribed for
19securing proper identification of such person.

20(ii) Any person with respect to whom a return, declaration,
21statement, or other document is required under the authority of
22this article to make a return, declaration, statement, or other
23document with respect to another person, shall request from such
24other person, and shall include in any such return, declaration,
25statement, or other document, such identifying number as may be
26prescribed for securing proper identification of such other
27person.

28(2) For purposes of this section, the department is
29authorized to require such information as may be necessary to
30assign an identifying number to any person.

1(c) (1) Every partnership, estate or trust having a
2resident partner or a resident beneficiary or every partnership, 
3estate or trust having any income derived from sources within
4this Commonwealth shall make a return for the taxable year
5setting forth all items of income, loss and deduction, and such
6other pertinent information as the department may by regulations
7prescribe. Such return shall be filed on or before the fifteenth
8day of the fourth month following the close of each taxable
9year. For purposes of this subsection, "taxable year" means year
10or period which would be a taxable year of the partnership if it
11were subject to tax under this article.

12(2) Every partnership, estate or trust required to file a
13return under paragraph (1) shall also file with the department a
14true copy of the income tax return filed with the Federal
15Government at the time the return required under paragraph (1)
16is filed.

17(3) Every partnership, estate or trust required to file a
18return under paragraph (1) for any taxable year shall, on or
19before the day the return is filed, furnish to each partner or
20nominee for another person or to each beneficiary to whom the
21income or gains of the estate or trust is taxable, a copy of one
22or both of the following showing their share of income and any
23other information as may be required by the department:

24(i) The Resident Schedule of Shareholder/Partner/Beneficiary
25Pass Through Income, Loss and Credits (Schedule RK-1) form.

26(ii) The Nonresident Schedule of
27Shareholder/Partner/Beneficiary Pass Through Income, Loss and
28Credits (Schedule NRK-1) form.

29(4) Failure to file a timely return as required under
30paragraph (2) and failure to furnish a copy of the returns

1required under paragraph (3) shall result in a penalty of fifty
2dollars ($50) for each individual return or individual copy
3required.

4(d) The department may prescribe regulations requiring
5returns of information to be made and filed on or before
6February 28 of each year as to the payment or crediting in any
7calendar year of amounts of ten dollars ($10) or more to any
8taxpayer. Such returns may be required of any person, including
9lessees or mortgagors of real or personal property, fiduciaries,
10employers and all officers and employes of this Commonwealth, or
11of any municipal corporation or political subdivision of this
12Commonwealth having the control, receipt, custody, disposal or
13payment of interest, rents, salaries, wages, premiums,
14annuities, compensations, remunerations, emoluments or other
15fixed or determinable gains, profits or income, except interest
16coupons payable to bearer. A duplicate of the statement as to
17tax withheld on compensation required to be furnished by an
18employer to an employe, shall constitute the return of
19information required to be made under this section with respect
20to such compensation.

21(e) Any person who is required to make a form W-2G return to
22the Secretary of the Treasury of the United States in regard to
23taxable gambling or lottery winnings from sources within this
24Commonwealth shall file a copy of the form with the department
25by March 1 of each year or, if filed electronically, by March 31
26of each year.

27(f) The following apply:

28(1) Any person who:

29(i) makes payments of income from sources within this
30Commonwealth;

1(ii) makes payments of nonemploye compensation or payments
2under an oil and gas lease under subparagraph (i) to a resident
3or nonresident individual, an entity treated as a partnership
4for tax purposes or a single member limited liability company;
5and

6(iii) is required to make a form 1099-MISC return to the
7Secretary of the Treasury of the United States with respect to
8the payments shall file a copy of form 1099-MISC with the
9department and send a copy of form 1099-MISC to the payee by the
10Federal filing deadline each year.

11(2) If the payor is required to perform electronic filing
12for Pennsylvania employer withholding purposes, the form 1099-
13MISC shall be filed electronically with the department.

14(g) (1) Every estate, trust, Pennsylvania S Corporation or
15partnership, other than a publicly traded partnership, shall
16maintain at the end of the entity's taxable year an accurate
17list of partners, members, beneficiaries or shareholders. The
18list shall include the name, current address and tax
19identification number of all existing partners, members,
20beneficiaries or shareholders and of all partners, members,
21beneficiaries or shareholders, who were admitted or who withdrew
22during the taxable year, including the date of withdrawal and
23admittance.

24(2) If the entity under paragraph (1) does not maintain an
25accurate list as required, the tax, penalty and interest with
26respect to the entity shall be considered the tax, penalty and
27interest of the partnership, estate, trust or Pennsylvania S
28Corporation and of the general partner, tax matters partner,
29corporate officer or trustee.

30Section 10. Section 401(3)1 and 2(a)(17) of the act, amended

1September 9, 1971 (P.L.437, No.105), are amended, clause (3)1 is
2amended by adding a phrase, subclause 2(a) is amended by adding
3a paragraph, paragraphs (3)4(c)(1)(A) and 2(B) are amended by
4adding subparagraphs and the section is amended by adding
5clauses to read:

6Section 401. Definitions.--The following words, terms, and
7phrases, when used in this article, shall have the meaning
8ascribed to them in this section, except where the context
9clearly indicates a different meaning:

10* * *

11(3) "Taxable income." 1. * * *

12(t) (1) Except as provided in paragraph (2), (3) or (4) for
13taxable years beginning after December 31, 2014, and in addition
14to any authority the department has on the effective date of
15this paragraph to deny a deduction related to a fraudulent or
16sham transaction, no deduction shall be allowed for an
17intangible expense or cost, or an interest expense or cost,
18paid, accrued or incurred directly or indirectly in connection
19with one or more transactions with an affiliated entity. In
20calculating taxable income under this paragraph, when the
21taxpayer is engaged in one or more transactions with an
22affiliated entity that was subject to tax in this Commonwealth
23or another state or possession of the United States on a tax
24base that included the intangible expense or cost, or the
25interest expense or cost, paid, accrued or incurred by the
26taxpayer, the taxpayer shall receive a credit against tax due in
27this Commonwealth in an amount equal to the apportionment factor
28of the taxpayer in this Commonwealth multiplied by the greater
29of 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.

12. In case the entire business of any corporation, other
2than a corporation engaged in doing business as a regulated
3investment company as defined by the Internal Revenue Code of
41986, is not transacted within this Commonwealth, the tax
5imposed by this article shall be based upon such portion of the
6taxable income of such corporation for the fiscal or calendar
7year, as defined in subclause 1 hereof, and may be determined as
8follows:

9(a) Division of Income.

10* * *

11(16.1) Sales, other than sales under paragraphs (16) and
12(17), are in this State as follows:

13(A) The sale, lease, rental or other use of real property,
14if the real property is located in this State. If real property
15is located both in and outside this State, the sale is in this
16State based upon the percentage of total assessed value of the
17real property located in this State.

18(B) (I) The rental, lease or licensing of tangible personal
19property, if the customer first obtained possession of the
20tangible personal property in this State.

21(II) If the tangible personal property is subsequently taken
22out of this State, the taxpayer may use a reasonably determined
23estimate of usage in this State to determine the extent of sale
24in this State.

25(C) (I) The sale of service, if the service is delivered to
26a location in this State. If the service is delivered both to a
27location in and outside this State, the sale is in this State
28based upon the percentage of total value of the service
29delivered to a location in this State.

30(II) If the state or states of assignment under subparagraph

1(I) cannot be determined for a customer who is an individual
2that is not a sole proprietor, a service is deemed to be
3delivered at the customer's billing address.

4(III) If the state or states of assignment under
5subparagraph (I) cannot be determined for a customer, except for
6a customer under subparagraph (II), a service is deemed to be
7delivered at the location from which the services were ordered
8in the customer's regular course of operations. If the location
9from which the services were ordered in the customer's regular
10course of operations cannot be determined, a service is deemed
11to be delivered at the customer's billing address.

12(17) Sales, other than sales [of tangible personal property] 
13under paragraphs (16) and (16.1), are in this State if:

14(A) The income-producing activity is performed in this
15State; or

16(B) The income-producing activity is performed both in and
17outside this State and a greater proportion of the income-
18producing activity is performed in this State than in any other
19state, based on costs of performance.

20* * *

214. * * *

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

23(A) * * *

24(V) For taxable years beginning after December 31, 2013, the
25greater of twenty-five per cent of taxable income as determined
26under subclause 1 or, if applicable, subclause 2 or four million
27dollars ($4,000,000);

28(VI) For taxable years beginning after December 31, 2014,
29the greater of thirty per cent of taxable income as determined
30under subclause 1 or, if applicable, subclause 2 or five million

1dollars ($5,000,000); or

2* * *

3(2) * * *

4(B) The earliest net loss shall be carried over to the
5earliest taxable year to which it may be carried under this
6schedule. The total net loss deduction allowed in any taxable
7year shall not exceed:

8* * *

9(V) The greater of twenty-five per cent of taxable income as
10determined under subclause 1 or, if applicable, subclause 2 or
11four million dollars ($4,000,000) for taxable years beginning
12after December 31, 2013.

13(VI) The greater of thirty per cent of taxable income as
14determined under subclause 1 or, if applicable, subclause 2 or
15five million dollars ($5,000,000) for taxable years beginning
16after December 31, 2014.

17* * *

18(8) "Intangible expense or cost." Royalties, licenses or
19fees paid for the acquisition, use, maintenance, management,
20ownership, sale, exchange or other disposition of patents,
21patent applications, trade names, trademarks, service marks,
22copyrights, mask works or other similar expenses or costs.

23(9) "Interest expense or cost." A deduction allowed under
24section 163 of the Internal Revenue Code of 1986 (26 U.S.C. §
25163) to the extent that such deduction is directly related to an
26intangible expense or cost.

27(10) "Affiliated entity." A person with a relationship to 
28the taxpayer during all or any portion of the taxable year that 
29is any of the following:

30(i) a stockholder who is an individual, or a member of the 

1stockholder's family as set forth in section 318 of the Internal 
2Revenue Code of 1986 (26 U.S.C. § 318), if the stockholder and 
3the members of the stockholder's family own, directly, 
4indirectly, beneficially or constructively, in the aggregate, 
5more than fifty per cent of the value of the taxpayer's 
6outstanding stock;

7(ii) a stockholder, or a stockholder's partnership, limited 
8liability company, estate, trust or corporation, if the 
9stockholder and the stockholder's partnerships, limited 
10liability companies, estates, trusts and corporations own 
11directly, indirectly, beneficially or constructively, in the 
12aggregate, more than fifty per cent of the value of the 
13taxpayer's outstanding stock;

14(iii) a corporation, or a party related to the corporation 
15in a manner that would require an attribution of stock from the 
16corporation to the party or from the party to the corporation 
17under the attribution rules of the Internal Revenue Code of 
181986, if the taxpayer owns, directly, indirectly, beneficially 
19or constructively, more than fifty per cent of the value of the 
20corporation's outstanding stock. The attribution rules of 
21section 318 of the Internal Revenue Code of 1986 shall apply for 
22purposes of determining whether the ownership requirements of 
23this definition have been met;

24(iv) a component member as defined in section 1563(b) of the
25Internal Revenue Code of 1986 (26 U.S.C. § 1563(b)); or

26(v) a person to or from whom there is attribution of stock
27ownership in accordance with section 1563(e) of the Internal
28Revenue Code of 1986.

29(11) "Valid business purpose." A purpose, other than the
30avoidance or reduction of taxation, which alone or in

1combination with other purposes constitute the primary
2motivation for a business activity or transaction. A transaction
3done at arm's length terms shall be presumed to be directly
4related to a valid business purpose.

5Section 11. Section 402(b) of the act, amended June 29, 2002
6(P.L.559, No.89), is amended to read:

7Section 402. Imposition of Tax.--* * *

8(b) The annual rate of tax on corporate net income imposed
9by subsection (a) for taxable years beginning for the calendar
10year or fiscal year on or after the dates set forth shall be as
11follows:

12Taxable Year	Tax Rate
13January 1, 1995[, and 14each taxable year 15thereafter] to  16December 31, 2014	9.99%
17January 1, 2015, to 18December 31, 2015	9.89%
19January 1, 2016, to 20December 31, 2016	9.69%
21January 1, 2017, to 22December 31, 2017	9.49%
23January 1, 2018, to 24December 31, 2018	9.29%
25January 1, 2019, to 26December 31, 2019	8.96%
27January 1, 2020, to 28December 31, 2020	8.63%
29January 1, 2021, to 30December 31, 2021	8.3%
20130HB0440PN1608 -23-
1January 1, 2022, to 2December 31, 2022	7.97%
3January 1, 2023, to 4December 31, 2023	7.64%
5January 1, 2024, to 6December 31, 2024	7.31%
7January 1, 2025, and 8each taxable year 9thereafter	6.99%

10* * *

11Section 12. Section 403(d) of the act, amended October 18,
122006 (P.L.1149, No.119), is amended to read:

13Section 403. Reports and Payment of Tax.--* * *

14(d) If the officers of any corporation shall neglect, or
15refuse to make any report as herein required, or shall knowingly
16make any false report, [the following percentages of the amount
17of the tax shall be added by the department to the tax
18determined to be due on the first one thousand dollars ($1,000)
19of tax ten per cent, on the next four thousand dollars ($4,000)
20five per cent, and on everything in excess of five thousand
21dollars ($5,000) one per cent, no such] a penalty of five 
22hundred dollars ($500) plus an additional one per cent for every 
23dollar of tax determined to be due in excess of twenty-five 
24thousand dollars ($25,000) shall be added to the tax determined 
25to be due. No amounts added to the tax shall bear any interest
26whatsoever.

27* * *

28Section 12.1. The definitions of "document," "real estate"
29and "real estate company" in section 1101-C of the act, amended
30July 2, 1986 (P.L.318, No.77), are amended to read:

1Section 1101-C. Definitions.--The following words when used
2in this article shall have the meanings ascribed to them in this
3section:

4* * *

5"Document." Any deed, instrument or writing which conveys,
6transfers, devises, vests, confirms or evidences any transfer or
7devise of title to real estate in this Commonwealth, but does
8not include wills, mortgages, deeds of trust or other
9instruments of like character given as security for a debt and
10deeds of release thereof to the debtor, land contracts whereby
11the legal title does not pass to the grantee until the total
12consideration specified in the contract has been paid or any
13cancellation thereof unless the consideration is payable over a
14period of time exceeding thirty years or instruments which
15solely grant, vest or confirm a public utility easement.
16"Document" shall also include a declaration of acquisition
17required to be presented for recording under section 1102-C.5 of
18this article.

19* * *

20"Real estate."

21(1) Any lands, tenements or hereditaments [within this
22Commonwealth], including, without limitation, buildings,
23structures, fixtures, mines, minerals, oil, gas, quarries,
24spaces with or without upper or lower boundaries, trees and
25other improvements, immovables or interests which by custom,
26usage or law pass with a conveyance of land, but excluding
27permanently attached machinery and equipment in an industrial
28plant.

29(2) A condominium unit.

30(3) A tenant-stockholder's interest in a cooperative housing

1corporation, trust or association under a proprietary lease or
2occupancy agreement.

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

5(1) Is  primarily engaged in the business of holding,
6selling or leasing real estate ninety per cent or more of the
7ownership interest in which is held by thirty-five or fewer
8persons and which:

9[(1)] (i) derives sixty per cent or more of its annual gross
10receipts from the ownership or disposition of real estate; or

11[(2)] (ii) holds real estate, the value of which comprises
12[ninety] fifty per cent or more of the value of its entire
13tangible asset holdings exclusive of tangible assets which are
14freely transferable and actively traded on an established
15market.

16(2) Owns a direct or indirect interest in a real estate
17company. An indirect ownership interest is an interest in a
18corporation or association whose purpose is the ownership of a
19real estate company either by itself or as part of a tiered
20structure of corporations or associations.

21* * *

22Section 12.2. Section 1102-C of the act, amended July 2,
231986 (P.L.318, No.77), is amended to read:

24Section 1102-C. Imposition of Tax.--Every person who makes,
25executes, delivers, accepts or presents for recording any
26document or in whose behalf any document is made, executed,
27delivered, accepted or presented for recording, shall be subject
28to pay for and in respect to the transaction or any part
29thereof, or for or in respect of the vellum parchment or paper
30upon which such document is written or printed, a State tax at

1the rate of one per cent of the value of the real estate within 
2this Commonwealth represented by such document, which State tax
3shall be payable at the earlier of the time the document is
4presented for recording or within thirty days of acceptance of
5such document or within thirty days of becoming an acquired
6company.

7Section 12.3. Section 1102-C.5(a) of the act, amended July
82, 2012 (P.L.751, No.85), is amended to read:

9Section 1102-C.5. Acquired Company.--(a) A real estate
10company is an acquired company upon a change in the ownership
11interest in the company, however effected, if the change:

12(1) does not affect the continuity of the company; and

13(2) of itself or together with prior changes has the effect
14of transferring, directly or indirectly, ninety per cent or more
15of the total ownership interest in the company within a period
16of three years.

17(3) For the purposes of paragraph (2), a transfer occurs
18within a period of three years of another transfer or transfers
19if, during the period[:

20(i) the transferring party provides a legally binding
21commitment, enforceable at a future date, to execute the
22transfer;

23(ii) the terms of the transfer are fixed and not subject to
24negotiation; and

25(iii) the transferring party receives full consideration, in
26any form, in exchange for the transfer.], the transferring party 
27provides the transferee a legally binding commitment or option, 
28enforceable at a future date, to execute the transfer.

29* * *

30Section 12.4. Article XVIII-A of the act, added May 12, 1999

1(P.L.26, No.4), is repealed:

2[ARTICLE XVIII-A

3COAL WASTE REMOVAL AND ULTRACLEAN FUELS

4TAX CREDIT

5Section 1801-A. Short Title.--This article shall be known
6and may be cited as the "Coal Waste Removal and Ultraclean Fuels
7Act."

8Section 1802-A. Definitions.--The following words, terms and
9phrases, when used in this article, shall have the meanings
10ascribed to them in this section, except where the context
11clearly indicates a different meaning:

12"Department" means the Department of Revenue of the
13Commonwealth.

14"Developer" means the owner-operator of a facility, as
15defined in this section, or the operator of the facility that
16has sold the facility in new condition to a third party from
17whom that operator has simultaneously leased back the facility
18for a minimum period of twelve years.

19"Facility" includes all plant and equipment purchased or
20constructed by or on behalf of the developer which is used
21within this Commonwealth by the developer to produce one or more
22qualified fuels.

23"Internal Revenue Code" means the Internal Revenue Code of
241986 (Public Law 99-514, 26 U.S.C. § 1 et seq.).

25"Qualified fuels" means those fuels produced from
26nontraditional coal culm and silt feedstocks as defined in
27section 29(c) of the Internal Revenue Code of 1986 (Public Law
2899-514, 26 U.S.C. § 29(c)).

29"Qualifying property" means tangible personal property and
30other forms of tangible property which qualify for investment

1tax credit treatment and which meet all of the following
2requirements:

3(1) Be acquired through a purchase, as defined under section
4179(d)(2) of the Internal Revenue Code (26 U.S.C. § 179(d)(2)),
5or constructed by the developer for its own use.

6(2) Be depreciable under section 167 of the Internal Revenue
7Code (26 U.S.C. § 167).

8(3) Have a useful life of greater than or equal to four
9years.

10(4) Be located within this Commonwealth.

11(5) Be used by the developer in the production of qualified
12fuels.

13(6) Be acquired by purchase or constructed on or after
14January 1, 2000, and before January 1, 2013.

15(7) Not be the subject of any tax credit otherwise available
16to the developer under this act.

17"Tax credit base" means only the cost or other basis of
18qualifying property that is properly transferred to the
19facility's basis for depreciation for Federal income tax
20purposes between January 1, 2000, and December 31, 2012.

21Section 1803-A. Investment Tax Credits Program.--(a) A
22developer of a new facility for the production of one or more
23qualified fuels shall be allowed an investment tax credit
24against the taxes imposed under Articles II, IV and VI of this
25act. The amount of the credit shall be computed as a percentage
26applied to the cost or other basis for Federal income tax
27purposes of qualifying property.

28(b) (1) The investment tax credit shall be computed as
29fifteen per cent of the tax credit base.

30(2) The maximum investment tax credit available for

1application, whether claimed by one or more taxpayers, shall not
2exceed fifteen per cent of the capital cost of the facility.

3(3) Any amount of allowable investment tax credit not used
4in the tax year for which the credit was claimed can be carried
5forward by the claiming taxpayer to succeeding years until the
6full amount of allowable credit has been used.

7(c) (1) The developer, upon notice to the department as
8specified by the department, may sell or assign, in whole or in
9part, any investment tax credit afforded under this section to
10one or more taxpayers if no claim for allowance of such credit
11has been filed.

12(2) A taxpayer recipient by purchase or assignment of any
13portion of the developer's investment tax credit under paragraph
14(1) shall initially claim such credit, upon notice to the
15department of the derivative basis of the credit in compliance
16with procedures specified by the department, for the tax year in
17which the purchase or assignment is made, but in no event
18subsequent to the filing of an income tax return for the year
192012.

20(3) Any taxpayer who acquires any portion of the developer's
21investment tax credit by sale or assignment for value and
22without notice by the developer of any irregularity or
23invalidity shall not suffer any disallowance of the credit or
24the imposition of any adjustment or fraud penalty attributable
25to conduct by the developer.

26(d) (1) If prior to the expiration of any qualifying
27property's useful life, as used to calculate depreciation for
28Federal income tax purposes, the developer, upon mandatory
29notice to the department in compliance with procedures specified
30by the department, disposes of any qualifying property, in a

1transaction other than a sale-leaseback transaction, upon which
2the department has previously allowed an investment tax credit
3claimed by any taxpayer, a portion of all such credit shall be
4recaptured and added to the developer's tax liability for the
5tax year in which the qualifying property is disposed.

6(2) The portion of the investment tax credit previously
7allowed, which is subject to recapture from the developer, shall
8be equal to a fraction whose numerator is the number of years
9remaining to fully depreciate for Federal income tax purposes
10the qualifying property disposed and whose denominator is the
11total number of years over which the property otherwise would
12have been subject to depreciation by the developer.

13(3) In calculating the recapture percentage, the year of
14disposition of the qualifying property is considered a year of
15remaining depreciation.

16(e) The department shall verify the validity of any claim
17for allowance of any investment tax credit afforded under this
18section and, in the case of a fraudulent claim, may assess
19against the developer a penalty of one hundred and twenty-five
20per cent of the credit improperly claimed.

21(f) The tax credits authorized by this section shall not
22exceed eighteen million dollars ($18,000,000) in the aggregate
23during any year.

24Section 1804-A. Contract Required.--(a) In order for a
25developer to claim investment tax credits under this article,
26the developer must enter into a contract with the Commonwealth
27that provides as follows:

28(1) The term of the contract shall be twenty-five years,
29beginning with the first tax year in which the investment tax
30credits are claimed.

1(2) The developer shall make periodic payments to the
2Commonwealth, which payments may not exceed in the aggregate
3forty-six million eight hundred thousand dollars ($46,800,000)
4over the term of the contract.

5(3) The periodic payments shall occur every five years and
6each payment shall be nine million three hundred sixty thousand
7dollars ($9,360,000), except as provided in paragraphs (4), (5)
8and (6).

9(4) For the first five-year period, the amount specified in
10paragraph (3) shall be reduced by:

11(i) An amount equal to the business losses of the developer,
12if any, relating to the facility that are sustained in the first
13and second years of the contract, provided such amount does not
14exceed three million seven hundred forty-four thousand dollars
15($3,744,000) for both years.

16(ii) Allowable offsets identified in subsection (b),
17provided that such offsets do not exceed nine million three
18hundred sixty thousand dollars ($9,360,000).

19(5) For the remaining five-year periods, the amount
20specified in paragraph (3) shall be reduced by the amount of
21allowable offsets identified in subsection (b), provided that
22such offsets do not exceed nine million three hundred sixty
23thousand dollars ($9,360,000) during any five-year period.

24(6) To the extent the amount of allowable offsets during any
25five-year period exceeds nine million three hundred sixty
26thousand dollars ($9,360,000), the excess may be carried over
27and added to the allowable offsets taken in the following five-
28year period, provided that the excess is applied first.

29(b) For purposes of this section, "allowable offset"
30includes all of the following:

1(1) An amount equal to the corporate net income tax, capital
2stock and franchise tax and personal income tax related to the
3construction, ownership and operation of the facility.

4(2) An amount equal to all personal income tax withheld from
5the developer's employes.

6(3) An amount equal to all sales and use tax related to the
7operation and construction of the facility.

8(4) The amount paid by the developer of any new tax enacted
9by the Commonwealth following the effective date of this
10article.

11Section 1805-A. Requirements.--Tax credits authorized by
12this article shall not be granted unless the developer has
13obtained an investment tax credit from the Federal Government or
14an investment by a person other than an agency or
15instrumentality of the Commonwealth, or any combination thereof,
16in an amount equal to or greater than the tax credit granted by
17this article.]

18Section 13. Section 2112 of the act, amended or added August
194, 1991 (P.L.97, No.22), June 16, 1994 (P.L.279, No.48) and June
2030, 1995 (P.L.139, No.21), is repealed:

21[Section 2112. Exemption for Poverty.--(a) The General
22Assembly, in recognition of the powers contained in section 2(b)
23(ii) of Article VIII of the Constitution of Pennsylvania which
24provides therein for the establishing as a class or classes of
25subjects of taxation the property or privileges of persons who
26because of poverty are determined to be in need of special tax
27provisions or tax exemptions, hereby declares as its legislative
28intent and purpose to implement such powers under such
29Constitutional provision by establishing a tax exemption as
30hereinafter provided in this section.

1(b) The General Assembly, having determined that there are
2persons within this Commonwealth the value of whose incomes and
3estates are such that the imposition of an inheritance tax under
4this article would cause them hardship and economic burden and
5having further determined that poverty is a relative concept
6inextricably joined with the ability to maintain assets
7inherited upon the death of a spouse, deems it to be a matter of
8public policy to provide an exemption from taxation for
9transfers of property to or for the use of that class of persons
10hereinafter designated in order to relieve their hardship and
11economic burden.

12(c) Any claim for a tax exemption hereunder shall be
13determined in accordance with the following:

14(1) The transferee is the spouse of the decedent at the date
15of death of the decedent.

16(2) The value of the estate of the decedent does not exceed
17two hundred thousand dollars ($200,000) after reduction for
18actual liabilities of the decedent as evidenced by a written
19agreement.

20(3) The average of the joint exemption income of the
21decedent and the transferee for the three taxable years, as
22defined in Article III, immediately preceding the date of death
23of the decedent does not exceed forty thousand dollars
24($40,000).

25(d) Notwithstanding any other provision of this article,
26transfers of property to or for the use of any eligible
27transferee who meets the standards of eligibility established by
28this section as the test for poverty shall be deemed a separate
29class subject to taxation and, as such, shall be entitled to the
30benefit of the following exemptions from taxation on transfers

1of property as a credit against the tax imposed by this article:

2(1) For decedents dying on or after January 1, 1992, and
3before January 1, 1993, the lesser of:

4(i) Two per cent of the taxable value of the property of the
5decedent transferred to or for the use of the transferee.

6(ii) Two per cent of one hundred thousand dollars ($100,000)
7of the taxable value of the property of the decedent transferred
8to or for the use of the transferee.

9(2) For decedents dying on or after January 1, 1993, and
10before January 1, 1994, the lesser of:

11(i) Four per cent of the taxable value of the property of
12the decedent transferred to or for the use of the transferee.

13(ii) Four per cent of one hundred thousand dollars
14($100,000) of the taxable value of the property of the decedent
15transferred to or for the use of the transferee.

16(3) For decedents dying on or after January 1, 1994, and
17before January 1, 1995, the lesser of:

18(i) Six per cent of the taxable value of the property of the
19decedent transferred to or for the use of the transferee.

20(ii) Six per cent of one hundred thousand dollars ($100,000)
21of the taxable value of the property of the decedent transferred
22to or for the use of the transferee.

23(e) For nonresident decedents, the credit provided in this
24section shall bear the same ratio as that of the decedent's
25estate in this Commonwealth bears to the decedent's total estate
26without regard to situs.

27(f) The credit provided in this section shall not be greater
28than the tax imposed.

29(g) This section shall not apply to the estates of decedents
30dying on or after January 1, 1995.]

1Section 14. The following shall apply:

2(1) A tax credit may not be granted under section 206(b)
3of the act after June 30, 2013.

4(2) The amendment or addition of the following
5provisions of the act shall apply to tax years beginning
6after December 31, 2013:

7(i) Section 301(d.2), <-(n.1), (n.2), (o.3) <-(n.2), 
8(o.4) and (t).

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

10(iii) Section 306.

11(iv) Section 306.1.

12(v) Section 306.2.

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

14(vii) Section 314(a).

15(viii) Section 324.

16(ix) Section 330.1.

17(x) Section 335.

18(xi) Section 401(3)1(t), 2(a)(16.1) and (17) and
19(8), (9), (10) and (11) and 4(c)(1)(A)(V) and (VI) and
202(B)(V) and (VI).

21(xii) Section 402(b).

22(xiii) Section 403(d).

23(3) The addition of section 303(a)(3)(viii) shall apply
24to tax years beginning after December 31, 2015.

25Section 15. This act shall take effect as follows:

26(1) The following shall take effect January 1, 2014, or
27immediately, whichever is later:

28(i) The amendment of the definitions of "document," 
29"real estate" and "real estate company" in section 1101-C 
30of the act.

1(ii) The amendment of sections 1102-C and 
21102-C.5(a) of the act.

3(2) The remainder of this act shall take effect
4immediately.