PRINTER'S NO. 3549
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No.
2172
Session of
2015
INTRODUCED BY THOMAS, JUNE 16, 2016
REFERRED TO COMMITTEE ON FINANCE, JUNE 16, 2016
AN ACT
Amending the act of March 4, 1971 (P.L.6, No.2), entitled "An
act relating to tax reform and State taxation by codifying
and enumerating certain subjects of taxation and imposing
taxes thereon; providing procedures for the payment,
collection, administration and enforcement thereof; providing
for tax credits in certain cases; conferring powers and
imposing duties upon the Department of Revenue, certain
employers, fiduciaries, individuals, persons, corporations
and other entities; prescribing crimes, offenses and
penalties," in bank and trust company shares tax, further
providing for imposition of tax, for ascertainment of taxable
amount and exclusion of United States obligations, for
apportionment and for definitions.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Sections 701, 701.1 and 701.4(3)(xiii) of the act
of March 4, 1971 (P.L.6, No.2), known as the Tax Reform Code of
1971, amended July 9, 2013 (P.L.270, No.52), are amended to
read:
Section 701. Imposition of Tax.--(a) Every institution
doing business in this Commonwealth shall, on or before March 15
in each and every year, make to the Department of Revenue a
report in writing, verified as required by law, setting forth
the full number of shares of the capital stock subscribed for or
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issued, as of the preceding January 1, by such institution, and
the taxable amount of such shares of capital stock determined
pursuant to section 701.1.
(b) It shall be the duty of the Department of Revenue to
assess such shares for the calendar years beginning January 1,
1971 through January 1, 1983, at the rate of fifteen mills and
for the calendar years beginning January 1, 1984 through January
1, 1988, at the rate of one and seventy-five one thousandths per
cent and for the calendar year beginning January 1, 1989, at the
rate of 10.77 per cent and for the calendar years beginning
January 1, 1990, through January 1, 2013, at the rate of 1.25
per cent and for the calendar [year] years beginning January 1,
2014, [and each calendar year thereafter at the rate of 0.89 per
cent] through January 1, 2016, at the rate of 0.89 per cent and
for the calendar year beginning January 1, 2017, and each
calendar year thereafter at the rate of 0.99 per cent upon each
dollar of taxable amount thereof, the taxable amount of each
share of stock to be ascertained and fixed pursuant to section
701.1, and dividing this amount by the number of shares.
(c) It shall be the duty of every institution doing business
in this Commonwealth, at the time of making every report
required by this section, to compute the tax and to pay the
amount of said tax to the State Treasurer, through the
Department of Revenue either from its general fund, or from the
amount of said tax collected from its shareholders. Provided,
That in case any institution shall collect, annually, from the
shareholders thereof said tax, according to the provisions of
this article, that have been subscribed for or issued, and pay
the same into the State Treasury, through the Department of
Revenue, the shares, and so much of the capital and profits of
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such institution as shall not be invested in real estate, shall
be exempt from local taxation under the laws of this
Commonwealth; and such institution shall not be required to make
any report to the local assessor or county commissioners of its
personal property owned by it in its own right for purposes of
taxation and shall not be required to pay any tax thereon.
Section 701.1. Ascertainment of Taxable Amount; Exclusion of
United States Obligations.--(a) The taxable amount of shares
shall be ascertained and fixed by the book value of total bank
equity capital as determined by the Reports of Condition at the
end of the preceding calendar year in accordance with the
requirements of the Board of Governors of the Federal Reserve
System, the Comptroller of the Currency, the Federal Deposit
Insurance Corporation or other applicable regulatory authority.
If an institution does not file the Reports of Condition, book
values shall be determined by generally accepted accounting
principles as of the end of the preceding calendar year.
(b) A deduction for the value of United States obligations
shall be provided from the taxable amount of shares in an amount
equal to the same percentage of total bank equity capital as the
book value of obligations of the United States bears to the book
value of the total assets[, except that, for the value of shares
reported on tax returns due on March 15, 2008, and thereafter].
In computing the deduction for United States obligations, any
goodwill recorded as a result of the use of purchase accounting
for an acquisition or combination as described in this section
and occurring after June 30, 2001, [may] shall be subtracted
from the book value of total bank equity capital and disregarded
in determining the deduction provided for obligations of the
United States. For purposes of this article, United States
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obligations shall be obligations coming within the scope of 31
U.S.C. § 3124 (relating to exemption from taxation). [In the
case of institutions which do not file such Reports of
Condition, book values shall be determined by generally accepted
accounting principles as of the end of the preceding calendar
year.]
(b.1) A deduction for goodwill shall be provided from the
taxable amount of shares in an amount equal to the value of any
goodwill recorded as a result of the use of purchase accounting
for an acquisition or combination as described in this section
and occurring after June 30, 2001.
(c) For purposes of this section:
(1) a mere change in identity, form or place of organization
of one institution, however effected, shall be treated as if a
single institution had been in existence prior to as well as
after such change; and
(2) if there is a combination of two or more institutions
into one, the book values and deductions for United States
obligations from the Reports of Condition of the constituent
institutions shall be combined. For purposes of this section, a
combination shall include any acquisition required to be
accounted for by using the purchase method in accordance with
generally accepted accounting principles or a statutory merger
or consolidation.
Section 701.4. Apportionment.--An institution may apportion
its taxable amount of shares determined under section 701.1 in
accordance with this subsection if the institution is subject to
tax in another state based on or measured by net worth, gross
receipts, net income or some similar base of taxation, or if it
could be subject to such tax, whether or not such a tax has in
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fact been enacted. The following shall apply:
* * *
(3) The receipts factor is a fraction, the numerator of
which is total receipts located in this Commonwealth and the
denominator of which is the total receipts located in all
states. The method of calculating receipts for purposes of the
denominator shall be the same as the method used in determining
receipts for purposes of the numerator. The location of receipts
shall be determined as follows:
* * *
(xiii) The following shall apply to receipts from an
institution's investment assets and activity and trading assets
and activity:
(A) Interest, dividends, net gains equal to zero or above,
and other income from investment assets and activities and from
trading assets and activities shall be included in the receipts
factor. Investment assets and activities and trading assets and
activities shall include investment securities, trading account
assets, Federal funds, securities purchased and sold under
agreements to resell or repurchase, options, futures contracts,
forward contracts and notional principal contracts such as
swaps, equities and foreign currency transactions. For the
investment and trading assets and activities under subclauses
(I) and (II), the receipts factor shall include the amounts
under subclauses (I) and (II). The following shall apply:
(I) The receipts factor shall include the amount by which
interest from Federal funds sold and securities purchased under
resale agreements exceeds interest expense on Federal funds
purchased and securities sold under repurchase agreements.
(II) The receipts factor shall include the amount by which
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interest, dividends, gains and other income from investment and
trading assets and activities, including assets and activities
in the matched book, in the arbitrage book and foreign currency
transactions, exceed amounts paid in lieu of interest, amounts
paid in lieu of dividends and losses from the assets and
activities.
(B) The numerator of the receipts factor shall include
[interest, dividends, net gains, equal to zero or above, and
other income from investment assets and activities and from
trading assets and activities] the receipts under clause (A)
that are attributable to this Commonwealth using one of the
following alternative methods:
(I) Method 1. The numerator shall be determined by
multiplying the total amount of receipts [from trading assets
and activities] under clause (A) by a fraction, the numerator of
which is the total amount of all other receipts attributable to
this Commonwealth and the denominator of which is the total
amount of all other receipts.
(II) Method 2. The numerator shall be determined by
multiplying the total amount of receipts under clause (A) by a
fraction, the numerator of which is the average value of the
assets which generate the receipts which are properly assigned
to a regular place of business of the institution within this
Commonwealth and the denominator of which is the average value
of all such assets.
(C) Upon the election by the institution to use one of the
methods under clause (B) for the tax imposed for a taxable year
beginning after December 31, 2015, the institution shall use the
method on all subsequent returns unless the institution receives
prior permission from the Department of Revenue to use a
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different method.
(D) The following shall apply:
(I) An institution electing to use Method 2 shall have the
burden of proving that an investment asset or activity or
trading asset or activity was properly assigned to a regular
place of business outside of this Commonwealth by demonstrating
that the day-to-day decisions regarding the asset or activity
occurred at a regular place of business outside this
Commonwealth.
(II) If the day-to-day decisions regarding an investment
asset or activity or trading asset or activity occur at more
than one regular place of business and one regular place of
business is in this Commonwealth and one regular place of
business is outside this Commonwealth, the asset or activity
shall be considered to be located at the regular place of
business of the institution where the investment or trading
policies or guidelines with respect to the asset or activity are
established.
(III) Unless the institution demonstrates to the contrary,
the investment or trading policies and guidelines under
subclause (II) shall be presumed to be established at the
commercial domicile of the institution.
[(E) Receipts apportioned under this subparagraph shall be
separately apportioned for:
(I) interest, dividends, net gains and other income from
investment assets and activities in an investment account;
(II) interest from Federal funds sold and purchased and from
securities purchased under resale agreements and securities sold
under repurchase agreements; and
(III) interest, dividends, gains and other income from
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trading assets and activities, including assets and activities
in the matched book, in the arbitrage book and foreign currency
transactions.]
* * *
Section 2. The definitions of "doing business in this
Commonwealth" and "receipts" in section 701.5 of the act,
amended July 9, 2013 (P.L.270, No.52), are amended to read:
Section 701.5. Definitions.--The following words, terms and
phrases when used in this article shall have the meaning
ascribed to them in this section, except where the context
clearly indicates a different meaning:
* * *
"Doing business in this Commonwealth." As follows:
(1) An institution is engaged in doing business in this
Commonwealth and is subject to the tax imposed under this
article if it satisfies any of the following requirements [and
generates gross receipts apportioned to this Commonwealth under
section 701.4 in excess of $100,000]:
(i) The institution has an office or branch in this
Commonwealth.
(ii) One or more employes, representatives, independent
contractors or agents of the institution conduct business
activities of the institution in this Commonwealth.
(iii) A person, including an employe, representative,
independent contractor, agent or affiliate of the institution,
or an employe, representative, independent contractor or agent
of an affiliate of the institution, directly or indirectly
solicits business in this Commonwealth by or for the benefit of
the institution, through:
(A) person-to-person contact, mail, telephone or other
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electronic means; or
(B) the use of advertising published, produced or
distributed in this Commonwealth.
(iv) The institution owns, leases or uses real or personal
property in this Commonwealth to conduct its business
activities.
(v) The institution holds a security interest, mortgage or
lien in real or personal property located in this Commonwealth.
(vi) A basis exists under section 701.4 to apportion the
institution's receipts to this Commonwealth.
(vii) The institution has a physical presence in this
Commonwealth for a period of more than one day during the tax
year or conducts an activity sufficient to create a nexus in
this Commonwealth for tax purposes under the Constitution of the
United States.
(2) The term shall not include:
(i) The use by the institution of a professional performing
a service on behalf of the institution in this Commonwealth if
the services are not significantly associated with the
institution's ability to establish and maintain a market in this
Commonwealth.
(ii) The mere use of financial intermediaries in this
Commonwealth by an institution for the processing or transfer of
checks, credit card receivables, commercial paper and similar
items.
* * *
"Receipts." [As follows:
(1) Except as provided under paragraph (2), an item included
in taxable income returned to and ascertained by the Federal
Government.
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(2) If consolidated returns are filed with the Federal
Government, an item that would be included in taxable income
returned to and ascertained by the Federal Government if a
separate return had been made to the Federal Government by the
institution, including the taxable income of a subsidiary of the
institution that are disregarded entities for purposes of
Federal taxation.] The total of all items of income reported on
the income statement of the institution's Reports of Condition
or, if the institution does not file a Reports of Condition, on
an income statement completed in accordance with generally
accepted accounting principles.
Section 3. This act shall apply as follows:
(1) The following provisions shall apply retroactively
to January 1, 2014:
(i) The amendment of section 701.1 of the act.
(ii) The amendment of section 701.4(3)(xiii) of the
act.
(2) The amendment of the definitions of "doing business
in this Commonwealth" and "receipts" in section 701.5 of the
act shall apply to taxable years beginning after December 31,
2016.
Section 4. This act shall take effect immediately.
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