AN ACT

 

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

1chapter to read:

2CHAPTER 6

3OPTIONAL PROPERTY TAX ELIMINATION

4Section 601. Scope of chapter.

5This chapter shall authorize a school district to levy,
6assess and collect an elimination tax as a means of reducing or
7eliminating property taxation.

8Section 602. Definitions.

9The following words and phrases when used in this chapter
10shall have the meanings given to them in this section unless the
11context clearly indicates otherwise:

12"Board of school directors." A board of school directors of
13a school district of the first class A, second class, third
14class or fourth class.

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

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

17"Elimination tax." Any of the following:

18(1) The tax levied by a school district on earned income
19and net profits under this chapter.

20(2) A mercantile tax imposed under section 613.

21(3) A business privilege tax imposed under section 613.

22"Index." The term as defined in section 302 of the Taxpayer
23Relief Act.

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

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

26"School district." A school district of the first class A,
27second class, third class or fourth class.

28"Tax Reform Code." The act of March 4, 1971 (P.L.6, No.2),
29known as the Tax Reform Code of 1971.

30"Taxpayer Relief Act." The act of June 27, 2006 (1st

1Sp.Sess., P.L.1873, No.1), known as the Taxpayer Relief Act.

2Section 603. Preemption.

3No act of the General Assembly may vacate or preempt any
4resolution passed or adopted under the authority of this
5chapter, or any other act, providing authority for the
6imposition of an elimination tax by a school district, unless
7the act of the General Assembly expressly vacates or preempts
8the authority to pass or adopt resolutions.

9Section 604. Real property tax replacement.

10A school district that levies a tax on real property may
11reduce or eliminate the revenues provided by the real property
12tax by imposing the elimination tax as provided under this
13chapter.

14Section 605. Resolution required.

15The board of school directors may impose or increase the
16maximum limits of the elimination tax by adopting a resolution.
17Prior to approving the resolution, the board of school directors
18shall:

19(1) Give public notice of its intent to adopt the
20resolution in the manner provided under section 306.

21(2) Conduct at least one public hearing regarding
22reducing or eliminating the tax on real property and imposing
23or increasing the maximum rate of the elimination tax.

24Section 606. Use of funds.

25All funds generated from an elimination tax shall be used to
26directly reduce or eliminate school district real property tax
27millage rates.

28Section 607. Elimination tax rate limits.

29(a) Limit.--If a school district has reduced property tax
30millage rates to zero, a board of school directors may not

1increase the elimination tax for the support of public schools
2by more than the index unless there is compliance with section
3333 of the Taxpayer Relief Act.

4(b) Maximum rate.--The maximum rate of the elimination tax
5calculated under this chapter shall not be subject to the limits
6on the earned income tax specified under section 311(3).

<-7(c) Limit.--The rate of the mercantile or business privilege
8tax imposed under section 613 shall not generate revenues in
9excess of 50% of the total elimination tax revenues generated
10under this chapter.

11Section 608. Exemption.

12A school district that imposes an elimination tax may exempt
13from the payment of that tax any person whose total income from
14all sources is less than $12,000.

15Section 609. Collections.

16(a) Earned income and net profits.--An elimination tax on
17earned income and net profits shall be subject to Chapters 5 and
187.

19(b) Mercantile tax or a business privilege tax.--A
20mercantile tax or a business privilege tax imposed under this
21chapter shall be subject to section 613.

22Section 610. Credits.

23(a) Credit.--Except as provided under subsection (b), the
24provisions of section 317 shall be applied by a board of school
25directors to determine any credits applicable to an elimination
26tax.

27(b) Limitation.--Payment of a tax on earned income and net
28profits to any state other than Pennsylvania or to any political
29subdivision located outside the boundaries of this Commonwealth
30by a resident of a school district located in this Commonwealth

1shall not be credited to and allowed as a deduction from the
2liability of the person for an elimination tax imposed by the
3school district of residence.

4Section 611. Real property tax prohibited.

5(a) Prohibition.--For the first fiscal year beginning after
6the adoption of a resolution that eliminates real property tax
7millage rates and each fiscal year thereafter, a school district
8shall be prohibited from levying, assessing or collecting a real
9property tax.

10(b) Applicability.--This section shall not apply to the
11collection of delinquent real property taxes.

12Section 612. Applicability of personal income tax.

13Nothing under this chapter shall be construed to authorize a
14school district to levy, assess or collect a personal income
15tax.

16Section 613. Mercantile or business privilege tax.

17(a) Wholesale dealers.--Each school district shall have the
18power and may levy, assess and collect a tax on each dollar of
19the whole volume of business transacted by wholesale dealers in
20goods, wares and merchandise.

21(b) Retail sales.--Each school district shall have the power
22and may levy, assess and collect a tax on each dollar of sales
23by:

24(1) Retail dealers in goods, wares and merchandise,
25including proprietors of restaurants or other places where
26food, drink and refreshments are served.

27(2) Providers of services.

28(c) Transactions partially free of tax.--No tax shall be
29levied on the dollar volume of business transacted by wholesale
30and retail dealers derived from the resale of goods, wares and

1merchandise, taken by any dealer as a trade-in or as part
2payment for other goods, wares and merchandise, except to the
3extent that the resale price exceeds the trade-in allowance.

4Section 614. Exclusions from tax.

5A tax under section 613 may not be levied, assessed or
6collected on:

7(1) The gross receipts from utility service of any
8person or company whose rates and services are fixed and
9regulated by the Pennsylvania Public Utility Commission, on
10any public utility services rendered by the person or
11company, on any privilege or transaction involving the
12rendering of the public utility service or on any Federal
13Energy Regulation Commission-approved qualifying facility.

14(2) Any of the following:

15(i) Goods and articles manufactured in the school
16district.

17(ii) The by-products of manufacture.

18(iii) Minerals, timber, natural resources and farm
19products produced in the school district.

20(iv) The preparation or processing of items under
21subparagraph (iii) for use or market.

22(v) Any privilege, act or transaction related to the
23business of manufacturing, the production, preparation or
24processing of minerals, timber and natural resources or
25farm products, by manufacturers, by producers and by
26farmers with respect to the goods, articles and products
27of their own manufacture, production or growth.

28(vi) Any privilege, act or transaction relating to
29the business of processing by-products of manufacture.

30(vii) The transportation, loading, unloading or

1dumping or storage of goods, articles, products or by-
2products under this paragraph, except that school
3districts may levy, assess and collect taxes on a person
4using municipal services and the personal income of
5natural persons engaged in these activities whether doing
6business as an individual proprietorship or as members of
7partnerships or other associations.

8(3) Gross receipts or part of gross receipts which are:

9(i) Discounts allowed to purchasers as cash
10discounts for prompt payment of their bills.

11(ii) Charges advanced by a seller for freight,
12delivery or other transportation for the purchaser in
13accordance with the terms of a contract of sale.

14(iii) Received upon the sale of an article of
15personal property which was acquired by the seller as a
16trade-in to the extent that the gross receipts in the
17sale of the article taken in trade does not exceed the
18amount of trade-in allowance made in acquiring the
19article.

20(iv) Refunds, credits or allowances given to a
21purchaser on account of defects in goods sold or
22merchandise returned.

23(v) Pennsylvania sales tax and any sales tax, use
24tax and occupancy tax imposed under law.

25(vi) Based on the value of exchanges or transfers
26between one seller and another seller who transfers
27property with the understanding that property of an
28identical description will be returned at a subsequent
29date, except that if sellers engaged in similar lines of
30business exchange property and one of them makes payment

1to the other in addition to the property exchanged, the
2additional payment received may be included in the gross
3receipts of the seller receiving such additional cash
4payments.

5(vii) Receipts of sellers from sales to other
6sellers in the same line where the seller transfers the
7title or possession at the same price for which the
8seller acquired the merchandise.

9(viii) Transfers between one department, branch or
10division of a corporation or other business entity of
11goods, wares and merchandise to another department,
12branch or division of the same corporation or business
13entity and which are recorded on the books to reflect
14such interdepartmental transactions.

15(ix) Transfers attributable to activities occurring
16outside the taxing authority. Gross receipts shall be
17attributed to the jurisdiction in which the activities
18generating the receipts occur.

19(4) The gross receipts of:

20(i) Any bank, bank and trust company, private bank,
21savings bank or trust company, as defined in the act of
22November 30, 1965 (P.L.847, No.356), known as the Banking
23Code of 1965.

24(ii) Any other institution or entity subject to the
25supervision of the Department of Banking under section
26201 of the act of May 15, 1933 (P.L.565, No.111), known
27as the Department of Banking Code.

28(iii) Any national bank.

29(iv) Any similar institution or entity established
30pursuant to Federal law or the law of any state.

1(5) The gross receipts of any distributor or importing
2distributor of malt or brewed beverages subject to licensure
3under the act of April 12, 1951 (P.L.90, No.21), known as the
4Liquor Code.

5Section 2. This act shall take effect in 60 days.

 

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