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," providing for the Innovate in PA Program.

11The General Assembly of the Commonwealth of Pennsylvania
12hereby enacts as follows:

13Section 1. The heading of Article XVIII-C of the act of
14March 4, 1971 (P.L.6, No.2), known as the Tax Reform Code of
151971, added July 9, 2008 (P.L.922, No.66), is amended to read:




19Section 2. The act is amended by adding sections to read:

20Section 1801-C. Scope of article.

1This article relates to the Innovate in PA Tax Credit.

2Section 1802-C. Legislative intent.

3It is the intent of this article to invest in innovation as a
4catalyst for economic growth. Investment, in the Ben Franklin
5Technology Development Authority, the Ben Franklin Technology
6Partners, the Partnerships for Regional Economic Performance,
<-7regional biotechnology research centers, the department and
8venture capital funds will advance the competitiveness of this
9Commonwealth's companies in the global economy. It is the goal
10of this article to maximize the available funding from a minimum
11amount of $157,500,000 <-$168,750,000 and up to and exceeding

13Section 1803-C. Definitions.

14The following words and phrases when used in this article
15shall have the meanings given to them in this section unless the
16context clearly indicates otherwise:

17"Allocation amount." The total amount of tax credits
18purchased by a qualified taxpayer.

19"Authority." The Ben Franklin Technology Development
20Authority established to manage and fund programs in this
21Commonwealth that support the development of technology as
22described in the act of June 22, 2001 (P.L.569, No.38), known as
23The Ben Franklin Technology Development Authority Act.

24"Ben Franklin Technology Partners Program." A program under
25the Ben Franklin Technology Development Authority that funds
26four regionally based economic development organizations
27dedicated to a common mission of technology commercialization.

28"Capital." The amount of money that a purchaser invests
29under the Innovate in PA Program.

30"Department." The Department of Community and Economic

1Development of the Commonwealth.

2"Fund." The Innovate in PA Fund.

3"Impact investment." An investment intended to solve social
4or environmental challenges while generating financial profit.
5Impact investing recognizes that investments have social and
6environmental returns in addition to financial returns and
7attempts to maximize the three returns rather than one at the
8expense of others.

9"Insurance premium tax liability." Any liability incurred by
10an insurance company under Article IX.

11"Program." The Innovate in PA Program.

12"Qualified taxpayer." Any of the following that has
13insurance premium tax liability and contributes capital to
14purchase premium tax credits under this article:

15(1) An insurance company authorized to do business in
16this Commonwealth.

17(2) A holding company that has at least one insurance
18company subsidiary authorized to do business in this

20"Recipient." An entity that receives a distribution of funds
21under section 1811-C(c).

<-22"Regional biotechnology research center." A regional
23biotechnology center established under Chapter 17 of the act of 
24June 26, 2001 (P.L.755, No.77), known as the Tobacco Settlement 

26"Tax credit." A credit against insurance premium tax
27liability offered to or held by a qualified taxpayer under this

29"Venture Investment Program." A program under the Ben
30Franklin Technology Development Authority dedicated to

1increasing the availability of venture capital in this

3Section 1804-C. Tax credit.

4A qualified taxpayer may purchase tax credits from the
5department <-in accordance with this article and may apply the tax
6credits against its insurance premium tax liability in
7accordance with this article.

8Section 1805-C. Duties.

9(a) Sale of tax credits.--The department, shall have the
10authority to sell up to $225,000,000 in tax credits to qualified
11taxpayers. The sale of the tax credits shall be in accordance
12with section 1808-C.

13(b) Time of sale.--The sale authorized under subsection (a)
14may not occur before October 1, 2013.

<-15(c) Transfer of amounts.--In a fiscal year in which a tax
16credit is claimed under this article, the State Treasurer shall,
17prior to June 30 of the fiscal year, transfer into the revenue
18account established under section 402(b) of the act of December 
1918, 1984 (P.L.1005, No.205), known as the Municipal Pension Plan 
20Funding Standard and Recovery Act, for distribution in
21accordance with the Municipal Pension Plan Funding Standard and 
22Recovery Act the following amounts:

23(1) an amount equal to the amount of tax credits applied
24against the insurance premium tax liability claimed by the
25qualified taxpayers under this article in the fiscal year;

27(2) an amount equal to the income lost by the revenue
28account established under section 402(b) of the Municipal 
29Pension Plan Funding Standard and Recovery Act because of the
30tax credit claims granted by this article.

1Section 1806-C. Use of tax credits by qualified taxpayers.

2(a) Use against insurance premium tax liability.--A
3qualified taxpayer that purchases tax credits under section
41805-C may claim the credits beginning in calendar year 2017
5against insurance premium tax liability incurred for a taxable
6year that begins on or after January 1, 2016.

7(b) Application to department.--A qualified taxpayer seeking
8to use purchased tax credits may submit an application to the
9department in a manner prescribed by the department.

10(c) Construction.--The following shall apply:

11(1) A qualified taxpayer may not be required to reduce
12the amount of insurance premium tax included by the taxpayer
13in connection with rate-making for any insurance contract
14written in this Commonwealth because of a reduction of the
15taxpayer's insurance premium tax liability derived from the
16tax credit purchased under this article.

17(2) If, under the insurance laws of this Commonwealth,
18the assets of the qualified taxpayer are examined or
19considered, the taxpayer's balance of tax credits shall be
20treated as an admitted asset subject to the same financial
21rating as held by the Commonwealth.

22(d) Limitations.--The following shall apply:

23(1) The total amount of tax credits applied against
24insurance premium tax liability by all qualified taxpayers in
25a fiscal year may not exceed $45,000,000 per year beginning
26in calendar year 2017.

27(2) The credit to be applied in any one year may not
28exceed the insurance premium tax liability of the qualified
29taxpayer for that taxable year.

<-30(e) Hold-harmless provision.--In any year that a tax credit

1is claimed under this article, the General Assembly shall do all
2of the following:

3(1) Transfer an amount equal to the amount of any tax
4credit claimed by a foreign fire insurance company against
5taxes that otherwise would be distributed in accordance with
6Chapter 7 of the act of December 18, 1984 (P.L.1005, No.205),
7known as the Municipal Pension Plan Funding Standard and
8Recovery Act, to the fund as defined in section 702 of the
9Municipal Pension Plan Funding Standard and Recovery Act.

10(2) Transfer an amount equal to the amount of any tax
11credit claimed by a foreign casualty insurance company
12against taxes that otherwise would be distributed and used
13for police pension, retirement or disability purposes as
14provided by the act of May 12, 1943 (P.L.259, No.120),
15referred to as the Foreign Casualty Insurance Premium Tax
16Allocation Law, for distribution in accordance with the
17Foreign Casualty Insurance Premium Tax Allocation Law.

18(3) Ensure that the programs under paragraphs (1) and
19(2) do not experience a negative fiscal impact due to a
20foreign fire insurance company or a foreign casualty
21insurance company claiming a tax credit authorized under this

23Section 1807-C. Sale, carryover and carryback.

24(a) Carryover.--If the qualified taxpayer cannot use the
25entire amount of the tax credit for the taxable year in which
26the taxpayer is eligible for the credit, the excess may be
27carried over to succeeding taxable years and used as a credit
28against the qualified tax liability of the taxpayer for those
29taxable years, provided that the credit may not be carried over
30to any taxable year that begins after December 31, 2025.

1(b) Sale.--No sooner than 30 days after providing the
2Insurance Department and the department written notice of the
3intent to transfer tax credits, a qualified taxpayer may
4transfer tax credits held without restriction to any entity that
5is a qualified taxpayer in good standing with the Insurance
6Department and that agrees to assume all of the transferor's
7obligations with respect to the tax credit.

8(c) Carryback.--A qualified taxpayer may not carry back a
9tax credit.

10Section 1808-C. Sale of tax credits to qualified taxpayers.

11(a) Conduct of sale.--The sale of tax credits authorized
12under section 1805-C(a) shall be conducted in accordance with
13this section.

14(b) Process.--The department may sell the tax credits
15authorized under this article or may contract with an
16independent third party to conduct a bidding process among
17qualified taxpayers to purchase the credits. In raising capital
18for the program, the department shall have the discretion to
19distribute credits using a market-driven approach or any
20approach that maximizes the yield to the Commonwealth.

21(c) Application.--A qualified taxpayer seeking to purchase
22tax credits may apply to the department in the manner prescribed
23by the department.

24(d) Bidding process.--Using procedures adopted by the
25department or, if applicable, by an independent third party,
26each qualified taxpayer that submits an application shall make a
27timely and irrevocable offer, subject only to the department's
28issuance to the taxpayer of tax credit certificates, to make
29specified contributions of capital to the department on dates
30specified by the department.

1(e) Contents of offer.--The offer under subsection (d) must
2include all of the following:

3(1) The requested amount of tax credits, which may not
4be less than $500,000.

5(2) The qualified taxpayer's capital contribution for
6each tax credit dollar requested, which may not be less than
7the greater of either of the following:

8(i) <-Seventy Seventy-five percent of the requested
9dollar amount of tax credits.

10(ii) The percentage of the requested dollar amount
11of tax credits that the department and, if applicable,
12the independent third party, determines to be consistent
13with market conditions as of the offer date.

14(3) Any other information the department or, if
15applicable, independent third party requires.

16(f) Notice of approval.--Each qualified taxpayer that
17submits an application under this section shall receive a
18written notice from the department indicating whether or not it
19has been approved as a purchaser of tax credits and, if so, the
20amount of tax credits allocated.

21(g) Limitation.--No tax credits may be sold if the bidding
22process, upon completion, has failed to yield at least
23$50,000,000 in revenue.

24Section 1809-C. Payment for tax credits purchased and

26(a) Payment of capital.--Capital committed by a qualified
27taxpayer shall be paid to the department for deposit into the
28fund. Nothing under this section shall prohibit the department
29from establishing an installment payment schedule for capital
30payments to be made by the qualified taxpayer.

1(b) Issuance of tax credit certificates.--On receipt of
2payment of capital, the department shall issue to each qualified
3taxpayer a tax credit certificate representing a fully vested
4credit against insurance premium tax liability.

5(c) Certificate issued in accordance with bidding process.--
6The department shall issue tax credit certificates to qualified
7taxpayers in accordance with the bidding process selected by the
8department or the independent third party.

9(d) Contents.--The tax credit certificate shall state all of
10the following:

11(1) The total amount of premium tax credits that the
12qualified taxpayer may claim.

13(2) The amount of capital that the qualified taxpayer
14has contributed or agreed to contribute in return for the
15issuance of the tax credit certificate.

16(3) The dates on which the tax credits will be available
17for use by the qualified taxpayer.

18(4) Any penalties or other remedies for noncompliance.

19(5) The procedures to be used for transferring the tax

21(6) Any other requirements the department considers

23Section 1810-C. Failure to make contribution of capital and

25(a) Prohibition.--A tax credit certificate under section
261809-C may not be issued to any qualified taxpayer that fails to
27make a contribution of capital within the time the department

29(b) Penalty.--A qualified taxpayer that fails to make a
30contribution of capital within the time the department specifies

1shall be subject to a penalty equal to 10% of the amount of
2capital that remains unpaid. The penalty shall be paid to the
3department within 30 days after demand.

4(c) Reallocation.--The department may offer to reallocate
5the defaulted capital among other qualified taxpayers, so that
6the result after reallocation is the same as if the initial
7allocation had been performed without considering the tax credit
8allocation to the defaulting qualified taxpayer.

9(d) Contribution.--If the reallocation of capital under
10subsection (c) results in the contribution by another qualified
11taxpayer of the amount of capital not contributed by the
12defaulting qualified taxpayer, the department may waive the
13penalty provided under subsection (b).

14(e) Transfer.--A qualified taxpayer that fails to make a
15contribution of capital within the time specified may avoid the
16imposition of the penalty by transferring the allocation of tax
17credits to a new or existing qualified taxpayer within 30 days
18after the due date of the defaulted installment. Any transferee
19of an allocation of tax credits of a defaulting qualified
20taxpayer under this subsection shall agree to make the required
21contribution of capital within 30 days after the date of the

23Section 1811-C. Innovate in PA Program.

24(a) Establishment.--The Innovate in PA Program is
25established within the authority.

26(b) Fund.--The authority shall have the power and duty to
27establish the Innovate in PA Fund within this authority.

28(c) Distribution.--The department shall distribute the net
29proceeds received by the department as a result of the sale of
30tax credits under section 1805-C(a) as follows:

1(1) <-Seventy Sixty-six percent of net proceeds received
2by the department shall be transferred to the authority for
3deposit into the fund for distribution as follows:

4(i) Thirty-three and one-half percent shall be
5distributed to the Ben Franklin Technology Partners
6Program for use according to program guidelines.

7(ii) Five and one-half percent shall be distributed
8by the authority for technology-based economic
9development programs designed to support
10entrepreneurship, including, but not limited to,
11university-based entrepreneurial programs and new or
12existing programs designed to support early stage
13technology companies through seed grants or programming.

14(iii) Sixty percent shall be distributed to the
15Venture Investment Program for use according to program
16guidelines including traditional venture investments or
17impact investments. The authority may consider impact
18investments based on performance. Impact investments may
19not exceed 15% of the Venture Investment Program
20distribution under this subparagraph.

21(iv) One percent shall be retained by the authority
22for administrative costs. At the end of the fiscal year,
23the funds distributed under this subparagraph that are
24not expended by the authority shall be rededicated to the

26(2) <-Thirty Twenty-nine percent of net proceeds shall be
27retained by the department in a restricted receipts account
28for distribution as follows:

29(i) Ninety-five percent shall be distributed to the
30Partnerships for Regional Economic Performance Program in

1accordance with guidelines issued by the department.

2(ii) Four percent shall be distributed by the
3department for initiatives related to:

4(A) policy-development;

5(B) program creation or enhancements; and

6(C) strategic planning efforts in the
7advancement of the life sciences industry in this

9(iii) One percent shall be retained by the
10department for administrative costs.

<-11(3) Five percent to the health account established under
12section 303(b) of the act of June 26, 2001 (P.L.755, No.77), 
13known as the Tobacco Settlement Act, for distribution in
14equal proportions to each regional biotechnology research

16Section 1812-C. Guidelines.

17The department, in consultation with the authority <-and each 
18regional biotechnology research center, shall promulgate
19guidelines implementing this article.

20Section 1813-C. Report.

21(a) Duties.--On or before January 1, 2015, and January 1 of
22each subsequent year, the department, in consultation with the
23authority <-and each regional biotechnology research center, shall
24do the following:

25(1) Submit a report on the implementation of the program
26to all of the following:

27(i) The Governor.

28(ii) The chairman and minority chairman of the
29Appropriations Committee of the Senate.

30(iii) The chairman and minority chairman of the

1Appropriations Committee of the House of Representatives.

2(2) Publish the report under paragraph (1) on the
3department's publicly accessible Internet website.

4(b) Contents.--The report under subsection (a) shall include
5the following:

6(1) The name of the purchaser of premium tax credits.

7(2) The amount of premium tax credits allocated to the

9(3) The amount of capital the purchaser contributed for
10the issuance of the tax credit certificate.

11(4) The amount of any tax credits that have been
12transferred under section 1810-C(e).

13(5) The amount of funds received by the recipients
14during the previous year.

15(6) The cumulative amount of capital received by the
16department in connection with the sale of the tax credits.

17(7) The amount of capital remaining uninvested at the
18end of the preceding calendar year.

19(8) The names and locations of businesses receiving
20capital from the recipients, the reason for the investment
21and the amount of the investment.

22(9) The total number of jobs created in this
23Commonwealth by the investment and the average wages paid for
24the jobs.

25(10) The total number of jobs retained in this 
26Commonwealth as a result of the investment and the average 
27wages paid for the jobs.

28Section 3. This act shall take effect in 60 days.