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| THE GENERAL ASSEMBLY OF PENNSYLVANIA |
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| SENATE BILL |
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| INTRODUCED BY BLAKE, COSTA, STACK, TARTAGLIONE, SOLOBAY, SCHWANK, BREWSTER, FONTANA, FARNESE, YUDICHAK, EARLL, D. WHITE, GORDNER, BRUBAKER, FERLO, BROWNE AND DINNIMAN, OCTOBER 1, 2012 |
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| REFERRED TO FINANCE, OCTOBER 1, 2012 |
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| AN ACT |
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1 | Amending the act of March 4, 1971 (P.L.6, No.2), entitled "An |
2 | act relating to tax reform and State taxation by codifying |
3 | and enumerating certain subjects of taxation and imposing |
4 | taxes thereon; providing procedures for the payment, |
5 | collection, administration and enforcement thereof; providing |
6 | for tax credits in certain cases; conferring powers and |
7 | imposing duties upon the Department of Revenue, certain |
8 | employers, fiduciaries, individuals, persons, corporations |
9 | and other entities; prescribing crimes, offenses and |
10 | penalties," providing for the Innovate in PA Program. |
11 | The General Assembly of the Commonwealth of Pennsylvania |
12 | hereby enacts as follows: |
13 | Section 1. The heading of Article XVIII-C of the act of |
14 | March 4, 1971 (P.L.6, No.2), known as the Tax Reform Code of |
15 | 1971, added July 9, 2008 (P.L.922, No.66), is amended to read: |
16 | ARTICLE XVIII-C |
17 | [(RESERVED)] |
18 | INNOVATE IN PA TAX CREDIT |
19 | Section 2. The act is amended by adding sections to read: |
20 | Section 1801-C. Scope of article. |
21 | This article relates to the Innovate in PA Tax Credit. |
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1 | Section 1802-C. Legislative intent. |
2 | It is the intent of this article to invest in innovation as a |
3 | catalyst for economic growth. Investment, through the Ben |
4 | Franklin Technology Development Authority, in the Ben Franklin |
5 | Technology Partners and in venture capital funds will advance |
6 | the competitiveness of this Commonwealth's companies in the |
7 | global economy. |
8 | Section 1803-C. Definitions. |
9 | The following words and phrases when used in this article |
10 | shall have the meanings given to them in this section unless the |
11 | context clearly indicates otherwise: |
12 | "Allocation amount." The total amount of tax credits |
13 | purchased by a qualified taxpayer. |
14 | "Authority." The Ben Franklin Technology Development |
15 | Authority. |
16 | "Capital." The amount of money that a purchaser invests |
17 | under the Innovate in PA Program. |
18 | "Department." The Department of Community and Economic |
19 | Development of the Commonwealth. |
20 | "Fund." The Innovate in PA Fund. |
21 | "Insurance premium tax liability." Any liability incurred by |
22 | an insurance company under Article IX. |
23 | "Program." The Innovate in PA Program. |
24 | "Qualified taxpayer." Any of the following that has |
25 | insurance premium tax liability and contributes capital to |
26 | purchase premium tax credits under this article: |
27 | (1) An insurance company authorized to do business in |
28 | this Commonwealth. |
29 | (2) A holding company that has at least one insurance |
30 | company subsidiary authorized to do business in this |
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1 | Commonwealth. |
2 | "Tax credit." A credit against insurance premium tax |
3 | liability offered to or held by a qualified taxpayer under this |
4 | article. |
5 | Section 1804-C. Tax credit. |
6 | A qualified taxpayer may purchase tax credits from the |
7 | department and may apply the tax credits against its insurance |
8 | premium tax liability in accordance with this article. |
9 | Section 1805-C. Duties. |
10 | (a) Sale of tax credits.--The department, shall have the |
11 | authority to sell up to $175,000,000 in tax credits to qualified |
12 | taxpayers. Sale of the tax credits shall be in accordance with |
13 | section 1808-C. |
14 | (b) Time of sale.--The sale authorized under subsection (a) |
15 | may not occur before October 1, 2012. |
16 | (c) Transfer of funds.--All funds, minus any administrative |
17 | costs, received by the department as a result of the sale under |
18 | subsection (a) shall be transferred to the authority for deposit |
19 | into the fund. |
20 | Section 1806-C. Use of tax credits by qualified taxpayers. |
21 | (a) Use against insurance premium tax liability.--A |
22 | qualified taxpayer that purchases tax credits under section |
23 | 1805-C may claim the credits beginning in calendar year 2016 |
24 | against insurance premium tax liability incurred for a taxable |
25 | year that begins on or after January 1, 2015. |
26 | (b) Application to department.--A qualified taxpayer seeking |
27 | to use purchased tax credits may submit an application to the |
28 | department in a manner prescribed by the department. |
29 | (c) Construction.--The following shall apply: |
30 | (1) A qualified taxpayer may not be required to reduce |
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1 | the amount of insurance premium tax included by the taxpayer |
2 | in connection with rate-making for any insurance contract |
3 | written in this Commonwealth because of a reduction of the |
4 | taxpayer's insurance premium tax liability derived from the |
5 | tax credit purchased under this article. |
6 | (2) If, under the insurance laws of this Commonwealth, |
7 | the assets of the qualified taxpayer are examined or |
8 | considered, the taxpayer's balance of tax credits shall be |
9 | treated as an admitted asset subject to the same financial |
10 | rating as held by the Commonwealth. |
11 | (d) Limitations.--The following shall apply: |
12 | (1) The total amount of tax credits applied against |
13 | insurance premium tax liability by all qualified taxpayers in |
14 | a fiscal year may not exceed $35,000,000 per year beginning |
15 | in calendar year 2016. |
16 | (2) The credit to be applied in any one year may not |
17 | exceed the insurance premium tax liability of the qualified |
18 | taxpayer for that taxable year. |
19 | (e) Hold-harmless provision.--In any year that a tax credit |
20 | is claimed under this article, the General Assembly shall do all |
21 | of the following: |
22 | (1) Transfer an amount equal to the amount of any tax |
23 | credit claimed by a foreign fire insurance company against |
24 | taxes that otherwise would be distributed in accordance with |
25 | Chapter 7 of the act of December 18, 1984 (P.L.1005, No.205), |
26 | known as the Municipal Pension Plan Funding Standard and |
27 | Recovery Act, to the fund as defined in section 702 of the |
28 | Municipal Pension Plan Funding Standard and Recovery Act. |
29 | (2) Transfer an amount equal to the amount of any tax |
30 | credit claimed by a foreign casualty insurance company |
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1 | against taxes that otherwise would be distributed and used |
2 | for police pension, retirement or disability purposes as |
3 | provided by the act of May 12, 1943 (P.L.259, No.120), |
4 | referred to as the Foreign Casualty Insurance Premium Tax |
5 | Allocation Law, for distribution in accordance with the |
6 | Foreign Casualty Insurance Premium Tax Allocation Law. |
7 | (3) Ensure that the programs under paragraphs (1) and |
8 | (2) do not experience a negative fiscal impact due to a |
9 | foreign fire insurance company or a foreign casualty |
10 | insurance company claiming a tax credit authorized under this |
11 | article. |
12 | Section 1807-C. Sale, carryover and carryback. |
13 | (a) Carryover.--If the qualified taxpayer cannot use the |
14 | entire amount of the tax credit for the taxable year in which |
15 | the taxpayer is eligible for the credit, the excess may be |
16 | carried over to succeeding taxable years and used as a credit |
17 | against the qualified tax liability of the taxpayer for those |
18 | taxable years, provided that the credit may not be carried over |
19 | to any taxable year that begins after December 31, 2025. |
20 | (b) Sale.--No sooner than 30 days after providing the |
21 | Insurance Department and the department written notice of the |
22 | intent to transfer tax credits, a qualified taxpayer may |
23 | transfer tax credits held without restriction to any entity that |
24 | is a qualified taxpayer in good standing with the Insurance |
25 | Department and that agrees to assume all of the transferor's |
26 | obligations with respect to the tax credit. |
27 | (c) Carryback.--A qualified taxpayer may not carry back a |
28 | tax credit. |
29 | Section 1808-C. Sale of tax credits to qualified taxpayers. |
30 | (a) Conduct of sale.--The sale of tax credits authorized |
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1 | under section 1805-C(a) shall be conducted in accordance with |
2 | this section. |
3 | (b) Process.--The department may sell the tax credits |
4 | authorized under this article or may contract with an |
5 | independent third party to conduct a bidding process among |
6 | qualified taxpayers to purchase the credits. In raising capital |
7 | for the program, the department shall have the discretion to |
8 | distribute credits using a market-driven approach or any |
9 | approach that maximizes the yield to the Commonwealth. |
10 | (c) Application.--A qualified taxpayer seeking to purchase |
11 | tax credits may apply to the department in the manner prescribed |
12 | by the department. |
13 | (d) Bidding process.--Using procedures adopted by the |
14 | department or, if applicable, by an independent third party, |
15 | each qualified taxpayer that submits an application shall make a |
16 | timely and irrevocable offer, subject only to the department's |
17 | issuance to the taxpayer of tax credit certificates, to make |
18 | specified contributions of capital to the department on dates |
19 | specified by the department. |
20 | (e) Contents of offer.--The offer under subsection (d) must |
21 | include all of the following: |
22 | (1) The requested amount of tax credits, which may not |
23 | be less than $500,000. |
24 | (2) The qualified taxpayer's capital contribution for |
25 | each tax credit dollar requested, which may not be less than |
26 | the greater of either of the following: |
27 | (i) Eighty percent of the requested dollar amount of |
28 | tax credits. |
29 | (ii) The percentage of the requested dollar amount |
30 | of tax credits that the department and, if applicable, |
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1 | the independent third party, determines to be consistent |
2 | with market conditions as of the offer date. |
3 | (3) Any other information the department or, if |
4 | applicable, independent third party requires. |
5 | (f) Notice of approval.--Each qualified taxpayer that |
6 | submits an application under this section shall receive a |
7 | written notice from the department indicating whether or not it |
8 | has been approved as a purchaser of tax credits and, if so, the |
9 | amount of tax credits allocated. |
10 | (g) Limitation.--No tax credits may be sold if the bidding |
11 | process, upon completion, has failed to yield at least |
12 | $50,000,000 in revenue. |
13 | Section 1809-C. Payment for tax credits purchased and |
14 | certificates. |
15 | (a) Payment of capital.--Capital committed by a qualified |
16 | taxpayer shall be paid to the department for deposit into the |
17 | fund. Nothing under this section shall prohibit the department |
18 | from establishing an installment payment schedule for capital |
19 | payments to be made by the qualified taxpayer. |
20 | (b) Issuance of tax credit certificates.--On receipt of |
21 | payment of capital, the department shall issue to each qualified |
22 | taxpayer a tax credit certificate representing a fully vested |
23 | credit against insurance premium tax liability. |
24 | (c) Certificate issued in accordance with bidding process.-- |
25 | The department shall issue tax credit certificates to qualified |
26 | taxpayers in accordance with the bidding process selected by the |
27 | department or the independent third party. |
28 | (d) Contents.--The tax credit certificate shall state all of |
29 | the following: |
30 | (1) The total amount of premium tax credits that the |
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1 | qualified taxpayer may claim. |
2 | (2) The amount of capital that the qualified taxpayer |
3 | has contributed or agreed to contribute in return for the |
4 | issuance of the tax credit certificate. |
5 | (3) The dates on which the tax credits will be available |
6 | for use by the qualified taxpayer. |
7 | (4) Any penalties or other remedies for noncompliance. |
8 | (5) The procedures to be used for transferring the tax |
9 | credits. |
10 | (6) Any other requirements the department considers |
11 | necessary. |
12 | Section 1810-C. Failure to make contribution of capital and |
13 | reallocation. |
14 | (a) Prohibition.--A tax credit certificate under section |
15 | 1809-C may not be issued to any qualified taxpayer that fails to |
16 | make a contribution of capital within the time the department |
17 | specifies. |
18 | (b) Penalty.--A qualified taxpayer that fails to make a |
19 | contribution of capital within the time the department specifies |
20 | shall be subject to a penalty equal to 10% of the amount of |
21 | capital that remains unpaid. The penalty shall be paid to the |
22 | department within 30 days after demand. |
23 | (c) Reallocation.--The department may offer to reallocate |
24 | the defaulted capital among other qualified taxpayers, so that |
25 | the result after reallocation is the same as if the initial |
26 | allocation had been performed without considering the tax credit |
27 | allocation to the defaulting qualified taxpayer. |
28 | (d) Contribution.--If the reallocation of capital under |
29 | subsection (c) results in the contribution by another qualified |
30 | taxpayer of the amount of capital not contributed by the |
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1 | defaulting qualified taxpayer, the department may waive the |
2 | penalty provided under subsection (b). |
3 | (e) Transfer.--A qualified taxpayer that fails to make a |
4 | contribution of capital within the time specified may avoid the |
5 | imposition of the penalty by transferring the allocation of tax |
6 | credits to a new or existing qualified taxpayer within 30 days |
7 | after the due date of the defaulted installment. Any transferee |
8 | of an allocation of tax credits of a defaulting qualified |
9 | taxpayer under this subsection shall agree to make the required |
10 | contribution of capital within 30 days after the date of the |
11 | transfer. |
12 | Section 1811-C. Innovate in PA Program. |
13 | (a) Establishment.--The Innovate in PA Program is |
14 | established within the authority. |
15 | (b) Authority.--The authority shall have the power and duty |
16 | to establish the Innovate in PA Fund within this authority. The |
17 | authority shall receive all net proceeds from the sale of tax |
18 | credits under section 1805-C(a) for deposit into the fund and |
19 | for distribution in accordance with subsection (c). |
20 | (c) Distribution.--The authority shall distribute all funds, |
21 | minus administrative costs incurred by the authority, received |
22 | under subsection (b) as follows: |
23 | (1) Sixty percent of the proceeds shall be distributed |
24 | to the Venture Investment Program for use according to |
25 | program guidelines. |
26 | (2) Forty percent shall be distributed to the Ben |
27 | Franklin Technology Partners Program for use according to |
28 | program guidelines. |
29 | Section 1812-C. Guidelines. |
30 | The department, in consultation with the authority, shall |
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1 | promulgate guidelines implementing this article. |
2 | Section 1813-C. Report. |
3 | (a) Duties.--On or before January 1, 2014, and January 1 of |
4 | each subsequent year, the department, in consultation with the |
5 | authority, shall do all of the following: |
6 | (1) Submit a report on the implementation of the program |
7 | to all of the following: |
8 | (i) The Governor. |
9 | (ii) The chairman and minority chairman of the |
10 | Appropriations Committee of the Senate. |
11 | (iii) The chairman and minority chairman of the |
12 | Appropriations Committee of the House of Representatives. |
13 | (2) Publish the report under paragraph (1) on the |
14 | department's publicly accessible Internet website. |
15 | (b) Contents.--The report under subsection (a) shall include |
16 | all of the following: |
17 | (1) The name of the purchaser of premium tax credits. |
18 | (2) The amount of premium tax credits allocated to the |
19 | purchaser. |
20 | (3) The amount of capital the purchaser contributed for |
21 | the issuance of the tax credit certificate. |
22 | (4) The amount of any tax credits that have been |
23 | transferred under section 1810-C(e). |
24 | (5) The amount of funds received by the authority during |
25 | the previous year. |
26 | (6) The cumulative amount of capital received by the |
27 | authority. |
28 | (7) The amount of capital remaining uninvested at the |
29 | end of the preceding calendar year. |
30 | (8) The names and locations of businesses receiving |
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1 | capital from the authority, the reason for the investment and |
2 | the amount of the investment. |
3 | (9) The total number of jobs created in this |
4 | Commonwealth by the investment and the average wages paid for |
5 | the jobs. |
6 | (10) The total number of jobs retained in this |
7 | Commonwealth as a result of the investment and the average |
8 | wages paid for the jobs. |
9 | Section 3. This act shall take effect in 60 days. |
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