1Amending the act of December 31, 1965 (P.L.1257, No.511),
2entitled "An act empowering cities of the second class,
3cities of the second class A, cities of the third class,
4boroughs, towns, townships of the first class, townships of
5the second class, school districts of the second class,
6school districts of the third class and school districts of
7the fourth class including independent school districts, to
8levy, assess, collect or to provide for the levying,
9assessment and collection of certain taxes subject to maximum
10limitations for general revenue purposes; authorizing the
11establishment of bureaus and the appointment and compensation
12of officers, agencies and employes to assess and collect such
13taxes; providing for joint collection of certain taxes,
14prescribing certain definitions and other provisions for
15taxes levied and assessed upon earned income, providing for
16annual audits and for collection of delinquent taxes, and
17permitting and requiring penalties to be imposed and
18enforced, including penalties for disclosure of confidential
19information, providing an appeal from the ordinance or
20resolution levying such taxes to the court of quarter
21sessions and to the Supreme Court and Superior Court,"
22providing for optional property tax elimination.

23The General Assembly of the Commonwealth of Pennsylvania
24hereby enacts as follows:

25Section 1. The act of December 31, 1965 (P.L.1257, No.511),
26known as The Local Tax Enabling Act, is amended by adding a
27chapter to read:

1CHAPTER 6

2OPTIONAL PROPERTY TAX ELIMINATION

3Section 601. Scope of chapter.

4This chapter shall authorize a school district to levy,
5assess and collect an elimination tax as a means of reducing or
6eliminating property taxation.

7Section 602. Definitions.

8The following words and phrases when used in this chapter
9shall have the meanings given to them in this section unless the
10context clearly indicates otherwise:

11"Board of school directors." A board of school directors of
12a school district of the first class A, second class, third
13class or fourth class.

14"Domicile." The term as defined in section 501.

15"Earned income." The term as defined in section 501.

16"Elimination tax." Any of the following:

17(1) The tax levied by a school district on earned income
18and net profits under this chapter.

19(2) A mercantile tax imposed under section 613.

20(3) A business privilege tax imposed under section 613.

21"Index." The term as defined in section 302 of the Taxpayer
22Relief Act.

23"Net profits." The term as defined in section 501.

24"Resident." The term as defined in section 501.

25"School district." A school district of the first class A,
26second class, third class or fourth class.

27"Tax Reform Code." The act of March 4, 1971 (P.L.6, No.2),
28known as the Tax Reform Code of 1971.

29"Taxpayer Relief Act." The act of June 27, 2006 (1st
30Sp.Sess., P.L.1873, No.1), known as the Taxpayer Relief Act.

1Section 603. Preemption.

2No act of the General Assembly may vacate or preempt any
3resolution passed or adopted under the authority of this
4chapter, or any other act, providing authority for the
5imposition of an elimination tax by a school district, unless
6the act of the General Assembly expressly vacates or preempts
7the authority to pass or adopt resolutions.

8Section 604. Real property tax replacement.

9A school district that levies a tax on real property may
10reduce or eliminate the revenues provided by the real property
11tax by imposing the elimination tax as provided under this
12chapter.

13Section 605. Resolution required.

14The board of school directors may impose or increase the
15maximum limits of the elimination tax by adopting a resolution.
16Prior to approving the resolution, the board of school directors
17shall:

18(1) Give public notice of its intent to adopt the
19resolution in the manner provided under section 306.

20(2) Conduct at least one public hearing regarding
21reducing or eliminating the tax on real property and imposing
22or increasing the maximum rate of the elimination tax.

23Section 606. Use of funds.

24All funds generated from an elimination tax shall be used to
25directly reduce or eliminate school district real property tax
26millage rates.

27Section 607. Elimination tax rate limits.

28(a) Limit.--If a school district has reduced property tax
29millage rates to zero, a board of school directors may not
30increase the elimination tax for the support of public schools

1by more than the index unless there is compliance with section
2333 of the Taxpayer Relief Act.

3(b) Maximum rate.--The maximum rate of the elimination tax
4calculated under this chapter shall not be subject to the limits
5on the earned income tax specified under section 311(3).

6Section 608. Exemption.

7A school district that imposes an elimination tax may exempt
8from the payment of that tax any person whose total income from
9all sources is less than $12,000.

10Section 609. Collections.

11(a) Earned income and net profits.--An elimination tax on
12earned income and net profits shall be subject to Chapters 5 and
137.

14(b) Mercantile tax or a business privilege tax.--A
15mercantile tax or a business privilege tax imposed under this
16chapter shall be subject to section 613.

17Section 610. Credits.

18(a) Credit.--Except as provided under subsection (b), the
19provisions of section 317 shall be applied by a board of school
20directors to determine any credits applicable to an elimination
21tax.

22(b) Limitation.--Payment of a tax on earned income and net
23profits to any state other than Pennsylvania or to any political
24subdivision located outside the boundaries of this Commonwealth
25by a resident of a school district located in this Commonwealth
26shall not be credited to and allowed as a deduction from the
27liability of the person for an elimination tax imposed by the
28school district of residence.

29Section 611. Real property tax prohibited.

30(a) Prohibition.--For the first fiscal year beginning after

1the adoption of a resolution that eliminates real property tax
2millage rates and each fiscal year thereafter, a school district
3shall be prohibited from levying, assessing or collecting a real
4property tax.

5(b) Applicability.--This section shall not apply to the
6collection of delinquent real property taxes.

7Section 612. Applicability of personal income tax.

8Nothing under this chapter shall be construed to authorize a
9school district to levy, assess or collect a personal income
10tax.

11Section 613. Mercantile or business privilege tax.

12(a) Wholesale dealers.--Each school district shall have the
13power and may levy, assess and collect a tax on each dollar of
14the whole volume of business transacted by wholesale dealers in
15goods, wares and merchandise.

16(b) Retail sales.--Each school district shall have the power
17and may levy, assess and collect a tax on each dollar of sales
18by:

19(1) Retail dealers in goods, wares and merchandise,
20including proprietors of restaurants or other places where
21food, drink and refreshments are served.

22(2) Providers of services.

23(c) Transactions partially free of tax.--No tax shall be
24levied on the dollar volume of business transacted by wholesale
25and retail dealers derived from the resale of goods, wares and
26merchandise, taken by any dealer as a trade-in or as part
27payment for other goods, wares and merchandise, except to the
28extent that the resale price exceeds the trade-in allowance.

29Section 614. Exclusions from tax.

30A tax under section 613 may not be levied, assessed or

1collected on:

2(1) The gross receipts from utility service of any
3person or company whose rates and services are fixed and
4regulated by the Pennsylvania Public Utility Commission, on
5any public utility services rendered by the person or
6company, on any privilege or transaction involving the
7rendering of the public utility service or on any Federal
8Energy Regulation Commission-approved qualifying facility.

9(2) Any of the following:

10(i) Goods and articles manufactured in the school
11district.

12(ii) The by-products of manufacture.

13(iii) Minerals, timber, natural resources and farm
14products produced in the school district.

15(iv) The preparation or processing of items under
16subparagraph (iii) for use or market.

17(v) Any privilege, act or transaction related to the
18business of manufacturing, the production, preparation or
19processing of minerals, timber and natural resources or
20farm products, by manufacturers, by producers and by
21farmers with respect to the goods, articles and products
22of their own manufacture, production or growth.

23(vi) Any privilege, act or transaction relating to
24the business of processing by-products of manufacture.

25(vii) The transportation, loading, unloading or
26dumping or storage of goods, articles, products or by-
27products under this paragraph, except that school
28districts may levy, assess and collect taxes on a person
29using municipal services and the personal income of
30natural persons engaged in these activities whether doing

1business as an individual proprietorship or as members of
2partnerships or other associations.

3(3) Gross receipts or part of gross receipts which are:

4(i) Discounts allowed to purchasers as cash
5discounts for prompt payment of their bills.

6(ii) Charges advanced by a seller for freight,
7delivery or other transportation for the purchaser in
8accordance with the terms of a contract of sale.

9(iii) Received upon the sale of an article of
10personal property which was acquired by the seller as a
11trade-in to the extent that the gross receipts in the
12sale of the article taken in trade does not exceed the
13amount of trade-in allowance made in acquiring the
14article.

15(iv) Refunds, credits or allowances given to a
16purchaser on account of defects in goods sold or
17merchandise returned.

18(v) Pennsylvania sales tax and any sales tax, use
19tax and occupancy tax imposed under law.

20(vi) Based on the value of exchanges or transfers
21between one seller and another seller who transfers
22property with the understanding that property of an
23identical description will be returned at a subsequent
24date, except that if sellers engaged in similar lines of
25business exchange property and one of them makes payment
26to the other in addition to the property exchanged, the
27additional payment received may be included in the gross
28receipts of the seller receiving such additional cash
29payments.

30(vii) Receipts of sellers from sales to other

1sellers in the same line where the seller transfers the
2title or possession at the same price for which the
3seller acquired the merchandise.

4(viii) Transfers between one department, branch or
5division of a corporation or other business entity of
6goods, wares and merchandise to another department,
7branch or division of the same corporation or business
8entity and which are recorded on the books to reflect
9such interdepartmental transactions.

10(ix) Transfers attributable to activities occurring
11outside the taxing authority. Gross receipts shall be
12attributed to the jurisdiction in which the activities
13generating the receipts occur.

14(4) The gross receipts of:

15(i) Any bank, bank and trust company, private bank,
16savings bank or trust company, as defined in the act of
17November 30, 1965 (P.L.847, No.356), known as the Banking
18Code of 1965.

19(ii) Any other institution or entity subject to the
20supervision of the Department of Banking under section
21201 of the act of May 15, 1933 (P.L.565, No.111), known
22as the Department of Banking Code.

23(iii) Any national bank.

24(iv) Any similar institution or entity established
25pursuant to Federal law or the law of any state.

26(5) The gross receipts of any distributor or importing
27distributor of malt or brewed beverages subject to licensure
28under the act of April 12, 1951 (P.L.90, No.21), known as the
29Liquor Code.

30Section 2. This act shall take effect in 60 days.