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:

16ARTICLE XVIII-C

17[(RESERVED)]

18INNOVATE IN PA TAX CREDIT

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

20Section 1801-C. Scope of article.

21This article relates to the Innovate in PA Tax Credit.

1Section 1802-C. Legislative intent.

2It is the intent of this article to invest in innovation as a
3catalyst for economic growth. Investment, in the Ben Franklin
4Technology Development Authority, the Ben Franklin Technology
5Partners, the Partnerships for Regional Economic Performance,
6the department and venture capital funds will advance the
7competitiveness of this Commonwealth's companies in the global
8economy. It is the goal of this article to maximize the
9available funding from a minimum amount of $157,500,000 and up
10to and exceeding $190,000,000.

11Section 1803-C. Definitions.

12The following words and phrases when used in this article
13shall have the meanings given to them in this section unless the
14context clearly indicates otherwise:

15"Allocation amount." The total amount of tax credits
16purchased by a qualified taxpayer.

17"Authority." The Ben Franklin Technology Development
18Authority established to manage and fund programs in this
19Commonwealth that support the development of technology as
20described in the act of June 22, 2001 (P.L.569, No.38), known as
21The Ben Franklin Technology Development Authority Act.

22"Ben Franklin Technology Partners Program." A program under
23the Ben Franklin Technology Development Authority that funds
24four regionally based economic development organizations
25dedicated to a common mission of technology commercialization.

26"Capital." The amount of money that a purchaser invests
27under the Innovate in PA Program.

28"Department." The Department of Community and Economic
29Development of the Commonwealth.

30"Fund." The Innovate in PA Fund.

1"Impact investment." An investment intended to solve social
2or environmental challenges while generating financial profit.
3Impact investing recognizes that investments have social and
4environmental returns in addition to financial returns and
5attempts to maximize the three returns rather than one at the
6expense of others.

7"Insurance premium tax liability." Any liability incurred by
8an insurance company under Article IX.

9"Program." The Innovate in PA Program.

10"Qualified taxpayer." Any of the following that has
11insurance premium tax liability and contributes capital to
12purchase premium tax credits under this article:

13(1) An insurance company authorized to do business in
14this Commonwealth.

15(2) A holding company that has at least one insurance
16company subsidiary authorized to do business in this
17Commonwealth.

18"Recipient." An entity that receives a distribution of funds
19under section 1811-C(c).

20"Tax credit." A credit against insurance premium tax
21liability offered to or held by a qualified taxpayer under this
22article.

23"Venture Investment Program." A program under the Ben
24Franklin Technology Development Authority dedicated to
25increasing the availability of venture capital in this
26Commonwealth.

27Section 1804-C. Tax credit.

28A qualified taxpayer may purchase tax credits from the
29department and may apply the tax credits against its insurance
30premium tax liability in accordance with this article.

1Section 1805-C. Duties.

2(a) Sale of tax credits.--The department, shall have the
3authority to sell up to $225,000,000 in tax credits to qualified
4taxpayers. The sale of the tax credits shall be in accordance
5with section 1808-C.

6(b) Time of sale.--The sale authorized under subsection (a)
7may not occur before October 1, 2013.

8Section 1806-C. Use of tax credits by qualified taxpayers.

9(a) Use against insurance premium tax liability.--A
10qualified taxpayer that purchases tax credits under section
111805-C may claim the credits beginning in calendar year 2017
12against insurance premium tax liability incurred for a taxable
13year that begins on or after January 1, 2016.

14(b) Application to department.--A qualified taxpayer seeking
15to use purchased tax credits may submit an application to the
16department in a manner prescribed by the department.

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

18(1) A qualified taxpayer may not be required to reduce
19the amount of insurance premium tax included by the taxpayer
20in connection with rate-making for any insurance contract
21written in this Commonwealth because of a reduction of the
22taxpayer's insurance premium tax liability derived from the
23tax credit purchased under this article.

24(2) If, under the insurance laws of this Commonwealth,
25the assets of the qualified taxpayer are examined or
26considered, the taxpayer's balance of tax credits shall be
27treated as an admitted asset subject to the same financial
28rating as held by the Commonwealth.

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

30(1) The total amount of tax credits applied against

1insurance premium tax liability by all qualified taxpayers in
2a fiscal year may not exceed $45,000,000 per year beginning
3in calendar year 2017.

4(2) The credit to be applied in any one year may not
5exceed the insurance premium tax liability of the qualified
6taxpayer for that taxable year.

7(e) Hold-harmless provision.--In any year that a tax credit
8is claimed under this article, the General Assembly shall do all
9of the following:

10(1) Transfer an amount equal to the amount of any tax
11credit claimed by a foreign fire insurance company against
12taxes that otherwise would be distributed in accordance with
13Chapter 7 of the act of December 18, 1984 (P.L.1005, No.205),
14known as the Municipal Pension Plan Funding Standard and
15Recovery Act, to the fund as defined in section 702 of the
16Municipal Pension Plan Funding Standard and Recovery Act.

17(2) Transfer an amount equal to the amount of any tax
18credit claimed by a foreign casualty insurance company
19against taxes that otherwise would be distributed and used
20for police pension, retirement or disability purposes as
21provided by the act of May 12, 1943 (P.L.259, No.120),
22referred to as the Foreign Casualty Insurance Premium Tax
23Allocation Law, for distribution in accordance with the
24Foreign Casualty Insurance Premium Tax Allocation Law.

25(3) Ensure that the programs under paragraphs (1) and
26(2) do not experience a negative fiscal impact due to a
27foreign fire insurance company or a foreign casualty
28insurance company claiming a tax credit authorized under this
29article.

30Section 1807-C. Sale, carryover and carryback.

1(a) Carryover.--If the qualified taxpayer cannot use the
2entire amount of the tax credit for the taxable year in which
3the taxpayer is eligible for the credit, the excess may be
4carried over to succeeding taxable years and used as a credit
5against the qualified tax liability of the taxpayer for those
6taxable years, provided that the credit may not be carried over
7to any taxable year that begins after December 31, 2025.

8(b) Sale.--No sooner than 30 days after providing the
9Insurance Department and the department written notice of the
10intent to transfer tax credits, a qualified taxpayer may
11transfer tax credits held without restriction to any entity that
12is a qualified taxpayer in good standing with the Insurance
13Department and that agrees to assume all of the transferor's
14obligations with respect to the tax credit.

15(c) Carryback.--A qualified taxpayer may not carry back a
16tax credit.

17Section 1808-C. Sale of tax credits to qualified taxpayers.

18(a) Conduct of sale.--The sale of tax credits authorized
19under section 1805-C(a) shall be conducted in accordance with
20this section.

21(b) Process.--The department may sell the tax credits
22authorized under this article or may contract with an
23independent third party to conduct a bidding process among
24qualified taxpayers to purchase the credits. In raising capital
25for the program, the department shall have the discretion to
26distribute credits using a market-driven approach or any
27approach that maximizes the yield to the Commonwealth.

28(c) Application.--A qualified taxpayer seeking to purchase
29tax credits may apply to the department in the manner prescribed
30by the department.

1(d) Bidding process.--Using procedures adopted by the
2department or, if applicable, by an independent third party,
3each qualified taxpayer that submits an application shall make a
4timely and irrevocable offer, subject only to the department's
5issuance to the taxpayer of tax credit certificates, to make
6specified contributions of capital to the department on dates
7specified by the department.

8(e) Contents of offer.--The offer under subsection (d) must
9include all of the following:

10(1) The requested amount of tax credits, which may not
11be less than $500,000.

12(2) The qualified taxpayer's capital contribution for
13each tax credit dollar requested, which may not be less than
14the greater of either of the following:

15(i) Seventy percent of the requested dollar amount
16of tax credits.

17(ii) The percentage of the requested dollar amount
18of tax credits that the department and, if applicable,
19the independent third party, determines to be consistent
20with market conditions as of the offer date.

21(3) Any other information the department or, if
22applicable, independent third party requires.

23(f) Notice of approval.--Each qualified taxpayer that
24submits an application under this section shall receive a
25written notice from the department indicating whether or not it
26has been approved as a purchaser of tax credits and, if so, the
27amount of tax credits allocated.

28(g) Limitation.--No tax credits may be sold if the bidding
29process, upon completion, has failed to yield at least
30$50,000,000 in revenue.

1Section 1809-C. Payment for tax credits purchased and
2certificates.

3(a) Payment of capital.--Capital committed by a qualified
4taxpayer shall be paid to the department for deposit into the
5fund. Nothing under this section shall prohibit the department
6from establishing an installment payment schedule for capital
7payments to be made by the qualified taxpayer.

8(b) Issuance of tax credit certificates.--On receipt of
9payment of capital, the department shall issue to each qualified
10taxpayer a tax credit certificate representing a fully vested
11credit against insurance premium tax liability.

12(c) Certificate issued in accordance with bidding process.--
13The department shall issue tax credit certificates to qualified
14taxpayers in accordance with the bidding process selected by the
15department or the independent third party.

16(d) Contents.--The tax credit certificate shall state all of
17the following:

18(1) The total amount of premium tax credits that the
19qualified taxpayer may claim.

20(2) The amount of capital that the qualified taxpayer
21has contributed or agreed to contribute in return for the
22issuance of the tax credit certificate.

23(3) The dates on which the tax credits will be available
24for use by the qualified taxpayer.

25(4) Any penalties or other remedies for noncompliance.

26(5) The procedures to be used for transferring the tax
27credits.

28(6) Any other requirements the department considers
29necessary.

30Section 1810-C. Failure to make contribution of capital and

1reallocation.

2(a) Prohibition.--A tax credit certificate under section
31809-C may not be issued to any qualified taxpayer that fails to
4make a contribution of capital within the time the department
5specifies.

6(b) Penalty.--A qualified taxpayer that fails to make a
7contribution of capital within the time the department specifies
8shall be subject to a penalty equal to 10% of the amount of
9capital that remains unpaid. The penalty shall be paid to the
10department within 30 days after demand.

11(c) Reallocation.--The department may offer to reallocate
12the defaulted capital among other qualified taxpayers, so that
13the result after reallocation is the same as if the initial
14allocation had been performed without considering the tax credit
15allocation to the defaulting qualified taxpayer.

16(d) Contribution.--If the reallocation of capital under
17subsection (c) results in the contribution by another qualified
18taxpayer of the amount of capital not contributed by the
19defaulting qualified taxpayer, the department may waive the
20penalty provided under subsection (b).

21(e) Transfer.--A qualified taxpayer that fails to make a
22contribution of capital within the time specified may avoid the
23imposition of the penalty by transferring the allocation of tax
24credits to a new or existing qualified taxpayer within 30 days
25after the due date of the defaulted installment. Any transferee
26of an allocation of tax credits of a defaulting qualified
27taxpayer under this subsection shall agree to make the required
28contribution of capital within 30 days after the date of the
29transfer.

30Section 1811-C. Innovate in PA Program.

1(a) Establishment.--The Innovate in PA Program is
2established within the authority.

3(b) Fund.--The authority shall have the power and duty to
4establish the Innovate in PA Fund within this authority.

5(c) Distribution.--The department shall distribute the net
6proceeds received by the department as a result of the sale of
7tax credits under section 1805-C(a) as follows:

8(1) Seventy percent of net proceeds received by the
9department shall be transferred to the authority for deposit
10into the fund for distribution as follows:

11(i) Thirty-three and one-half percent shall be
12distributed to the Ben Franklin Technology Partners
13Program for use according to program guidelines.

14(ii) Five and one-half percent shall be distributed
15by the authority for technology-based economic
16development programs designed to support
17entrepreneurship, including, but not limited to,
18university-based entrepreneurial programs and new or
19existing programs designed to support early stage
20technology companies through seed grants or programming.

21(iii) Sixty percent shall be distributed to the
22Venture Investment Program for use according to program
23guidelines including traditional venture investments or
24impact investments. The authority may consider impact
25investments based on performance. Impact investments may
26not exceed 15% of the Venture Investment Program
27distribution under this subparagraph.

28(iv) One percent shall be retained by the authority
29for administrative costs. At the end of the fiscal year,
30the funds distributed under this subparagraph that are

1not expended by the authority shall be rededicated to the
2fund.

3(2) Thirty percent of net proceeds shall be retained by
4the department in a restricted receipts account for
5distribution as follows:

6(i) Ninety-five percent shall be distributed to the
7Partnerships for Regional Economic Performance Program in
8accordance with guidelines issued by the department.

9(ii) Four percent shall be distributed by the
10department for initiatives related to:

11(A) policy-development;

12(B) program creation or enhancements; and

13(C) strategic planning efforts in the
14advancement of the life sciences industry in this
15Commonwealth.

16(iii) One percent shall be retained by the
17department for administrative costs.

18Section 1812-C. Guidelines.

19The department, in consultation with the authority, shall
20promulgate guidelines implementing this article.

21Section 1813-C. Report.

22(a) Duties.--On or before January 1, 2015, and January 1 of
23each subsequent year, the department, in consultation with the
24authority, shall do 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
8purchaser.

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.