PRINTER'S NO. 30
No. 27 Session of 2005
INTRODUCED BY TANGRETTI, FRANKEL, ARGALL, BALDWIN, BASTIAN,
BEBKO-JONES, BELARDI, BUXTON, CORRIGAN, CRAHALLA, CURRY,
DALEY, DeWEESE, FLICK, FREEMAN, GEORGE, GERGELY, GOOD,
GRUCELA, HALUSKA, HARHAI, HARPER, HENNESSEY, HERMAN, JAMES,
JOSEPHS, W. KELLER, KOTIK, LEACH, LEDERER, LESCOVITZ,
LEVDANSKY, MAHER, MANDERINO, MANN, MARKOSEK, McCALL, MELIO,
MUNDY, NAILOR, PALLONE, PETRARCA, PISTELLA, READSHAW,
ROEBUCK, RUBLEY, SAINATO, SAMUELSON, SANTONI, SAYLOR, SHANER,
SHAPIRO, SOLOBAY, STURLA, THOMAS, TIGUE, WALKO, WANSACZ,
WHEATLEY, WOJNAROSKI, YOUNGBLOOD, YUDICHAK, REICHLEY,
SCHRODER, WASHINGTON, E. Z. TAYLOR AND STETLER,
JANUARY 25, 2005
REFERRED TO COMMITTEE ON FINANCE, JANUARY 25, 2005
AN ACT
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," further providing for sales and use tax
11 definitions, for sales and use tax exclusions, for personal
12 income tax definitions and for classes of personal income;
13 providing for a credit against personal income tax; further
14 providing for realty transfer tax definitions, for realty
15 transfer tax exclusions and for penalties for failing to
16 fulfill a historic covenant; and conferring powers and duties
17 on the Pennsylvania Historical and Museum Commission.
18 The General Assembly of the Commonwealth of Pennsylvania
19 hereby enacts as follows:
20 Section 1. Sections 201, 204 and 301 of the act of March 4,
1 1971 (P.L.6, No.2), known as the Tax Reform Code of 1971, are
2 amended by adding clauses to read:
3 Section 201. Definitions.--The following words, terms and
4 phrases when used in this Article II shall have the meaning
5 ascribed to them in this section, except where the context
6 clearly indicates a different meaning:
7 * * *
8 (eee) "Historic homesite." A building which complies with
9 all of the following:
10 (1) The building is divided into no more than four units,
11 one of which is used as the owner's principal residence. The
12 requirements of this subclause shall be satisfied if the
13 purchaser of a building has entered into a covenant with the
14 Pennsylvania Historical and Museum Commission to divide the
15 building into no more than four units, one of which will be used
16 as the purchaser's principal residence beginning no later than
17 four months after the date of the transfer of title to the real
18 property.
19 (2) The building:
20 (i) has been designated by Federal or State Government as a
21 historic property;
22 (ii) is located in an area designated by Federal or State
23 Government as a historic district;
24 (iii) is located in an area designated as a historic
25 district under section 2 of the act of June 13, 1961 (P.L.282,
26 No.167), entitled "An act authorizing counties, cities,
27 boroughs, incorporated towns and townships to create historic
28 districts within their geographic boundaries; providing for the
29 appointment of Boards of Historical Architectural Review;
30 empowering governing bodies of political subdivisions to protect
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1 the distinctive historical character of these districts and to
2 regulate the erection, reconstruction, alteration, restoration,
3 demolition or razing of buildings within the historic
4 districts";
5 (iv) has been designated as a historic property or is
6 located in an area designated as a historic district pursuant to
7 the Historic Preservation Ordinance, Section 14-2007 of the
8 Philadelphia City Code; or
9 (v) has been designated as a historic property or is located
10 in an area designated as a historic district pursuant to Title
11 11 of the Pittsburgh City Code, chapter 1, section 3, as amended
12 by City Council on July 22, 1997.
13 (3) The owner or purchaser of the building has entered into
14 a covenant with the Pennsylvania Historical and Museum
15 Commission providing that:
16 (i) rehabilitation or restoration work, with a total cost of
17 rehabilitation or restoration valued in excess of one thousand
18 dollars ($1,000), will be completed to the satisfaction of the
19 commission in accordance with 36 CFR 67.7 (relating to standards
20 for rehabilitation) within five years of the date the covenant
21 was entered into with the commission; and
22 (ii) the building:
23 (A) has been or will be occupied as the principal residence
24 of the owner or, for good cause consented to by the Pennsylvania
25 Historical and Museum Commission, of a successor in interest for
26 at least five consecutive years, including the date the covenant
27 was entered into with the commission; or
28 (B) will be occupied as the principal residence of the
29 purchaser or, for good cause consented to by the Pennsylvania
30 Historical and Museum Commission, of a successor in interest for
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1 at least five consecutive years, beginning no later than four
2 months after the date of transfer of title to the real property.
3 (fff) "Cost of rehabilitation or restoration." Costs
4 attributed to the rehabilitation or restoration of a historic
5 homesite, including historic decorative elements; upgrading of
6 the structural, mechanical, electrical and plumbing systems to
7 applicable code; architectural fees; and alterations associated
8 with the conversion of the building to residential use. The term
9 shall not include costs attributable to the acquisition of the
10 real property; the enlargement of an existing building;
11 landscaping, driveways and other site features; outbuildings or
12 garages which do not meet the requirements of clause (eee)(2);
13 and personal labor performed by the owner.
14 Section 204. Exclusions from Tax.--The tax imposed by
15 section 202 shall not be imposed upon any of the following:
16 * * *
17 (65) The sale at retail or use of tangible personal property
18 or services which are costs of rehabilitation or restoration of
19 a historic homesite. The purchaser shall furnish to the vendor a
20 certificate substantially in the form as the Pennsylvania
21 Historical and Museum Commission, in conjunction with the
22 department, shall prescribe stating that the sale is exempt from
23 tax pursuant to this clause.
24 Section 301. Definitions.--The following words, terms and
25 phrases when used in this article shall have the meaning
26 ascribed to them in this section except where the context
27 clearly indicates a different meaning. Unless specifically
28 provided otherwise, any reference in this article to the
29 Internal Revenue Code shall include the Internal Revenue Code of
30 1986 (Public Law 99-514, 26 U.S.C. § 1 et seq.), as amended to
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1 January 1, 1997:
2 * * *
3 (i.3) "Historic homesite" means a historic homesite as
4 defined in section 201(eee).
5 * * *
6 Section 2. Section 303(a)(3) of the act is amended by adding
7 a subparagraph to read:
8 Section 303. Classes of Income.--(a) The classes of income
9 referred to above are as follows:
10 * * *
11 (3) Net gains or income from disposition of property. Net
12 gains or net income, less net losses, derived from the sale,
13 exchange or other disposition of property, including real
14 property, tangible personal property, intangible personal
15 property or obligations issued on or after the effective date of
16 this amendatory act by the Commonwealth; any public authority,
17 commission, board or other agency created by the Commonwealth;
18 any political subdivision of the Commonwealth or any public
19 authority created by any such political subdivision; or by the
20 Federal Government as determined in accordance with accepted
21 accounting principles and practices. For the purpose of this
22 article:
23 * * *
24 (viii) The term "net gains or income" shall not include the
25 net gain on the sale of a historic homesite site. No later than
26 the date of transfer of title to the real property, the
27 purchaser shall provide a copy of the covenant with the
28 Pennsylvania Historical and Museum Commission to the seller.
29 * * *
30 Section 3. The act is amended by adding a section to read:
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1 Section 314.1. Historic Rehabilitation Credit.--(a) An
2 individual shall be allowed a credit against the tax otherwise
3 due under this article for the rehabilitation or restoration of
4 a historic homesite upon certification by the Pennsylvania
5 Historical and Museum Commission that rehabilitation or
6 restoration work, with a total cost of rehabilitation or
7 restoration valued in excess of one thousand dollars ($1,000)
8 for a historic homesite, has been completed to the satisfaction
9 of the commission in accordance with 36 CFR 67.7 (relating to
10 standards for rehabilitation).
11 (b) The credit authorized under this section shall be twenty
12 per cent of the amount expended by the individual during the
13 taxable year on tangible personal property or services that
14 qualify for a sales and use tax exclusion under section 204(65)
15 as certified by the commission.
16 (c) If the taxpayer cannot use the entire amount of the
17 historic rehabilitation credit for the taxable year in which the
18 expenditures are first certified, then the excess may be carried
19 over to succeeding taxable years. Each time that the historic
20 rehabilitation credit is carried over to a succeeding taxable
21 year, it shall be reduced by the amount that was used as a
22 credit during the immediately preceding taxable year. The credit
23 may be carried over and applied to succeeding taxable years for
24 no more than five taxable years following the first taxable year
25 for which the taxpayer was entitled to claim the credit.
26 (d) The aggregate of historic rehabilitation credits in a
27 fiscal year shall not exceed five million dollars ($5,000,000).
28 Section 4. Section 1101-C of the act is amended by adding a
29 definition to read:
30 Section 1101-C. Definitions.--The following words when used
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1 in this article shall have the meanings ascribed to them in this
2 section:
3 * * *
4 "Historic homesite." A historic homesite as defined in
5 section 201(eee).
6 * * *
7 Section 5. Section 1102-C.3 of the act, amended or added
8 July 2, 1986 (P.L.318, No.77), June 16, 1994 (P.L.279, No.48)
9 and May 7, 1997 (P.L.85, No.7), is amended to read:
10 Section 1102-C.3. Excluded Transactions.--The tax imposed by
11 section 1102-C shall not be imposed upon:
12 (1) A transfer to the Commonwealth or to any of its
13 instrumentalities, agencies or political subdivisions by gift,
14 dedication or deed in lieu of condemnation or deed of
15 confirmation in connection with condemnation proceedings, or a
16 reconveyance by the condemning body of the property condemned to
17 the owner of record at the time of condemnation, which
18 reconveyance may include property line adjustments provided said
19 reconveyance is made within one year from the date of
20 condemnation.
21 (2) A document which the Commonwealth is prohibited from
22 taxing under the Constitution or statutes of the United States.
23 (3) A conveyance to a municipality, township, school
24 district or county pursuant to acquisition by the municipality,
25 township, school district or county of a tax delinquent property
26 at sheriff sale or tax claim bureau sale.
27 (4) A transfer for no or nominal actual consideration which
28 corrects or confirms a transfer previously recorded, but which
29 does not extend or limit existing record legal title or
30 interest.
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1 (5) A transfer of division in kind for no or nominal actual
2 consideration of property passed by testate or intestate
3 succession and held by cotenants; however, if any of the parties
4 take shares greater in value than their undivided interest, tax
5 is due on the excess.
6 (6) A transfer between husband and wife, between persons who
7 were previously husband and wife who have since been divorced,
8 provided the property or interest therein subject to such
9 transfer was acquired by the husband and wife or husband or wife
10 prior to the granting of the final decree in divorce, between
11 parent and child or the spouse of such child, between brother or
12 sister or spouse of a brother or sister and brother or sister or
13 the spouse of a brother or sister and between a grandparent and
14 grandchild or the spouse of such grandchild, except that a
15 subsequent transfer by the grantee within one year shall be
16 subject to tax as if the grantor were making such transfer.
17 (7) A transfer for no or nominal actual consideration of
18 property passing by testate or intestate succession from a
19 personal representative of a decedent to the decedent's devisee
20 or heir.
21 (8) A transfer for no or nominal actual consideration to a
22 trustee of an ordinary trust where the transfer of the same
23 property would be exempt if the transfer was made directly from
24 the grantor to all of the possible beneficiaries that are
25 entitled to receive the property or proceeds from the sale of
26 the property under the trust, whether or not such beneficiaries
27 are contingent or specifically named. A trust clause which
28 identifies the contingent beneficiaries by reference to the
29 heirs of the trust settlor as determined by the laws of the
30 intestate succession shall not disqualify a transfer from the
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1 exclusion provided by this clause. No such exemption shall be
2 granted unless the recorder of deeds is presented with a copy of
3 the trust instrument that clearly identifies the grantor and all
4 possible beneficiaries.
5 (8.1) A transfer for no or nominal actual consideration to a
6 trustee of a living trust from the settlor of the living trust.
7 No such exemption shall be granted unless the recorder of deeds
8 is presented with a copy of the living trust instrument.
9 (9) A transfer for no or nominal actual consideration from a
10 trustee of an ordinary trust to a specifically named beneficiary
11 that is entitled to receive the property under the recorded
12 trust instrument or to a contingent beneficiary where the
13 transfer of the same property would be exempt if the transfer
14 was made by the grantor of the property into the trust to that
15 beneficiary. However, any transfer of real estate from a living
16 trust during the settlor's lifetime shall be considered for the
17 purposes of this article as if such transfer were made directly
18 from the settlor to the grantee.
19 (9.1) A transfer for no or nominal actual consideration from
20 a trustee of a living trust after the death of the settlor of
21 the trust or from a trustee of a trust created pursuant to the
22 will of a decedent to a beneficiary to whom the property is
23 devised or bequeathed.
24 (9.2) A transfer for no or nominal actual consideration from
25 the trustee of a living trust to the settlor of the living trust
26 if such property was originally conveyed to the trustee by the
27 settlor.
28 (10) A transfer for no or nominal actual consideration from
29 trustee to successor trustee.
30 (11) A transfer:
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1 (i) for no or nominal actual consideration between principal
2 and agent or straw party; or
3 (ii) from or to an agent or straw party where, if the agent
4 or straw party were his principal, no tax would be imposed under
5 this article.
6 Where the document by which title is acquired by a grantee or
7 statement of value fails to set forth that the property was
8 acquired by the grantee from, or for the benefit of, his
9 principal, there is a rebuttable presumption that the property
10 is the property of the grantee in his individual capacity if the
11 grantee claims an exemption from taxation under this clause.
12 (12) A transfer made pursuant to the statutory merger or
13 consolidation of a corporation or statutory division of a
14 nonprofit corporation, except where the department reasonably
15 determines that the primary intent for such merger,
16 consolidation or division is avoidance of the tax imposed by
17 this article.
18 (13) A transfer from a corporation or association of real
19 estate held of record in the name of the corporation or
20 association where the grantee owns stock of the corporation or
21 an interest in the association in the same proportion as his
22 interest in or ownership of the real estate being conveyed and
23 where the stock of the corporation or the interest in the
24 association has been held by the grantee for more than two
25 years.
26 (14) A transfer from a nonprofit industrial development
27 agency or authority to a grantee of property conveyed by the
28 grantee to that agency or authority as security for a debt of
29 the grantee or a transfer to a nonprofit industrial development
30 agency or authority.
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1 (15) A transfer from a nonprofit industrial development
2 agency or authority to a grantee purchasing directly from it,
3 but only if:
4 (i) the grantee shall directly use such real estate for the
5 primary purpose of manufacturing, fabricating, compounding,
6 processing, publishing, research and development,
7 transportation, energy conversion, energy production, pollution
8 control, warehousing or agriculture; and
9 (ii) the agency or authority has the full ownership interest
10 in the real estate transferred.
11 (16) A transfer by a mortgagor to the holder of a bona fide
12 mortgage in default in lieu of a foreclosure or a transfer
13 pursuant to a judicial sale in which the successful bidder is
14 the bona fide holder of a mortgage, unless the holder assigns
15 the bid to another person.
16 (17) Any transfer between religious organizations or other
17 bodies or persons holding title for a religious organization if
18 such real estate is not being or has not been used by such
19 transferor for commercial purposes.
20 (18) A transfer to a conservancy which possesses a tax-
21 exempt status pursuant to section 501(c)(3) of the Internal
22 Revenue Code of 1954 (68A Stat. 3, 26 U.S.C. § 501(c)(3)) and
23 which has as its primary purpose preservation of land for
24 historic, recreational, scenic, agricultural or open-space
25 opportunities; or a transfer from such a conservancy to the
26 United States, the Commonwealth or to any of their
27 instrumentalities, agencies or political subdivisions; or any
28 transfer from such a conservancy where the real estate is
29 encumbered by a perpetual agricultural conservation easement as
30 defined by the act of June 30, 1981 (P.L.128, No.43), known as
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1 the "Agricultural Area Security Law," and such conservancy has
2 owned the real estate for at least two years immediately prior
3 to the transfer.
4 (19) A transfer of real estate devoted to the business of
5 agriculture to a family farm corporation by a member of the same
6 family which directly owns at least seventy-five per cent of
7 each class of the stock thereof.
8 (19.1) A transfer of real estate devoted to the business of
9 agriculture to a family farm partnership by a member of the same
10 family, which family directly owns at least seventy-five per
11 cent of the interests in the partnership.
12 (20) A transfer between members of the same family of an
13 ownership interest in a real estate company, family farm
14 corporation or family farm partnership which owns real estate.
15 (21) A transaction wherein the tax due is one dollar ($1) or
16 less.
17 (22) Leases for the production or extraction of coal, oil,
18 natural gas or minerals and assignments thereof.
19 In order to exercise any exclusion provided in this section, the
20 true, full and complete value of the transfer shall be shown on
21 the statement of value. For leases of coal, oil, natural gas or
22 minerals, the statement of value may be limited to an
23 explanation of the reason such document is not subject to tax
24 under this article.
25 (23) A transfer of a historic homesite. No later than the
26 date of transfer of title to the real property, the purchaser
27 shall provide a copy of the covenant with the Pennsylvania
28 Historical and Museum Commission to the seller.
29 Section 6. The act is amended by adding a section to read:
30 Section 3003.16. Failure to Fulfill Historic Homesite
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1 Covenant.--(a) The Pennsylvania Historical and Museum
2 Commission shall notify the department when an individual who
3 has entered into a covenant to rehabilitate or restore a
4 historic homesite under section 201(eee), 301(i.3) or 1101-C
5 fails to abide by the terms of the covenant.
6 (b) Upon notification by the Pennsylvania Historical and
7 Museum Commission that the individual has failed to abide by the
8 terms of the covenant, the department shall levy a penalty
9 against that individual equal to one hundred per cent of the tax
10 benefits granted under sections 204(65), 303(a)(3)(viii), 314.1
11 and 1102-C.3 with respect to the historic homesite to which the
12 covenant applied.
13 (c) The penalty provided by subsection (b), or any portion
14 thereof, may be abated if the failure to abide by the terms of
15 the covenant is justified by reason of change in employment,
16 health or, to the extent provided in regulation, unforeseen
17 circumstances. The department and the Pennsylvania Historical
18 and Museum Commission shall promulgate regulations to implement
19 this subsection.
20 Section 7. This act shall apply to covenants with the
21 Pennsylvania Historical and Museum Commission which are entered
22 into after June 30, 2005.
23 Section 8. This act shall be known and may be cited as the
24 Historic Home and Neighborhood Preservation Act.
25 Section 9. This act shall take effect July 1, 2005, or
26 immediately, whichever is later.
L22L72JS/20050H0027B0030 - 13 -