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 tax, further providing
11for definitions, for imposition, for reports and payment and
12for consolidated reports; and, in general provisions, further
13providing for underpayment of estimated tax.

14The General Assembly of the Commonwealth of Pennsylvania
15hereby enacts as follows:

16Section 1. Section 401(3)1(a) and (b) and 2(a) and (5) of
17the act of March 4, 1971 (P.L.6, No.2), known as the Tax Reform
18Code of 1971, amended or added December 23, 1983 (P.L.370, 
19No.90), July 1, 1985 (P.L.78, No.29), August 4, 1991 (P.L.97, 
20No.22), May 12, 1999 (P.L.26, No.4), June 22, 2001 (P.L.353, 
21No.23), June 29, 2002 (P.L.559, No.89), October 9, 2009 
22(P.L.451, No.48) and July 2, 2012 (P.L.751, No.85) are amended,
23clause (3)2 is amended by adding a phrase and the section is

1amended by adding clauses to read:

2Section 401. Definitions.--The following words, terms, and
3phrases, when used in this article, shall have the meaning
4ascribed to them in this section, except where the context
5clearly indicates a different meaning:

6* * *

7(3) "Taxable income." 1. (a) In case the entire business
8of the corporation is transacted within this Commonwealth, for
9any taxable year which begins on or after January 1, 1971,
10taxable income for the calendar year or fiscal year as returned
11to and ascertained by the Federal Government, or in the case of
12a corporation participating in the filing of consolidated
13returns to the Federal Government or that is not required to 
14file a return with the Federal Government, the taxable income
15which would have been returned to and ascertained by the Federal
16Government if separate returns had been made to the Federal
17Government for the current and prior taxable years, subject,
18however, to any correction thereof, for fraud, evasion, or error
19as finally ascertained by the Federal Government.

20(b) Additional deductions shall be allowed from taxable
21income on account of any dividends received from any other
22corporation but only to the extent that such dividends are
23included in taxable income as returned to and ascertained by the
24Federal Government. For tax years beginning on or after January
251, 1991, additional deductions shall only be allowed for amounts
26included, under section 78 of the Internal Revenue Code of 1986
27(Public Law 99-514, 26 U.S.C. § 78), in taxable income returned
28to and ascertained by the Federal Government and for the amount
29of any dividends received from a foreign corporation included in
30taxable income to the extent such dividends would be deductible

1in arriving at Federal taxable income if received from a
2domestic corporation. For taxable years beginning on or after 
3January 1, 2012, if not otherwise allowed as a deduction, an 
4additional deduction is allowed for all dividends paid by one to 
5another of the included corporations of a unitary business to 
6the extent those dividends are included in business income of a 
7corporation that is required to determine its business income 
8pursuant to paragraph (1) of phrase (e) of subclause (2).

9* * *

102. In case the entire business of any corporation, other
11than a corporation engaged in doing business as a regulated
12investment company as defined by the Internal Revenue Code of
131986, is not transacted within this Commonwealth, the tax
14imposed by this article shall be based upon such portion of the
15taxable income of such corporation for the fiscal or calendar
16year, as defined in subclause 1 hereof, and may be determined as
17follows:

18(a) Division of Income.

19(1) As used in this definition, unless the context otherwise
20requires:

21(A) "Business income" means income arising from transactions
22and activity in the regular course of the taxpayer's trade or
23business and includes income from tangible and intangible
24property if either the acquisition, the management or the
25disposition of the property constitutes an integral part of the
26taxpayer's regular trade or business operations. The term
27includes all income which is apportionable under the
28Constitution of the United States.

29(B) "Commercial domicile" means the principal place from
30which the trade or business of the taxpayer is directed or

1managed.

2(C) "Compensation" means wages, salaries, commissions and
3any other form of remuneration paid to employes for personal
4services.

5(D) "Nonbusiness income" means all income other than
6business income. The term does not include income which is
7apportionable under the Constitution of the United States.

8(E) "Sales" means all gross receipts of the taxpayer not
9allocated under this definition other than dividends received,
10interest on United States, state or political subdivision
11obligations and gross receipts heretofore or hereafter received
12from the sale, redemption, maturity or exchange of securities,
13except those held by the taxpayer primarily for sale to
14customers in the ordinary course of its trade or business.

15(F) "State" means any state of the United States, the
16District of Columbia, the Commonwealth of Puerto Rico, any
17territory or possession of the United States, and any foreign
18country or political subdivision thereof.

19(G) "This state" means the Commonwealth of Pennsylvania or,
20in the case of application of this definition to the
21apportionment and allocation of income for local tax purposes,
22the subdivision or local taxing district in which the relevant
23tax return is filed.

24(2) Any taxpayer having income from business activity which
25is taxable both within and without this State other than
26activity as a corporation whose allocation and apportionment of
27income is specifically provided for in section 401(3)2(b)(c) and
28(d) shall allocate and apportion taxable income as provided in
29this definition.

30(3) For purposes of allocation and apportionment of income

1under this definition, a taxpayer is taxable in another state if
2in that state the taxpayer is subject to a net income tax, a
3franchise tax measured by net income, a franchise tax for the
4privilege of doing business, or a corporate stock tax or if that
5state has jurisdiction to subject the taxpayer to a net income
6tax regardless of whether, in fact, the state does or does not.

7(4) Rents and royalties from real or tangible personal
8property, gains, interest, patent or copyright royalties, to the
9extent that they constitute nonbusiness income, shall be
10allocated as provided in paragraphs (5) through (8).

11(5) (A) Net rents and royalties from real property located
12in this State are allocable to this State.

13(B) Net rents and royalties from tangible personal property
14are allocable to this State if and to the extent that the
15property is utilized in this State, or in their entirety if the
16taxpayer's commercial domicile is in this State and the taxpayer
17is not organized under the laws of or taxable in the state in
18which the property is utilized.

19(C) The extent of utilization of tangible personal property
20in a state is determined by multiplying the rents and royalties
21by a fraction, the numerator of which is the number of days of
22physical location of the property in the state during the rental
23or royalty period in the taxable year and the denominator of
24which is the number of days of physical location of the property
25everywhere during all rental or royalty periods in the taxable
26year. If the physical location of the property during the rental
27or royalty period is unknown or unascertainable by the taxpayer,
28tangible personal property is utilized in the state in which the
29property was located at the time the rental or royalty payer
30obtained possession.

1(6) (A) Gains and losses from sales or other disposition of
2real property located in this State are allocable to this State.

3(B) Gains and losses from sales or other disposition of
4tangible personal property are allocable to this State if the
5property had a situs in this State at the time of the sale, or
6the taxpayer's commercial domicile is in this State and the
7taxpayer is not taxable in the state in which the property had a
8situs.

9(C) Gains and losses from sales or other disposition of
10intangible personal property are allocable to this State if the
11taxpayer's commercial domicile is in this State.

12(7) Interest is allocable to this State if the taxpayer's
13commercial domicile is in this State.

14(8) (A) Patent and copyright royalties are allocable to
15this State if and to the extent that the patent or copyright is
16utilized by the payer in this State, or if and to the extent
17that the patent copyright is utilized by the payer in a state in
18which the taxpayer is not taxable and the taxpayer's commercial
19domicile is in this State.

20(B) A patent is utilized in a state to the extent that it is
21employed in production, fabrication, manufacturing, or other
22processing in the state or to the extent that a patented product
23is produced in the state. If the basis of receipts from patent
24royalties does not permit allocation to states or if the
25accounting procedures do not reflect states of utilization, the
26patent is utilized in the state in which the taxpayer's
27commercial domicile is located.

28(C) A copyright is utilized in a state to the extent that
29printing or other publication originates in the state. If the
30basis of receipts from copyright royalties does not permit

1allocation to states or if the accounting procedures do not
2reflect states of utilization, the copyright is utilized in the
3state in which the taxpayer's commercial domicile is located.

4(9) (A) Except as provided in subparagraph (B):

5(i) For taxable years beginning before January 1, 2007, all
6business income shall be apportioned to this State by
7multiplying the income by a fraction, the numerator of which is
8the property factor plus the payroll factor plus three times the
9sales factor and the denominator of which is five.

10(ii) For taxable years beginning after December 31, 2006,
11all business income shall be apportioned to this State by
12multiplying the income by a fraction, the numerator of which is
13the sum of fifteen times the property factor, fifteen times the
14payroll factor and seventy times the sales factor and the
15denominator of which is one hundred.

16(iii) For taxable years beginning after December 31, 2008,
17all business income shall be apportioned to this State by
18multiplying the income by a fraction, the numerator of which is
19the sum of eight and a half times the property factor, eight and
20a half times the payroll factor and eighty-three times the sales
21factor and the denominator of which is one hundred.

22(iv) For taxable years beginning after December 31, 2009,
23all business income shall be apportioned to this State by
24multiplying the income by a fraction, the numerator of which is
25the sum of five times the property factor, five times the
26payroll factor and ninety times the sales factor and the
27denominator of which is one hundred.

28(v) For taxable years beginning after December 31, 2012, all
29business income shall be apportioned to this State by
30multiplying the income by the sales factor.

1(B) For purposes of apportionment of the capital stock -
2franchise tax as provided in section 602 of Article VI of this
3act, the apportionment fraction shall be the property factor
4plus the payroll factor plus the sales factor as the numerator,
5and the denominator shall be three.

6(10) The property factor is a fraction, the numerator of
7which is the average value of the taxpayer's real and tangible
8personal property owned or rented and used in this State during
9the tax period and the denominator of which is the average value
10of all the taxpayer's real and tangible personal property owned
11or rented and used during the tax period but shall not include
12the security interest of any corporation as seller or lessor in
13personal property sold or leased under a conditional sale,
14bailment lease, chattel mortgage or other contract providing for
15the retention of a lien or title as security for the sales price
16of the property.

17(11) Property owned by the taxpayer is valued at its
18original cost. Property rented by the taxpayer is valued at
19eight times the net annual rental rate. Net annual rental rate
20is the annual rental rate paid by the taxpayer less any annual
21rental rate received by the taxpayer from subrentals.

22(12) The average value of property shall be determined by
23averaging the values at the beginning and ending of the tax
24period but the tax administrator may require the averaging of
25monthly values during the tax period if reasonably required to
26reflect properly the average value of the taxpayer's property.

27(13) The payroll factor is a fraction, the numerator of
28which is the total amount paid in this State during the tax
29period by the taxpayer for compensation and the denominator of
30which is the total compensation paid everywhere during the tax

1period.

2(14) Compensation is paid in this State if:

3(A) The individual's service is performed entirely within
4the State;

5(B) The individual's service is performed both within and
6without this State, but the service performed without the State
7is incidental to the individual's service within this State; or

8(C) Some of the service is performed in this State and the
9base of operations or if there is no base of operations, the
10place from which the service is directed or controlled is in
11this State, or the base of operations or the place from which
12the service is directed or controlled is not in any state in
13which some part of the service is performed, but the
14individual's residence is in this State.

15(15) The sales factor is a fraction, the numerator of which
16is the total sales of the taxpayer in this State during the tax
17period, and the denominator of which is the total sales of the
18taxpayer everywhere during the tax period.

19(16) Sales of tangible personal property are in this State
20if the property is delivered or shipped to a purchaser, within
21this State regardless of the f.o.b. point or other conditions of
22the sale.

23(17) Sales, other than sales of tangible personal property
24and sales set forth under paragraphs (17.1) and (17.2), are in
25this State if:

26(A) The income-producing activity is performed in this
27State; or

28(B) The income-producing activity is performed both in and
29outside this State and a greater proportion of the income-
30producing activity is performed in this State than in any other

1state, based on costs of performance.

2(17.1) Sales of services are in this State if sales are
3derived from customers within this State. If part of the sales
4with respect to a specific contract or other agreement to
5perform services is derived from customers from within this
6State, sales are in this State in proportion to the sales
7derived from customers within this State to total sales with
8respect to that contract or agreement.

9(17.2) In order to determine sales in this State of any
10railroad, truck, bus, airline, pipeline, natural gas or water
11transportation company that is required to determine its
12business income under paragraph (1) of phrase (e) of this
13subclause the company must convert the relevant fraction set
14forth under phrase (b), (c) or (d) of this subclause to gross
15receipts. Sales in this State are the result of multiplying
16total gross receipts from relevant transportation activities by
17the decimal equivalent of the relevant fraction set forth under
18phrase (b), (c) or (d) of this subclause.

19(18) If the allocation and apportionment provisions of this
20definition do not fairly represent the extent of the taxpayer's
21business activity in this State, the taxpayer may petition the
22Secretary of Revenue or the Secretary of Revenue may require, in
23respect to all or any part of the taxpayer's business activity:

24(A) Separate accounting;

25(B) The exclusion of any one or more of the factors;

26(C) The inclusion of one or more additional factors which
27will fairly represent the taxpayer's business activity in this
28State; or

29(D) The employment of any other method to effectuate an
30equitable allocation and apportionment of the taxpayer's income.

1In determining the fairness of any allocation or apportionment,
2the Secretary of Revenue may give consideration to the
3taxpayer's previous reporting and its consistency with the
4requested relief.

5* * *

6(e) Corporations That are Members of a Unitary Business.

7(1) Notwithstanding any contrary provisions of this article,
8for taxable years that begin on or after January 1, 2012,
9business income of a corporation that is a member of a unitary
10business that consists of two or more corporations, at least one
11of which does not transact its entire business in this State, is
12determined by combining the business income of either all
13corporations, other than as provided under this paragraph, that
14are water's-edge basis members or all corporations, other than
15as provided under this paragraph, that are worldwide members of
16the unitary business. Business income from an intercompany
17transaction between included corporations of a unitary business
18shall be deferred in the manner set forth under 26 CFR 1.1502-13
19(relating to intercompany transactions) in determining the
20business income of a corporation that is a member of that
21unitary business. Business income of the following corporations
22is not included in the determination of combined business
23income:

24(i) any corporation subject to taxation under Article VII,
25VIII, IX or XV;

26(ii) any corporation specified in the definition of
27"institution" in section 701.5 that would be subject to taxation
28under Article VII if it was located, as defined in section
29701.5, in this State;

30(iii) any corporation commonly known as a title insurance

1company that would be subject to taxation under Article VIII if
2it was incorporated in this State;

3(iv) any corporation specified as an insurance company,
4association or exchange in Article IX that would be subject to
5taxation under Article IX if its insurance business was
6transacted in this State;

7(v) any corporation specified in the definition of
8"institution" in section 1501 that would be subject to taxation
9under Article XV if it was located, as defined in section 1501,
10in this State; or

11(vi) any corporation that is a small corporation, as defined
12in section 301(s.2), or a qualified Subchapter S subsidiary, as
13defined in section 301(o.3).

14(2) Notwithstanding any contrary provisions of this article,
15all corporations that are required to compute business income
16under paragraph (1) are entitled to apportion the business
17income when one corporation of the same unitary business is
18entitled to apportion the business income. Notwithstanding any
19contrary provisions of this article, for taxable years that
20begin on or after January 1, 2012, the denominator of the
21apportionment fraction of a corporation that is required to
22compute its business income under paragraph (1) shall be
23computed on a combined basis for all included corporations of
24the unitary business. Gross receipts from an intercompany
25transaction between included corporations of a unitary business
26shall be eliminated unless the gross receipts are derived from
27transactions that are deferred in the manner set forth under 26
28CFR 1.1502-13 in computing the numerator and denominator of the
29apportionment fraction of a corporation that is required to
30compute its business income under paragraph (1). Gross receipts

1from transactions that had been deferred in the manner set forth
2under 26 CFR 1.1502-13 are included in a corporation's
3apportionment fraction during the same taxable year that it
4realizes business income that had been deferred due to the
5transaction. The apportionment fraction of the following
6corporations shall not be included in the determination of the
7combined apportionment fraction:

8(i) any corporation subject to taxation under Article VII,
9VIII, IX or XV;

10(ii) any corporation specified in the definition of
11"institution" in section 701.5 that would be subject to taxation
12under Article VII if it was located, as defined in section
13701.5, in this State;

14(iii) any corporation commonly known as a title insurance
15company that would be subject to taxation under Article VIII if
16it was incorporated in this State;

17(iv) any corporation specified as an insurance company,
18association or exchange in Article IX that would be subject to
19taxation under Article IX if its insurance business was
20transacted in this State;

21(v) any corporation specified in the definition of
22"institution" in section 1501 that would be subject to taxation
23under Article XV if it was located, as defined in section 1501,
24in this State;

25(vi) any corporation that is a small corporation, as defined
26in section 301(s.2), or a qualified Subchapter S subsidiary, as
27defined in section 301(o.3).

28(3) A corporation that is required to compute its business
29income under paragraph (1) shall apportion the combined business
30income by multiplying the combined business income by a fraction

1which is the combined apportionment fraction set forth under
2paragraph (2).

3(4) Nonbusiness income of a corporation that is required to
4compute business income under paragraph (1) shall be allocated
5as provided in paragraphs (5), (6), (7) and (8) of phrase (a) of
6subclause 2 of the definition of "taxable income."

7(5) Each corporation that is a member of a unitary business
8that consists of two or more corporation shall determine its tax
9liability based on its apportioned share of the combined
10business income of the unitary business plus its nonbusiness
11income or loss allocated to this State, minus its net loss
12deduction.

13(6) If any provision of this phrase operates so that an
14amount is added to or deducted from taxable income for a taxable
15year for any corporation of a unitary business that previously
16had been added to or deducted from taxable income of any
17corporation of the same unitary business, an appropriate
18adjustment shall be made for the taxable year in order to
19prevent double taxation or double deduction. If this adjustment
20is not made by the appropriate corporation of the unitary
21business, the Secretary of Revenue is authorized to make this
22adjustment.

23(7) The Secretary of Revenue shall have the authority and
24responsibility to make adjustments to insure that a corporation
25does not incur an unfair penalty nor realize an unfair benefit
26because it is required to compute its business income under
27paragraph (1). Fairness shall be measured by whether the
28corporation's income allocated and apportioned to this State
29fairly reflects the corporation's share of the unitary business
30conducted in this State in the taxable year.

1* * *

2(5) "Taxable year." [The] 1. Except as set forth in 
3subclause 2, the taxable year which the corporation, or any
4consolidated group with which the corporation participates in
5the filing of consolidated returns, actually uses in reporting
6taxable income to the Federal Government[.], or which the 
7corporation would have used in reporting taxable income to the 
8Federal Government had it been required to report its taxable 
9income to the Federal Government. With regard to the tax imposed
10by Article IV of this act (relating to the Corporate Net Income
11Tax), the terms "annual year," "fiscal year," "annual or fiscal
12year," "tax year" and "tax period" shall be the same as the
13corporation's taxable year, as defined in this [paragraph.]
14subclause or subclause 2.

152. All corporations of a unitary business shall have a
16common taxable year for purposes of computing tax due under this
17article. The taxable year for the purposes shall be the common
18taxable year adopted, in a manner prescribed by the department,
19by all corporations of a unitary business. The common taxable
20year must be used by all corporations of that unitary business
21in the year of adoption and all future years unless otherwise
22permitted by the department.

23* * *

24(8) "Tax haven." A jurisdiction that, during the tax year
25in question, has no or nominal effective tax on the relevant
26income and meets any of the following:

27(i) Has laws or practices that prevent effective exchange of
28information for tax purposes with other governments on taxpayers
29benefiting from the tax regime.

30(ii) Has tax regime which lacks transparency. A tax regime

1lacks transparency if the details of legislative, legal or
2administrative provisions are not open and apparent or are not
3consistently applied among similarly situated taxpayers, or if
4the information needed by tax authorities to determine a
5taxpayer's correct tax liability, such as accounting records and
6underlying documentation, is not adequately available.

7(iii) Facilitates the establishment of foreign-owned
8entities without the need for a local substantive presence or
9prohibits these entities from having any commercial impact on
10the local economy.

11(iv) Explicitly or implicitly excludes the jurisdiction's
12resident taxpayers from taking advantage of the tax regime's
13benefits or prohibits enterprises that benefit from the regime
14operating in the jurisdiction's domestic market.

15(v) Has created a tax regime which is favorable for tax
16avoidance based upon an overall assessment of relevant factors,
17including whether the jurisdiction has a significant untaxed
18off-shore financial and other services sector relative to its
19overall economy.

20(9) "Unitary business." A single economic enterprise that
21is made up of separate parts of a single corporation, of a
22commonly controlled group of corporations, or both, that are
23sufficiently interdependent, integrated and interrelated through
24their activities so as to provide a synergy and mutual benefit
25that produces a sharing or exchange of value among them and a
26significant flow of value to the separate parts. A unitary
27business shall include only those parts and corporations which
28may be included as a unitary business under the Constitution of
29the United States.

30(10) "Water's-edge basis." A system of reporting that

1includes the business income and apportionment factor of certain
2corporations of a unitary business, described as follows:

31. The business income and apportionment factor of any
4member incorporated in the United States or formed under the
5laws of any state of the United States, the District of
6Columbia, any territory or possession of the United States or
7the Commonwealth of Puerto Rico.

82. The business income and apportionment factor of any
9member, regardless of the place incorporated or formed, if the
10average of its property, payroll and sales factors within the
11United States is twenty per cent or more.

123. The business income and apportionment factor of any 
13member which is a domestic international sales corporation as 
14described in sections 991, 992, 993 and 994 of the Internal 
15Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. §§ 991, 992, 
16993 and 994); a foreign sales corporation as described in former 
17sections 921, 922, 923, 924, 925, 926 and 927 of the Internal 
18Revenue Code of 1986 (formerly 26 U.S.C. §§ 921, 922, 923, 924, 
19925, 926 and 927); or any member which is an export trade 
20corporation, as described in sections 970 and 971 of the 
21Internal Revenue Code of 1986 (26 U.S.C. §§ 970 and 971).

224. Any member not described in subclauses 1, 2 and 3 shall
23include the portion of its business income derived from or
24attributable to sources within the United States, as determined
25under the Internal Revenue Code of 1986 without regard to
26Federal treaties, and its apportionment factor related thereto.

275. Any member that is a "controlled foreign corporation" as
28defined in section 957 of the Internal Revenue Code of 1986 (26 
29U.S.C. § 957), to the extent the business income of that member
30is income defined in section 952 of the Internal Revenue Code of

11986 (26 U.S.C. § 952), Subpart F income, not excluding lower-
2tier subsidiaries' distributions of the income which were
3previously taxed, determined without regard to Federal treaties,
4and the apportionment factor related to that income; any item of
5income received by a controlled foreign corporation and the
6apportionment factor related to the income shall be excluded if
7the corporation establishes to the satisfaction of the Secretary
8of Revenue that the income was subject to an effective rate of
9income tax imposed by a foreign country greater than ninety per
10cent of the maximum rate of tax specified in section 11 of the
11Internal Revenue Code of 1986 (26 U.S.C. § 11). The effective
12rate of income tax determination shall be based upon the
13methodology set forth under 26 CFR 1.954-1 (relating to foreign
14base company income).

156. The business income and apportionment factor of any
16member that is not described in subclause 1, 2, 3, 4 and 5 and
17that is doing business in a tax haven. The business income and
18apportionment factor of a corporation doing business in a tax
19haven shall be excluded if the corporation establishes to the
20satisfaction of the Secretary of Revenue that its income was
21subject to an effective rate of income tax imposed by a country
22greater than ninety per cent of the maximum rate of tax
23specified in section 11 of the Internal Revenue Code of 1986 (26 
24U.S.C. § 11).

25(11) "Commonly controlled group." For a corporation, the
26corporation is a member of a group of two or more corporations
27and more than fifty per cent of the voting stock of each member
28of the group is directly or indirectly owned by a common owner
29or by common owners, either corporate or noncorporate, or by one
30or more of the member corporations of the group.

1(12) "Separate company." A corporation that is not a member
2of a unitary business that consists of two or more corporations.

3(13) "Tax." Includes interest, penalties and additions to
4tax unless a more limited meaning is disclosed by the context.

5Section 2. 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
13[January 1, 1995, and each 14taxable year thereafter	9.99%]
15January 1, 1995, through taxable 16years ending December 31, 172013	9.99%
18January 1, 2014, to December 31, 192014	8.99%
20January 1, 2015, to December 31, 212015	7.99%
22January 1, 2016, to December 31, 232016, and each taxable year 24thereafter	6.99%

25* * *

26Section 3. Section 403 of the act is amended by adding
27subsections to read:

28Section 403. Reports and Payment of Tax.--* * *

29(a.1) (1) Each corporation subject to tax under this
30article shall file an annual report in accordance with this

1section. Each corporation that is a member of a unitary business
2that consists of two or more corporations, unless excluded by
3the provisions of this article, shall file as part of a combined
4annual report. The corporations of the unitary business shall
5designate one member that is subject to tax under this article
6to file the combined annual report and to act as agent on behalf
7of all other corporations that are members of the unitary
8business. Each corporation that is a member of a unitary
9business shall be responsible for its tax liability under this
10article.

11(2) The oath or affirmation of the designated member's
12president, vice president or other principal officer, and of its
13treasurer or assistant treasurer shall constitute the oath or
14affirmation of each corporation that is a member of that unitary
15business.

16(3) The designated member shall transmit to the department
17upon a form prescribed by the department, an annual combined
18report under oath or affirmation of its president, vice
19president or other principal officer, and of its treasurer or
20assistant treasurer. The report shall set forth:

21(i) All corporations included in the unitary business.

22(ii) All necessary data, both in the aggregate and for each
23corporation of the unitary business, that sets forth the
24determination of tax liability for each corporation of the
25unitary business.

26(iii) Any other information that the department may require.

27(a.2) (1) Activities that evidence a significant flow of
28value among commonly controlled corporations shall include the
29following:

30(i) Assisting in the acquisition of equipment.

1(ii) Assisting with filling personnel needs.

2(iii) Lending funds or guaranteeing loans.

3(iv) Interplay in the area of corporate expansion.

4(v) Providing technical assistance.

5(vi) Supervising.

6(vii) Providing general operational guidance.

7(viii) Providing overall operational strategic advice.

8(ix) Common use of trade names and patents.

9(2) Significant flow of value must be more than the flow of
10funds arising out of passive investment and shall consist of
11more than periodic financial oversight.

12(a.3) (1) With respect to a commonly controlled group of
13corporations, the presence of any of these factors creates a
14presumption of a unitary business:

15(i) Corporations engaged in the same type of business.

16(ii) Corporations engaged in different steps in a vertically
17structured enterprise.

18(iii) Strong centralized management of corporations.

19(2) A corporation newly formed by a corporation that is a
20member of a unitary business is rebuttably presumed to be a
21member of the unitary business.

22(3) A corporation that owns a controlling interest in two or
23more corporations of a unitary business is rebuttably presumed
24to be a member of the unitary business.

25(4) A corporation that permits one or more other
26corporations of a unitary business to substantially use its
27patents, trademarks, service marks, logo-types, trade secrets,
28copyrights or other proprietary assets or that is principally
29engaged in loaning money to one or more other corporations of a
30unitary business is rebuttably presumed to be a member of the

1unitary business. This presumption only applies to a commonly
2controlled group of corporations.

3(a.4) As far as applicable to a specific unitary business,
4unless there is a revision of applicable State law or unless a
5corporation is not included under the provisions of this
6article, there is a rebuttable presumption for all tax years
7that begin in years 2012 and 2013 that a unitary business of two
8or more corporations includes at least all corporations that are
9part of a unitary business under the law of any state of the
10United States in which the corporation files a tax report or tax
11return of combined net income for the same tax year.

12(a.5) Unless an election is made to use a worldwide basis of
13accounting, a corporation that is a member of a unitary business
14of two or more corporations must determine its business income
15and apportionment factor upon a water's-edge basis. This basis
16shall apply to all corporations of the unitary business. If an
17election is made to use a worldwide basis of accounting, all
18corporations of the unitary business must make the election,
19upon a form, prescribed, prepared and furnished by the
20department. This election shall bind all corporations of the
21unitary business for the period of time that the election
22remains in effect. An initial election is binding for a period
23of seven years. Subsequent elections shall be binding for a
24period of five years.

25* * *

26Section 4. Section 404 of the act is amended to read:

27Section 404. Consolidated Reports.--The department shall not
28permit any corporation owning or controlling, directly or
29indirectly, any of the voting capital stock of another
30corporation or of other corporations, subject to the provisions

1of this article, to make a consolidated report[, showing the
2combined net income].

3Section 5. Section 3003.3(d) of the act, amended October 18, 
42006 (P.L.1149, No.119), is amended and the section is amended
5by adding subsections to read:

6Section 3003.3. Underpayment of Estimated Tax.--* * *

7(d) Notwithstanding the provisions of the preceding
8subsections, other than as set forth under subsection (d.1),
9interest with respect to any underpayment of any installment of
10estimated tax shall not be imposed if the total amount of all
11payments of estimated tax made on or before the last date
12prescribed for the payment of such installment equals or exceeds
13the amount which would have been required to be paid on or
14before such date if the estimated tax were an amount equal to
15the tax computed at the rates applicable to the taxable year,
16including any minimum tax imposed, but otherwise on the basis of
17the facts shown on the report of the taxpayer for, and the law
18applicable to, the safe harbor base year, adjusted for any
19changes to sections 401, 601, 602 and 1101 enacted for the
20taxable year, if a report showing a liability for tax was filed
21by the taxpayer for the safe harbor base year. If the total
22amount of all payments of estimated tax made on or before the
23last date prescribed for the payment of such installment does
24not equal or exceed the amount required to be paid per the
25preceding sentence, but such amount is paid after the date the
26installment was required to be paid, then the period of
27underpayment shall run from the date the installment was
28required to be paid to the date the amount required to be paid
29per the preceding sentence is paid. Provided, that if the total
30tax for the safe harbor base year exceeds the tax shown on such

1report by ten per cent or more, the total tax adjusted to
2reflect the current tax rate shall be used for purposes of this
3subsection. In the event that the total tax for the safe harbor
4base year exceeds the tax shown on the report by ten per cent or
5more, interest resulting from the utilization of such total tax
6in the application of the provisions of this subsection shall
7not be imposed if, within forty-five days of the mailing date of
8each assessment, payments are made such that the total amount of
9all payments of estimated tax equals or exceeds the amount which
10would have been required to be paid on or before such date if
11the estimated tax were an amount equal to the total tax adjusted
12to reflect the current tax rate. In any case in which the
13taxable year for which an underpayment of estimated tax may
14exist is a short taxable year, in determining the tax shown on
15the report or the total tax for the safe harbor base year, the
16tax will be reduced by multiplying it by the ratio of the number
17of installment payments made in the short taxable year to the
18number of installment payments required to be made for the full
19taxable year.

20(d.1) (1) Notwithstanding subsections (a), (b) and (c),
21interest with respect to any underpayment of any installment of
22estimated corporate net income tax for any tax year that begins
23in year 2012 or 2013 shall not be imposed if the total amount of
24all payments of estimated corporate net income tax made on or
25before the last date prescribed for the payment of the
26installment equals or exceeds the amount which would have been
27required to be paid on or before that date if the estimated tax
28were an amount equal to the tax shown on the report of the
29taxpayer for the safe harbor base year, if a report showing a
30liability for tax was filed by the taxpayer for the safe harbor

1base year.

2(2) If the total amount of all payments of estimated tax
3made on or before the last date prescribed for the payment of
4the installment does not equal or exceed the amount required to
5be paid under paragraph (1), but the amount is paid after the
6date the installment was required to be paid, the period of
7underpayment shall run from the date the installment was
8required to be paid to the date the amount required to be paid
9under paragraph (1) is paid.

10(3) If the total tax for the safe harbor base year exceeds
11the tax shown on the report by ten per cent or more, the total
12tax shall be used for purposes of this subsection. If the total
13tax for the safe harbor base year exceeds the tax shown on the
14report by ten per cent or more, interest resulting from the
15utilization of the total tax in the application of the
16provisions of this subsection shall not be imposed if, within
17forty-five days of the mailing date of a notice from the
18department increasing the total tax, payments are made such that
19the total amount of all payments of estimated tax equals or
20exceeds the amount which would have been required to be paid on
21or before the date if the estimated tax were an amount equal to
22the total tax.

23(4) If the taxable year for which an underpayment of
24estimated tax may exist is a short taxable year, in determining
25the tax shown on the report or the total tax for the safe harbor
26base year, the tax shall be reduced by multiplying it by the
27ratio of the number of installment payments made in the short
28taxable year to the number of installment payments required to
29be made for the full taxable year.

30(d.2) (1) If there is a substantial underpayment, as

1defined in subsection (a), of any installment of estimated
2corporate net income tax or estimated capital stock/franchise
3tax for any taxable year beginning in 2012 or 2013, there shall
4be imposed additional interest in an amount determined at one
5hundred twenty per cent of the annual rate as provided by law
6upon the entire underpayment for the period of the substantial
7underpayment.

8(2) The additional interest imposed under this subsection
9shall be in addition to any other interest imposed on
10underpayments under this section.

11Section 6. The amendment or addition of the following
12provisions shall apply to taxable years beginning after December
1331, 2013:

14(1) Section 401(3)1(a) and (b) and 2(a) and (e), (5),
15(8), (9), (10), (11), (12) and (13) of the act.

16(2) Section 402(b) of the act.

17(3) Section 403(a.1), (a.2), (a.3), (a.4) and (a.5) of
18the act.

19(4) Section 404 of the act.

20(5) Section 3003.3(d), (d.1) and (d.2) of the act.

21Section 7. This act shall take effect immediately.