PRINTER'S NO. 1932
No. 1557 Session of 2005
INTRODUCED BY LEVDANSKY, DeWEESE, VEON, BELARDI, CALTAGIRONE,
CURRY, DERMODY, FABRIZIO, FRANKEL, FREEMAN, GERBER, GERGELY,
HANNA, HERSHEY, JOSEPHS, MANDERINO, MANN, MUNDY, PALLONE,
PISTELLA, ROONEY, SAINATO, SHANER, SHAPIRO, SOLOBAY, STABACK,
STETLER, STURLA, TANGRETTI, TIGUE, WALKO, WHEATLEY, YUDICHAK
AND JAMES, MAY 10, 2005
REFERRED TO COMMITTEE ON FINANCE, MAY 10, 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, in sales and use tax, for
11 assessment and for reassessment; deleting provisions relating
12 to review by Board of Finance and Revenue; further providing
13 for refund of sales tax attributed to bad debt; deleting
14 provisions relating to refund or credit for overpayment and
15 to restriction on refunds; further providing, in sales and
16 use tax, for refunds, for refund petition and for extended
17 time for filing special petition for refund; further
18 providing, in personal income tax, for definitions and for
19 classes of income; providing for withholding tax on early
20 distributions; further providing, in personal income tax, for
21 assessment, for jeopardy assessments, for procedure for
22 reassessment, for restrictions on refunds and for limitations
23 on refund or credit; further providing, in corporate net
24 income tax, for definitions, for imposition, for reports and
25 payment, for consolidated reports and for changes by Federal
26 Government; providing, in corporate net income tax, for
27 assessments, for jeopardy assessments, for limitations on
28 assessments and for extension of limitation period; further
29 providing for enforcement relating to corporate net income
30 tax; providing, in corporate net income tax, for collection
1 and for actions to collect and defenses; further providing,
2 in gross receipts tax, for imposition; further providing, in
3 realty transfer tax, for assessment, for lien and for
4 refunds; further providing for mutual thrift institutions tax
5 assessment; further providing, in malt beverage tax, for
6 assessment and for refund of tax; further providing for
7 inheritance tax refund; providing for petition procedure and
8 administration; establishing the Tax Review Tribunal and
9 providing for its powers and duties; providing for tax
10 clearance for renewals of licenses, permits and
11 registrations; deleting provisions relating to petitions for
12 refunds; further providing for estimated tax and for
13 underpayment of estimated tax, for refund petitions and for
14 timely filing; providing for assessments by the Department of
15 Revenue; and making related repeals.
16 The General Assembly of the Commonwealth of Pennsylvania
17 hereby enacts as follows:
18 Section 1. Sections 230 and 232 of the act of March 4, 1971
19 (P.L.6, No.2), known as the Tax Reform Code of 1971, are amended
20 to read:
21 Section 230. Assessment.--The department is authorized and
22 required to make the inquiries, determinations and assessments
23 of the tax (including interest, additions and penalties) imposed
24 by this article. A notice of assessment and demand for payment
25 shall be mailed by certified mail to the taxpayer. The notice
26 shall set forth the basis of the assessment.
27 Section 232. Reassessment.--Any taxpayer against whom an
28 assessment is made may petition the department for a
29 reassessment pursuant to Article XXVII. [Notice of an intention
30 to file such a petition shall be given to the department within
31 thirty days of the date the notice of assessment was mailed to
32 the taxpayer, except that the department for due cause may
33 accept such notice within ninety days of the date the notice of
34 assessment was mailed. The department by registered mail shall
35 supply the taxpayer with a statement setting forth in reasonable
36 detail the basis of the assessment within thirty days after
37 receipt of the taxpayer's notice of intention to file a petition
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1 for reassessment. A petition for reassessment shall thereafter
2 be filed within thirty days after such basis of assessment has
3 been mailed to the taxpayer. Such petition shall set forth in
4 reasonable detail the grounds upon which the taxpayer claims
5 that the assessment is erroneous or unlawful, in whole or in
6 part, and shall be accompanied by an affidavit or affirmation
7 that the facts contained therein are true and correct and that
8 the petition is not interposed for delay. An extension of time
9 for filing the petition may be allowed for cause but in no case
10 shall such extension exceed one hundred twenty days. The
11 department shall hold such hearings as may be necessary for the
12 purpose, at such times and places as it may determine, and each
13 taxpayer who has duly filed such petition for reassessment shall
14 be notified by the department of the time when, and the place
15 where, such hearing in his case will be held.
16 It shall be the duty of the department, within six months
17 after receiving a filed petition for reassessment, to dispose of
18 the issue raised by such petition and mail notice of the
19 department's decision to the petitioner: Provided, however, That
20 the taxpayer and the department may, by stipulation, extend such
21 disposal time by not more than six additional months.]
22 Section 2. Section 234 of the act is repealed.
23 Section 3. Section 247.1(a) of the act, amended June 22,
24 2001 (P.L.353, No.23), is amended to read:
25 Section 247.1. Refund of Sales Tax Attributed to Bad Debt.--
26 (a) A vendor may file a petition for refund of sales tax paid
27 to the department that is attributed to a bad debt if all of the
28 following apply:
29 (1) The purchaser fails to pay the vendor the total purchase
30 price.
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1 (2) The purchase price is written off, either in whole or in
2 part, as a bad debt on the vendor's books and records.
3 (3) The bad debt has been deducted for Federal income tax
4 purposes under section 166 of the Internal Revenue Code of 1986
5 (Public Law 99-514, 26 U.S.C. § 166).
6 The petition shall be filed with the department within the time
7 limitations prescribed by section [3003.1 of this act.] 2703 of
8 this act and shall be governed by the procedure of Article
9 XXVII.
10 * * *
11 Section 4. Sections 250 and 251 of the act are repealed.
12 Section 5. Section 252 of the act, amended April 23, 1998
13 (P.L.239, No.45), is amended to read:
14 Section 252. Refunds.--The department shall, pursuant to the
15 provisions of [sections 253 and 254] Article XXVII, refund all
16 taxes, interest and penalties paid to the Commonwealth under the
17 provisions of this article and to which the Commonwealth is not
18 rightfully entitled. Such refunds shall be made to the person,
19 his heirs, successors, assigns or other personal
20 representatives, who actually paid the tax: Provided, That no
21 refund shall be made under this section with respect to any
22 payment made by reason of an assessment with respect to which a
23 taxpayer has filed a petition for reassessment pursuant to
24 section [232 of this article] 2702 of Article XXVII to the
25 extent that said petition has been determined adversely to the
26 taxpayer by a decision which is no longer subject to further
27 review or appeal: Provided further, That nothing contained
28 herein shall be deemed to prohibit a taxpayer who has filed a
29 timely petition for reassessment from amending it to a petition
30 for refund where the petitioner has paid the tax assessed.
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1 Section 6. Section 253 of the act, amended May 7, 1997
2 (P.L.85, No.7), is amended to read:
3 Section 253. Refund Petition.--(a) Except as provided for
4 in section 256 and in subsection (b) [and (d)] of this section,
5 the refund or credit of tax, interest or penalty provided for by
6 section 252 shall be made only where the person who has actually
7 paid the tax files a petition for refund with the department
8 under [section 3003.1. Such petition for refund must set forth
9 in reasonable detail the grounds upon which the taxpayer claims
10 that the Commonwealth is not rightfully entitled to such tax,
11 interest or penalty, in whole or in part, and shall be
12 accompanied by an affidavit affirming that the facts contained
13 therein are true and correct. The department may hold such
14 hearings as may be necessary for the purpose at such times and
15 places as it may determine, and each person who has duly filed a
16 refund petition shall be notified by the department of the time
17 when, and the place where, such hearing in his case will be
18 held.] Article XXVII.
19 (b) A refund or credit of tax, interest or penalty, paid as
20 a result of an assessment made by the department under section
21 231, shall be made only where the person who has actually paid
22 the tax files with the department a petition for a refund with
23 the department under [section 3003.1(d)] Article XXVII. The
24 filing of a petition for refund, under the provisions of this
25 subsection, shall not affect the abatement of interest,
26 additions or penalties to which the person may be entitled by
27 reason of his payment of the assessment.
28 [(c) It shall be the duty of the department, within six
29 months after receiving a petition for refund, to dispose of the
30 issue raised by such petition, and mail notice of the
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1 department's decision to the petitioner: Provided, however, That
2 the taxpayer and the department may, by stipulation, extend such
3 disposal time by not more than six additional months.
4 (d) Notwithstanding any other provision of this section
5 where any tax, interest or penalty has been paid under a
6 provision of this article subsequently held by final judgment of
7 a court of competent jurisdiction to be unconstitutional, or
8 under an interpretation of such provision subsequently held by
9 such court to be erroneous, a petition for refund may be filed
10 either before or subsequent to final judgment, but such petition
11 must be filed under section 3003.1. The department shall have
12 jurisdiction to hear and determine any such petition filed prior
13 to such final judgment only if, at the time of filing of the
14 petition, proceedings are pending in a court of competent
15 jurisdiction wherein the claim of unconstitutionality or of
16 erroneous interpretation, made in the petition for refund may be
17 established, and in such case, the department shall not take
18 final action upon the petition for refund until the judgment
19 determining the question involved in such petition has become
20 final.]
21 Section 7. Section 254 of the act is repealed.
22 Section 8. Section 256 of the act is amended to read:
23 Section 256. Extended Time for Filing Special Petition for
24 Refund.--Any party to a transaction who has paid tax by reason
25 of a transaction with respect to which the department is
26 assessing tax against another person may, within six months
27 after the filing by the department of the assessment against
28 such other person, file a special petition for refund,
29 notwithstanding his failure to [file a regular petition within
30 three years of the payment.] timely file a petition pursuant to
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1 section 2703 of Article XXVII. The provisions of [sections 253,
2 254 and 255] Article XXVII shall be applicable to such special
3 petition for refund, except that the department need not act on
4 such petition until there is a final determination as to the
5 propriety of the assessment filed against the other party to the
6 transaction. Where a petition is filed under this provision in
7 order to take advantage of the extended period of limitations,
8 overpayments by the petitioner shall be refunded but only to the
9 extent of the actual tax (without consideration of interest and
10 penalties) paid by the other party to the transaction. The
11 purpose of this section is to avoid duplicate payment of tax
12 where a determination is made by the department that one party
13 to a transaction is subject to tax, and another party to the
14 transaction has previously paid tax with respect to such
15 transaction and, as such, this section shall be construed as
16 extending right beyond that provided for by section [253] 2703,
17 and not to limit such other section.
18 Section 9. Section 301(a), (d) and (q) of the act, amended
19 December 23, 1983 (P.L.370, No.90), April 23, 1998 (P.L.239,
20 No.45) and June 29, 2002 (P.L.559, No.89), are amended and the
21 section is amended by adding clauses to read:
22 Section 301. Definitions.--The following words, terms and
23 phrases when used in this article shall have the meaning
24 ascribed to them in this section except where the context
25 clearly indicates a different meaning, and, unless specifically
26 provided otherwise, any reference in this article to the
27 Internal Revenue Code of 1986 shall mean the Internal Revenue
28 Code of 1986 (Public Law 99-514, 26 U.S.C. § 1 et seq.), as
29 amended to January 1, 1997:
30 (a) "Accepted accounting principles and practices" means
20050H1557B1932 - 7 -
1 [those]:
2 (i) The requirements of sections 451 and 457 of the Internal
3 Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. §§ 451 and
4 457), as amended to January 1, 2005; (ii) those accounting
5 principles, systems or practices, including the installment
6 sales method of reporting, which are acceptable by standards of
7 the accounting profession and which are not inconsistent with
8 the regulations of the department setting forth such principles
9 and practices or the requirements described in subclause (i).
10 * * *
11 (d) "Compensation" means and shall include salaries, wages,
12 commissions, bonuses and incentive payments whether based on
13 profits or otherwise, fees, tips and similar remuneration
14 received for services rendered, whether directly or through an
15 agent, and whether in cash or in property.
16 The term "compensation" shall not mean or include: (i)
17 periodic payments for sickness and disability other than regular
18 wages received during a period of sickness or disability; or
19 (ii) disability, retirement or other payments arising under
20 workmen's compensation acts, occupational disease acts and
21 similar legislation by any government; or (iii) payments
22 commonly recognized as [old age or retirement benefits paid to
23 persons retired from service after reaching a specific age or
24 after a stated period of employment] Social Security or Tier 1
25 railroad retirement benefits or government or church pension
26 plan payments; or (iv) payments commonly known as public
27 assistance, or unemployment compensation payments by any
28 governmental agency; or (v) payments to reimburse actual
29 expenses; or (vi) payments made by employers or labor unions,
30 including payments made pursuant to a cafeteria plan qualifying
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1 under section 125 of the Internal Revenue Code of 1986 (Public
2 Law 99-514, 26 U.S.C. § 125), for employe benefit programs
3 covering hospitalization, sickness, disability or death,
4 supplemental unemployment benefits or strike benefits: Provided,
5 That the program does not discriminate in favor of highly
6 compensated individuals as to eligibility to participate,
7 payments or program benefits; or (vii) any compensation received
8 by United States servicemen serving in a combat zone; or (viii)
9 payments received by a foster parent for in-home care of foster
10 children from an agency of the Commonwealth or a political
11 subdivision thereof or an organization exempt from Federal tax
12 under section 501(c)(3) of the Internal Revenue Code of 1954
13 which is licensed by the Commonwealth or a political subdivision
14 thereof as a placement agency; or (ix) payments made by
15 employers or labor unions for employe benefit programs covering
16 social security or [retirement] railroad retirement benefits; or
17 (x) personal use of an employer's owned or leased property or of
18 employer-provided services[.]; or (xi) payments received under
19 an eligible retirement plan or funded eligible excess benefit
20 plan by an employe after separation from covered service after
21 attainment of retirement age or service; or (xii) payments
22 received by an employe under an eligible supplemental executive
23 retirement plan or unfunded eligible excess benefit plan after
24 separation from covered service after attainment of retirement
25 age or service as part of a series of substantially equal
26 periodic payments, not less frequently than annually, made for:
27 (A) the life or life expectancy of the recipient or the joint
28 lives or joint life expectancies of the recipient and the
29 designated beneficiary of the recipient; or (B) a period of not
30 less than ten years; or (xiii) any distribution under an employe
20050H1557B1932 - 9 -
1 welfare or pension benefit plan that is made to a plan
2 beneficiary or to the estate of the employe by reason of the
3 death of the employe; or (xiv) payments made under eligible
4 retirement plans, eligible excess benefit plans or eligible
5 supplemental executive retirement plans that are contingent upon
6 the employe's being unable to engage in any substantial gainful
7 activity by reason of any medically determinable physical or
8 mental impairment that can be expected to result in death or to
9 last for a continuous period of not less than twelve months; or
10 (xv) retired or retainer pay of a member or former member of a
11 uniform service computed under 10 U.S.C. Ch. 71.
12 * * *
13 (h.1) "Eligible excess benefit plan" means any nonelective
14 plan, program or arrangement that meets the requirements of
15 paragraphs (2), (3) and (4) of subsection (a) of section 409A of
16 the Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C.
17 § 409A), as amended to January 1, 2005, is operated in
18 accordance with such requirements and is maintained solely for
19 the purpose of providing retirement benefits for employes in
20 excess of the limitations imposed by one or more of sections
21 401(a)(17), (k) or (m), 402(g), 403(b), 408(k) or 415 of the
22 Internal Revenue Code of 1986, as amended, or any other
23 limitation on contributions or benefits in such code on plans to
24 which any of such sections apply.
25 (h.2) "Eligible retirement plan" means any qualified
26 retirement plan as defined in section 4974(c) of the Internal
27 Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. § 4974(c)),
28 as amended to January 1, 2005, simplified employe pension plan
29 as defined in section 408(k) of the Internal Revenue Code of
30 1986, simple retirement account as defined in section 408(p) of
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1 the Internal Revenue Code of 1986, Roth IRA as defined in
2 section 408A of the Internal Revenue Code of 1986, or eligible
3 deferred compensation plan as defined in section 457(b) of the
4 Internal Revenue Code of 1986 that is in compliance, by design
5 and in operation, with Federal requirements.
6 (h.3) "Eligible supplemental executive retirement plan"
7 means any nonelective nonqualified deferred compensation plan
8 that meets the requirements of section 409A(a)(2), (3) and (4)
9 of the Internal Revenue Code of 1986 (Public Law 99-514, 26
10 U.S.C. § 409A(a)(2), (3) and (4)), as amended to January 1,
11 2005, is operated in accordance with such requirements, and is
12 maintained solely to provide supplemental retirement benefits.
13 * * *
14 (q) (1) "Received" for the purpose of computation of income
15 subject to tax under this article means "received, earned or
16 acquired" [and];
17 (2) the phrase "received, earned or acquired" shall be
18 construed according to the method of accounting required by the
19 department under this article for computing and reporting income
20 subject to the tax[.];
21 (3) with respect to eligible retirement plans, the phrase
22 shall be construed, as applicable, according to the provisions
23 of sections 72(a), (b), (c) and (d), 83, 402, 403, 404, 404A,
24 406, 407, 408, 408A, 451 and 457 of the Internal Revenue Code of
25 1986 (Public Law 99-514, U.S.C. §§ 72(a), (b), (c) and (d), 83,
26 402, 403, 404, 404A, 406, 407, 408, 408A, 451 and 457), as
27 amended to January 1, 2005, except that, for purposes of
28 computing tax under this article:
29 (i) Amounts lawfully deducted and withheld from the
30 compensation of employes shall be considered to have been
20050H1557B1932 - 11 -
1 received by the employe as compensation at the time the
2 deduction is made.
3 (ii) Contributions to an employes' trust, pooled fund,
4 custodial account or contract or annuity made by an employer
5 pursuant to a cash or deferred arrangement or salary reduction
6 agreement shall be deemed to have been received by the employe
7 as compensation at the time the contribution is made, regardless
8 of when the election is made or a payment is received.
9 (iii) Any compensation deferred at a plan participant's
10 election shall be deemed to have been received as compensation
11 at the time the compensated service is performed, regardless of
12 when the election is made or a payment is received.
13 (iv) Any contribution to a plan by, on behalf of or
14 attributable to a self-employed person shall be deemed to have
15 been received at the time the contribution is made.
16 (v) Employer contributions to a Roth IRA custodial account
17 or annuity shall be deemed received, earned or acquired only
18 when distributed or the plan fails to meet the requirements of
19 section 408A of the Internal Revenue Code of 1986 or is not
20 operated in accordance with such requirements.
21 (vi) No deduction or exclusion shall be allowed for employe
22 contributions to an employes' trust or pooled fund or custodial
23 account or contract or annuity;
24 (4) with respect to eligible excess benefit or supplemental
25 executive retirement plans, the phrase shall be construed
26 according to the provisions of sections 72(a), (b), (c) and (d),
27 83, 409A and 671 of the Internal Revenue Code of 1986, as
28 amended to January 1, 2005, except that:
29 (i) Any compensation contributed in cash or in other assets
30 at a plan participant's election shall be deemed to have been
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1 received as remuneration at the time the compensated service is
2 performed, regardless of when the election or payment is made
3 and no deduction or exclusion shall be allowed for employe
4 contributions to an employes' trust or pooled fund or custodial
5 account or contract or annuity.
6 (ii) Notwithstanding subsection (d)(xi) and (xii), any
7 unfunded eligible excess benefit plan or eligible supplemental
8 executive retirement plan distribution of remuneration deferred
9 at a plan participant's election which was not includable in the
10 income of the participant shall be taxable as compensation when
11 distributed; and
12 (5) with respect to nonqualified deferred compensation plans
13 other than eligible excess benefit plans, the phrase shall be
14 construed according to the provisions of sections 72(a), (b),
15 (c) and (d), 83, 409A and 671 of the Internal Revenue Code of
16 1986, as amended to January 1, 2005, except that no deduction or
17 exclusion shall be allowed for employe contributions to an
18 employes' trust or pooled fund or custodial account or contract
19 or annuity.
20 * * *
21 (s.3) "Retirement age or service" means the earliest of:
22 (1) The earliest time specified in the employes' plan at
23 which all plan participants who are not disabled acquire the
24 right to separate from employment by retirement without the
25 consent of the employer and the right immediately to begin
26 receiving retirement benefits without reduction due to early
27 retirement.
28 (2) The earliest time specified in the employes' plan at
29 which all plan participants who are not disabled acquire the
30 right to separate from employment by retirement without the
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1 consent of the employer and the right immediately to begin
2 receiving the benefit to which they would be entitled at the
3 normal retirement time actuarially reduced due to age.
4 (3) Where a plan does not specify retirement age or service,
5 the date on which the employe attains fifty-nine and a half
6 years of age.
7 Section 10. Section 303 of the act is amended by adding
8 subsections to read:
9 Section 303. Classes of Income.--* * *
10 (a.4) Applicable Federal limitations on State income
11 taxation are incorporated by reference.
12 (a.5) Except as provided in this article and without regard
13 to section 409A(a)(1)(B)(i)(II) of the Internal Revenue Code of
14 1986 (26 U.S.C. § 409A(a)(1)(B)(i)(II)), the requirements of
15 Subtitle A, Ch. 1 Subch. D, Pt. 1, Subpt. A of the Internal
16 Revenue Code of 1986 (26 U.S.C. § 401 et seq.), as amended to
17 January 1, 2005, and sections 72(a), (b), (c) and (d), 83 and
18 457 of the Internal Revenue Code of 1986 (26 U.S.C. §§ 72(a),
19 (b), (c) and (d), 83 and 457), as amended to January 1, 2005,
20 shall be applicable.
21 (a.6) Any benefit provided under the Railroad Retirement Act
22 of 1974 (Public Law 93-445, 88 Stat. 1305), as amended, other
23 than a Tier 1 railroad retirement benefit, and amounts described
24 in section 1402(a)(10) of the Internal Revenue Code of 1986 (26
25 U.S.C. § 1402(a)(10), as amended to January 1, 2005, shall be
26 treated for purposes of this article as a benefit provided under
27 an eligible retirement plan.
28 * * *
29 Section 11. Article III of the act is amended by adding a
30 part to read:
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1 PART VII-B
2 WITHHOLDING TAX ON EARLY DISTRIBUTIONS
3 Section 324.8. Withholding Tax on Early Distributions.--(a)
4 Except as provided in this section, all provisions of this
5 article that are applicable to an employer shall be applicable
6 to any payor of any distribution or payment from or under an
7 employe benefit plan, individual retirement plan as defined in
8 section 7701(a)(37) of the Internal Revenue Code of 1986 (Public
9 Law 99-514, 26 U.S.C. § 7701(a)(37)) or commercial annuity. Any
10 such payor shall withhold from such distribution or payment the
11 amount that would be required to be withheld therefrom if it
12 were a payment of wages by an employer to an employe.
13 (b) Subsection (a) shall not apply to:
14 (1) Any nonperiodic distribution that is an eligible
15 rollover distribution as defined by section 402(f)(2)(A) of the
16 Internal Revenue Code of 1986, as amended to January 1, 2005, if
17 the distributee elects under section 401(a)(31)(A) of the
18 Internal Revenue Code of 1986 to have such distribution paid
19 directly to an eligible retirement plan.
20 (2) Any amount that is wages for Federal income tax purposes
21 without regard to this section.
22 (3) Any portion of a distribution or payment which it is
23 reasonable to believe is excludable from tax under this article.
24 (4) Any amount paid on employer securities that is paid to a
25 plan and reinvested in employer securities and allowed as a
26 deduction under section 404(k) of the Internal Revenue Code of
27 1986, as amended to January 1, 2005.
28 (c) The plan administrator shall withhold and be liable for
29 payment of the tax required to be withheld under this section
30 unless the plan administrator directs the payor to withhold such
20050H1557B1932 - 15 -
1 tax and provides the payor with such information as the
2 department may require by regulations.
3 Section 12. Sections 338, 339 and 340 of the act, added
4 August 31, 1971 (P.L.362, No.93), are amended to read:
5 Section 338. Assessment.--(a) The department is authorized
6 and required to make the inquiries, determinations and
7 assessments of all taxes imposed by this article.
8 (b) If the mode or time for the assessment of any tax is not
9 otherwise provided for, the department may establish the same by
10 regulations.
11 (c) In the event that any taxpayer fails to file a return
12 required by this article, the department may make an estimated
13 assessment (based on information available) of the proper amount
14 of tax owing by the taxpayer. A notice of assessment in the
15 estimated amount shall be sent to the taxpayer. The tax shall be
16 paid within ninety days after a notice of such estimated
17 assessment has been mailed to the taxpayer, unless within such
18 period the taxpayer has filed a petition for reassessment in the
19 manner prescribed by [section 340 of this article.] Article
20 XXVII.
21 (d) A notice of assessment issued by the department pursuant
22 to this article shall be mailed by certified mail to the
23 taxpayer. The notice shall set forth the basis of the
24 assessment.
25 Section 339. Jeopardy Assessments.--(a) Jeopardy
26 Assessments, Filing and Notice. If the department believes that
27 the assessment or the collection of a deficiency will be
28 jeopardized in whole or in part by delay, it may mail or issue
29 notice of its finding to the taxpayer, together with a demand
30 for immediate payment of the tax or the deficiency declared to
20050H1557B1932 - 16 -
1 be in jeopardy including interest and penalties and additions
2 thereto, if any.
3 (b) Closing of Taxable Year. If the department believes that
4 a taxpayer designs quickly to depart from the State or to remove
5 his property therefrom or to conceal himself or his property
6 therein, or to do any other act tending to prejudice or to
7 render wholly or partly ineffectual proceedings to collect the
8 tax for the taxable year then last past or the taxable year then
9 current unless such proceedings be brought without delay, the
10 department shall declare the taxable period for such taxpayer
11 immediately terminated and shall cause notice of such finding
12 and declaration to be given the taxpayer, together with a demand
13 for immediate payment of the tax for the taxable period so
14 declared terminated and of the tax for the preceding taxable
15 year or so much of such tax as is unpaid, whether or not the
16 time otherwise allowed by law for filing return and paying the
17 tax has expired; and such taxes shall thereupon become
18 immediately due and payable.
19 (c) Jeopardy Assessments, Collection. A jeopardy assessment
20 is immediately due and payable, and proceedings for collection
21 may be commenced at once. The taxpayer, however, may stay
22 collection and prevent the jeopardy assessment from becoming
23 final by filing, within ten days after the date of the notice of
24 jeopardy assessment, a petition for reassessment,
25 notwithstanding the provisions of section [340] 2702 to the
26 contrary, accompanied by a bond or other security in such
27 amounts as the department may deem necessary, not exceeding
28 double the amount (including interest and penalties and
29 additions thereto) as to which the stay is desired.
30 (d) Jeopardy Assessment, When Final. If a petition for
20050H1557B1932 - 17 -
1 reassessment, accompanied by bond or other security is not filed
2 within the ten-day period, the assessment becomes final.
3 (e) Jeopardy Assessments, Hearing. If the taxpayer has so
4 requested in his petition, the department shall grant him or his
5 authorized representative an oral hearing.
6 (f) Jeopardy Assessments, Action on Petition for
7 Reassessment. The department shall consider the petition for
8 reassessment and notify the taxpayer of its decision thereon.
9 Its decision as to the validity of the jeopardy assessment shall
10 be final, unless the taxpayer within ninety days after
11 notification of the department's decision files a petition for
12 review authorized under section [341] 2705.
13 (g) Jeopardy Assessments, Presumptive Evidence of Jeopardy.
14 In any proceeding brought to enforce payment of taxes made due
15 and payable by this section, the belief of the department under
16 subsection (a) whether made after notice to the taxpayer or not,
17 is for all purposes presumptive evidence that the assessment or
18 collection of the tax or the deficiency was in jeopardy. A
19 certificate of the department of the mailing or issuing of the
20 notices specified in this section is presumptive evidence that
21 the notices were mailed or issued.
22 Section 340. Procedure for Reassessment.--[Promptly after
23 the date of an assessment by the department, the department
24 shall send by mail a copy thereof to the person against whom it
25 was made. Within ninety days after the date upon which the copy
26 of any such assessment was mailed, such person may file with the
27 department a petition for reassessment of such tax. Every
28 petition for reassessment shall state specifically the reasons
29 which the petitioner believes entitled him to such reassessment,
30 and it shall be supported by affidavit that it is not made for
20050H1557B1932 - 18 -
1 the purpose of delay and that the facts set forth therein are
2 true. It shall be the duty of the department, within six months
3 after receiving a petition for reassessment, to dispose of such
4 petition for reassessment. Notice of the action taken upon any
5 petition for reassessment shall be given to the petitioner
6 promptly thereafter.] Any taxpayer against whom an assessment is
7 made may petition the department for a reassessment pursuant to
8 Article XXVII.
9 Section 13. Section 341 of the act is repealed.
10 Section 14. Section 347 of the act, amended July 1, 1985
11 (P.L.78, No.29), is amended to read:
12 Section 347. Restrictions on Refunds.--[No] A credit or
13 refund [shall] may be made under section 346 [without the
14 approval of the Board of Finance and Revenue, except such
15 credits or refunds as arise]:
16 (1) By reason of the overpayment of an installment of
17 estimated tax;
18 (2) Upon reassessment [or upon];
19 (3) Upon the filing of a final return or amended final
20 return showing any overpayment of tax.
21 Section 15. Section 350 of the act, amended May 7, 1997
22 (P.L.85, No.7), is amended to read:
23 Section 350. Limitations on Refund or Credit.--Any
24 application for refund must be filed with the department under
25 section [3003.1] 2703.
26 Section 16. Section 401(3)1(a) and (b), 2(a) and 4(c) and
27 (5) of the act, amended or added December 23, 1983 (P.L.370,
28 No.90), July 1, 1985 (P.L.78, No.29), August 4, 1991 (P.L.97,
29 No.22), May 12, 1999 (P.L.26, No.4), June 22, 2001 (P.L.353,
30 No.23) and June 29, 2002 (P.L.559, No.89) are amended, clause
20050H1557B1932 - 19 -
1 (3)2 is amended by adding a phrase and the section is amended by
2 adding clauses to read:
3 Section 401. Definitions.--The following words, terms, and
4 phrases, when used in this article, shall have the meaning
5 ascribed to them in this section, except where the context
6 clearly indicates a different meaning:
7 * * *
8 (3) "Taxable income." 1. (a) In case the entire business
9 of the corporation is transacted within this Commonwealth, for
10 any taxable year which begins on or after January 1, 1971,
11 taxable income for the calendar year or fiscal year as returned
12 to and ascertained by the Federal Government, or in the case of
13 a corporation participating in the filing of consolidated
14 returns to the Federal Government or that is not required to
15 file a return with the Federal Government, the taxable income
16 which would have been returned to and ascertained by the Federal
17 Government if separate returns had been made to the Federal
18 Government for the current and prior taxable years, subject,
19 however, to any correction thereof, for fraud, evasion, or error
20 as finally ascertained by the Federal Government.
21 (b) Additional deductions shall be allowed from taxable
22 income on account of any dividends received from any other
23 corporation but only to the extent that such dividends are
24 included in taxable income as returned to and ascertained by the
25 Federal Government. For tax years beginning on or after January
26 1, 1991, additional deductions shall only be allowed for amounts
27 included, under section 78 of the Internal Revenue Code of 1986
28 (Public Law 99-514, 26 U.S.C. § 78), in taxable income returned
29 to and ascertained by the Federal Government and for the amount
30 of any dividends received from a foreign corporation included in
20050H1557B1932 - 20 -
1 taxable income to the extent such dividends would be deductible
2 in arriving at Federal taxable income if received from a
3 domestic corporation. For taxable years beginning on or after
4 January 1, 2007, if not otherwise allowed as a deduction, an
5 additional deduction is allowed for all dividends paid by one to
6 another of the included corporations of a unitary business to
7 the extent those dividends are included in business income of a
8 corporation that is required to determine its business income
9 pursuant to paragraph (1) of phrase (e) of subclause (2).
10 * * *
11 2. In case the entire business of any corporation, other
12 than a corporation engaged in doing business as a regulated
13 investment company as defined by the Internal Revenue Code of
14 1986, is not transacted within this Commonwealth, the tax
15 imposed by this article shall be based upon such portion of the
16 taxable income of such corporation for the fiscal or calendar
17 year, as defined in subclause 1 hereof, and may be determined as
18 follows:
19 (a) Division of Income.
20 (1) As used in this definition, unless the context otherwise
21 requires:
22 (A) "Business income" means income arising from transactions
23 and activity in the regular course of the taxpayer's trade or
24 business and includes income from tangible and intangible
25 property if either the acquisition, the management or the
26 disposition of the property constitutes an integral part of the
27 taxpayer's regular trade or business operations. The term
28 includes all income which is apportionable under the
29 Constitution of the United States.
30 (B) "Commercial domicile" means the principal place from
20050H1557B1932 - 21 -
1 which the trade or business of the taxpayer is directed or
2 managed.
3 (C) "Compensation" means wages, salaries, commissions and
4 any other form of remuneration paid to employes for personal
5 services.
6 (D) "Nonbusiness income" means all income other than
7 business income. The term does not include income which is
8 apportionable under the Constitution of the United States.
9 (E) "Sales" means all gross receipts of the taxpayer not
10 allocated under this definition other than dividends received,
11 interest on United States, state or political subdivision
12 obligations and gross receipts heretofore or hereafter received
13 from the sale, redemption, maturity or exchange of securities,
14 except those held by the taxpayer primarily for sale to
15 customers in the ordinary course of its trade or business.
16 (F) "State" means any state of the United States, the
17 District of Columbia, the Commonwealth of Puerto Rico, any
18 territory or possession of the United States, and any foreign
19 country or political subdivision thereof.
20 (G) "This state" means the Commonwealth of Pennsylvania or,
21 in the case of application of this definition to the
22 apportionment and allocation of income for local tax purposes,
23 the subdivision or local taxing district in which the relevant
24 tax return is filed.
25 (2) Any taxpayer having income from business activity which
26 is taxable both within and without this State other than
27 activity as a corporation whose allocation and apportionment of
28 income is specifically provided for in section 401(3)2(b)(c) and
29 (d) shall allocate and apportion taxable income as provided in
30 this definition.
20050H1557B1932 - 22 -
1 (3) For purposes of allocation and apportionment of income
2 under this definition, a taxpayer is taxable in another state if
3 in that state the taxpayer is subject to a net income tax, a
4 franchise tax measured by net income, a franchise tax for the
5 privilege of doing business, or a corporate stock tax or if that
6 state has jurisdiction to subject the taxpayer to a net income
7 tax regardless of whether, in fact, the state does or does not.
8 (4) Rents and royalties from real or tangible personal
9 property, gains, interest, patent or copyright royalties, to the
10 extent that they constitute nonbusiness income, shall be
11 allocated as provided in paragraphs (5) through (8).
12 (5) (A) Net rents and royalties from real property located
13 in this State are allocable to this State.
14 (B) Net rents and royalties from tangible personal property
15 are allocable to this State if and to the extent that the
16 property is utilized in this State, or in their entirety if the
17 taxpayer's commercial domicile is in this State and the taxpayer
18 is not organized under the laws of or taxable in the state in
19 which the property is utilized.
20 (C) The extent of utilization of tangible personal property
21 in a state is determined by multiplying the rents and royalties
22 by a fraction, the numerator of which is the number of days of
23 physical location of the property in the state during the rental
24 or royalty period in the taxable year and the denominator of
25 which is the number of days of physical location of the property
26 everywhere during all rental or royalty periods in the taxable
27 year. If the physical location of the property during the rental
28 or royalty period is unknown or unascertainable by the taxpayer,
29 tangible personal property is utilized in the state in which the
30 property was located at the time the rental or royalty payer
20050H1557B1932 - 23 -
1 obtained possession.
2 (6) (A) Gains and losses from sales or other disposition of
3 real property located in this State are allocable to this State.
4 (B) Gains and losses from sales or other disposition of
5 tangible personal property are allocable to this State if the
6 property had a situs in this State at the time of the sale, or
7 the taxpayer's commercial domicile is in this State and the
8 taxpayer is not taxable in the state in which the property had a
9 situs.
10 (C) Gains and losses from sales or other disposition of
11 intangible personal property are allocable to this State if the
12 taxpayer's commercial domicile is in this State.
13 (7) Interest is allocable to this State if the taxpayer's
14 commercial domicile is in this State.
15 (8) (A) Patent and copyright royalties are allocable to
16 this State if and to the extent that the patent or copyright is
17 utilized by the payer in this State, or if and to the extent
18 that the patent copyright is utilized by the payer in a state in
19 which the taxpayer is not taxable and the taxpayer's commercial
20 domicile is in this State.
21 (B) A patent is utilized in a state to the extent that it is
22 employed in production, fabrication, manufacturing, or other
23 processing in the state or to the extent that a patented product
24 is produced in the state. If the basis of receipts from patent
25 royalties does not permit allocation to states or if the
26 accounting procedures do not reflect states of utilization, the
27 patent is utilized in the state in which the taxpayer's
28 commercial domicile is located.
29 (C) A copyright is utilized in a state to the extent that
30 printing or other publication originates in the state. If the
20050H1557B1932 - 24 -
1 basis of receipts from copyright royalties does not permit
2 allocation to states or if the accounting procedures do not
3 reflect states of utilization, the copyright is utilized in the
4 state in which the taxpayer's commercial domicile is located.
5 (9) (A) Except as provided in [subparagraph (B)]
6 subparagraphs (B) and (C), all business income shall be
7 apportioned to this State by multiplying the income by a
8 fraction, the numerator of which is the property factor plus the
9 payroll factor plus three times the sales factor, and the
10 denominator of which is five.
11 (B) For purposes of apportionment of the capital stock -
12 franchise tax as provided in section 602 of Article VI of this
13 act, the apportionment fraction shall be the property factor
14 plus the payroll factor plus the sales factor as the numerator,
15 and the denominator shall be three.
16 (C) For taxable years that begin on or after January 1,
17 2007, all business income shall be apportioned to this State by
18 a fraction, which is the sales factor. This includes any
19 railroad, truck, bus, airline, pipeline, natural gas or water
20 transportation company that is required to determine its
21 business income pursuant to paragraph (1) of phrase (e) of this
22 subclause.
23 (10) The property factor is a fraction, the numerator of
24 which is the average value of the taxpayer's real and tangible
25 personal property owned or rented and used in this State during
26 the tax period and the denominator of which is the average value
27 of all the taxpayer's real and tangible personal property owned
28 or rented and used during the tax period but shall not include
29 the security interest of any corporation as seller or lessor in
30 personal property sold or leased under a conditional sale,
20050H1557B1932 - 25 -
1 bailment lease, chattel mortgage or other contract providing for
2 the retention of a lien or title as security for the sales price
3 of the property.
4 (11) Property owned by the taxpayer is valued at its
5 original cost. Property rented by the taxpayer is valued at
6 eight times the net annual rental rate. Net annual rental rate
7 is the annual rental rate paid by the taxpayer less any annual
8 rental rate received by the taxpayer from subrentals.
9 (12) The average value of property shall be determined by
10 averaging the values at the beginning and ending of the tax
11 period but the tax administrator may require the averaging of
12 monthly values during the tax period if reasonably required to
13 reflect properly the average value of the taxpayer's property.
14 (13) The payroll factor is a fraction, the numerator of
15 which is the total amount paid in this State during the tax
16 period by the taxpayer for compensation and the denominator of
17 which is the total compensation paid everywhere during the tax
18 period.
19 (14) Compensation is paid in this State if:
20 (A) The individual's service is performed entirely within
21 the State;
22 (B) The individual's service is performed both within and
23 without this State, but the service performed without the State
24 is incidental to the individual's service within this State; or
25 (C) Some of the service is performed in this State and the
26 base of operations or if there is no base of operations, the
27 place from which the service is directed or controlled is in
28 this State, or the base of operations or the place from which
29 the service is directed or controlled is not in any state in
30 which some part of the service is performed, but the
20050H1557B1932 - 26 -
1 individual's residence is in this State.
2 (15) The sales factor is a fraction, the numerator of which
3 is the total sales of the taxpayer in this State during the tax
4 period, and the denominator of which is the total sales of the
5 taxpayer everywhere during the tax period.
6 (16) Sales of tangible personal property are in this State
7 if the property is delivered or shipped to a purchaser, within
8 this State regardless of the f.o.b. point or other conditions of
9 the sale.
10 (17) Sales, other than sales of tangible personal property
11 and sales set forth in paragraphs (17.1) and (17.2), are in this
12 State if:
13 (A) The income-producing activity is performed in this
14 State; or
15 (B) The income-producing activity is performed both in and
16 outside this State and a greater proportion of the income-
17 producing activity is performed in this State than in any other
18 state, based on costs of performance.
19 (17.1) Sales of services are in this State if sales are
20 derived from customers within this State. If part of the sales
21 with respect to a specific contract or other agreement to
22 perform services is derived from customers from within this
23 State, sales are in this State in proportion to the sales
24 derived from customers within this State to total sales with
25 respect to that contract or agreement.
26 (17.2) In order to determine sales in this State of any
27 railroad, truck, bus, airline, pipeline, natural gas or water
28 transportation company that is required to determine its
29 business income pursuant to paragraph (1) of phrase (e) of this
30 subclause such company must convert the relevant fraction set
20050H1557B1932 - 27 -
1 forth in phrase (b), (c) or (d) of this subclause to gross
2 receipts. Sales in this State are the result of multiplying
3 total gross receipts from relevant transportation activities by
4 the decimal equivalent of the relevant fraction set forth in
5 phrase (b), (c) or (d) of this subclause.
6 (18) If the allocation and apportionment provisions of this
7 definition do not fairly represent the extent of the taxpayer's
8 business activity in this State, the taxpayer may petition the
9 Secretary of Revenue or the Secretary of Revenue may require, in
10 respect to all or any part of the taxpayer's business activity:
11 (A) Separate accounting;
12 (B) The exclusion of any one or more of the factors;
13 (C) The inclusion of one or more additional factors which
14 will fairly represent the taxpayer's business activity in this
15 State; or
16 (D) The employment of any other method to effectuate an
17 equitable allocation and apportionment of the taxpayer's income.
18 In determining the fairness of any allocation or apportionment,
19 the Secretary of Revenue may give consideration to the
20 taxpayer's previous reporting and its consistency with the
21 requested relief.
22 * * *
23 (e) Corporations That are Members of a Unitary Business.
24 (1) Notwithstanding any contrary provisions of this article,
25 for taxable years that begin on or after January 1, 2007,
26 business income of a corporation that is a member of a unitary
27 business that consists of two or more corporations, at least one
28 of which does not transact its entire business in this State, is
29 determined by combining the business income of either all
30 corporations, other than as set forth below, that are water's-
20050H1557B1932 - 28 -
1 edge basis members or all corporations, other than as set forth
2 below, that are worldwide members of the unitary business. All
3 transactions among included corporations of the unitary business
4 are eliminated in determining the business income of a
5 corporation that is a member of that unitary business. Business
6 income of the following corporations is not included in the
7 determination of combined business income:
8 (i) any corporation subject to taxation under Article VII,
9 VIII, IX or XV;
10 (ii) any corporation specified in the definition of
11 "institution" in section 701.5 that would be subject to taxation
12 under Article VII were it located, as defined in section 701.5,
13 in this State;
14 (iii) any corporation commonly known as a title insurance
15 company that would be subject to taxation under Article VIII
16 were it incorporated in this State;
17 (iv) any corporation specified as an insurance company,
18 association or exchange in Article IX that would be subject to
19 taxation under Article IX were its insurance business transacted
20 in this State;
21 (v) any corporation specified in the definition of
22 "institution" in section 1501 that would be subject to taxation
23 under Article XV were it located, as defined in section 1501, in
24 this State; or
25 (vi) any corporation that is a small corporation, as defined
26 in section 301(s.2), or a qualified Subchapter S subsidiary, as
27 defined in section 301(o.3).
28 (2) Notwithstanding any contrary provisions of this article,
29 all corporations that are required to compute business income
30 under paragraph (1) are entitled to apportion such business
20050H1557B1932 - 29 -
1 income when one corporation of the same unitary business is
2 entitled to apportion such business income. Notwithstanding any
3 contrary provisions of this article, for taxable years that
4 begin on or after January 1, 2007, the denominator of the
5 apportionment fraction of a corporation that is required to
6 compute its business income under paragraph (1) shall be
7 computed on a combined basis for all included corporations of
8 the unitary business. All transactions among included
9 corporations of the unitary business are eliminated in computing
10 the numerator and denominator of the apportionment fraction of a
11 corporation that is required to compute its business income
12 under paragraph (1). The apportionment fraction of the following
13 corporations is not included in the determination of the
14 combined apportionment fraction:
15 (i) any corporation subject to taxation under Article VII,
16 VIII, IX or XV;
17 (ii) any corporation specified in the definition of
18 "institution" in section 701.5 that would be subject to taxation
19 under Article VII were it located, as defined in section 701.5,
20 in this State;
21 (iii) any corporation commonly known as a title insurance
22 company that would be subject to taxation under Article VIII
23 were it incorporated in this State;
24 (iv) any corporation specified as an insurance company,
25 association or exchange in Article IX that would be subject to
26 taxation under Article IX were its insurance business transacted
27 in this State;
28 (v) any corporation specified in the definition of
29 "institution" in section 1501 that would be subject to taxation
30 under Article XV were it located, as defined in section 1501, in
20050H1557B1932 - 30 -
1 this State;
2 (vi) any corporation that is a small corporation, as defined
3 in section 301(s.2), or a qualified Subchapter S subsidiary, as
4 defined in section 301(o.3).
5 (3) A corporation that is required to compute its business
6 income under paragraph (1) shall apportion such combined
7 business income by multiplying such combined business income by
8 a fraction which is the combined apportionment fraction set
9 forth in paragraph (2).
10 (4) Nonbusiness income of a corporation that is required to
11 compute business income under paragraph (1) shall be allocated
12 as provided in paragraphs (5) through (8) of phrase (a) of
13 subclause 2 of the definition of "taxable income."
14 (5) Each corporation that is a member of a unitary business
15 that consists of two or more corporations determines its tax
16 liability based on its apportioned share of the combined
17 business income of the unitary business plus its nonbusiness
18 income or loss allocated to this State, minus its net loss
19 deduction.
20 (6) If any provision of this phrase operates so that an
21 amount is added to or deducted from taxable income for a taxable
22 year for any corporation of a unitary business that previously
23 had been added to or deducted from taxable income of any
24 corporation of the same unitary business, an appropriate
25 adjustment shall be made for the taxable year in order to
26 prevent double taxation or double deduction. If this adjustment
27 is not made by the appropriate corporation of the unitary
28 business, the Secretary of Revenue is authorized to make this
29 adjustment.
30 (7) The Secretary of Revenue has the authority and
20050H1557B1932 - 31 -
1 responsibility to make adjustments to insure that a corporation
2 does not incur an unfair penalty nor realize an unfair benefit
3 because it is required to compute its business income under
4 paragraph (1). Fairness shall be measured by whether the
5 corporation's income allocated and apportioned to this State
6 fairly reflects the corporation's share of the unitary business
7 conducted in this State in the taxable year.
8 * * *
9 4. * * *
10 (c) (1) The net loss deduction shall be the lesser of two
11 million dollars ($2,000,000) or the amount of the net loss or
12 losses which may be carried over to the taxable year or taxable
13 income as determined under subclause 1 or, if applicable,
14 subclause 2[.] for taxable years that begin on or prior to
15 December 31, 2007. The net loss deduction for any taxable year
16 that begins during calendar year 2007 is further limited by the
17 provisions of paragraph (4). Except as set forth in paragraph
18 (4), there is no maximum on the amount of the net loss deduction
19 allowed for taxable years beginning on or after January 1, 2008.
20 In no event shall the net loss deduction include more than five
21 hundred thousand dollars ($500,000), in the aggregate, of net
22 losses from taxable years 1988 through 1994.
23 (2) A net loss for a taxable year may only be carried over
24 pursuant to the following schedule:
25 Taxable Year Carryover
26 1981 1 taxable year
27 1982 2 taxable years
28 1983-1987 3 taxable years
29 1988 2 taxable years plus
30 1 taxable year
20050H1557B1932 - 32 -
1 starting with the
2 1995 taxable year
3 1989 1 taxable year plus
4 2 taxable years
5 starting with the
6 1995 taxable year
7 1990-1993 3 taxable years
8 starting with the
9 1995 taxable year
10 1994 1 taxable year
11 1995
12 -1997 10 taxable years
13 1998 and thereafter 20 taxable years
14 The earliest net loss shall be carried over to the earliest
15 taxable year to which it may be carried under this schedule.
16 [The total net loss deduction allowed in any taxable year shall
17 not exceed two million dollars ($2,000,000).]
18 (3) The entire net loss for a taxable year that begins on or
19 after January 1, 2007, is available to be carried over to a
20 taxable year that begins on or after January 1, 2008, pursuant
21 to the schedule set forth in paragraph (2) and shall be carried
22 over to the earliest taxable year to which it may be carried
23 pursuant to the schedule set forth in paragraph (2).
24 (4) The amount of unused net loss from all taxable years
25 that begin prior to January 1, 2007, that may be carried over to
26 any taxable year that begins on or after January 1, 2007, is
27 limited to two million dollars ($2,000,000) per taxable year and
28 may only be used by the corporation that realized the net loss.
29 If a corporation is required to determine its business income
30 pursuant to paragraph (1) of phrase (e) of subclause 2, it may
20050H1557B1932 - 33 -
1 only use such loss in a year to the extent that it has taxable
2 income before use of such loss determined as if it were a
3 separate company.
4 (5) Any net loss realized for a taxable year that begins on
5 or after January 1, 2007, by one corporation of a unitary
6 business may be used by other corporations of the same unitary
7 business, provided that the corporation that realized the net
8 loss must first use the portion of such net loss to reduce its
9 taxable income to zero. Other corporations of the same unitary
10 business that have insufficient net losses of their own to
11 reduce their tax liabilities to zero may then use the remainder
12 of such net loss in proportion to their remaining taxable
13 incomes before the application of such loss.
14 (6) Any net loss realized for a taxable year that begins on
15 or after January 1, 2007, unused by a corporation which
16 subsequently becomes a member of another unitary business may
17 only be used by that corporation.
18 * * *
19 (5) "Taxable year." [The] 1. Except as set forth in
20 subclause 2, the taxable year which the corporation, or any
21 consolidated group with which the corporation participates in
22 the filing of consolidated returns, actually uses in reporting
23 taxable income to the Federal Government[.], or which the
24 corporation would have used in reporting taxable income to the
25 Federal Government had it been required to report its taxable
26 income to the Federal Government. With regard to the tax imposed
27 by Article IV of this act (relating to the Corporate Net Income
28 Tax), the terms "annual year," "fiscal year," "annual or fiscal
29 year," "tax year" and "tax period" shall be the same as the
30 corporation's taxable year, as defined in this [paragraph.]
20050H1557B1932 - 34 -
1 subclause or subclause 2.
2 2. All corporations of a unitary business shall have a
3 common taxable year for purposes of computing tax due under this
4 article. The taxable year for such purposes is the common
5 taxable year adopted, in a manner prescribed by the department,
6 by all corporations of a unitary business. The common taxable
7 year must be used by all corporations of that unitary business
8 in the year of adoption and all future years unless otherwise
9 permitted by the department.
10 * * *
11 (7) "Tax haven." A jurisdiction that at the beginning of a
12 taxable year is a tax haven as identified by the Organization
13 for Economic Co-operation and Development, plus the
14 sovereignties of Bermuda, the Cayman Islands, the Bailiwick of
15 Jersey and the Grand Duchy of Luxembourg.
16 (8) "Unitary business." A single economic enterprise that
17 is made up of separate parts of a single corporation, of a
18 commonly controlled group of corporations, or both, that are
19 sufficiently interdependent, integrated and interrelated through
20 their activities so as to provide a synergy and mutual benefit
21 that produces a sharing or exchange of value among them and a
22 significant flow of value to the separate parts. A unitary
23 business includes only those parts and corporations which may be
24 included as a unitary business under the Constitution of the
25 United States.
26 (9) "Water's-edge basis." A system of accounting that
27 includes the business income and apportionment factor of certain
28 corporations of a unitary business, described as follows:
29 1. The entire business income and apportionment factor of
30 any member incorporated in the United States or formed under the
20050H1557B1932 - 35 -
1 laws of any state of the United States, the District of
2 Columbia, any territory or possession of the United States or
3 the Commonwealth of Puerto Rico.
4 2. The entire business income and apportionment factor of
5 any member, regardless of the place incorporated or formed, if
6 the average of its property, payroll and sales factors within
7 the United States is twenty per cent or more.
8 3. The entire business income and apportionment factor of
9 any member which is a domestic international sales corporation
10 as described in sections 991, 992, 993 and 994 of the Internal
11 Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. §§ 991, 992,
12 993 and 994); a foreign sales corporation as described in
13 sections 921, 922, 923, 924, 925, 926 and 927 of the Internal
14 Revenue Code of 1986 (26 U.S.C. §§ 921, 922, 923, 924, 925, 926
15 and 927); or any member which is an export trade corporation, as
16 described in sections 970 and 971 of the Internal Revenue Code
17 of 1986 (26 U.S.C. §§ 970 and 971).
18 4. Any member not described in subclauses 1, 2 and 3 shall
19 include the portion of its business income derived from or
20 attributable to sources within the United States, as determined
21 under the Internal Revenue Code of 1986 without regard to
22 Federal treaties, and its apportionment factor related thereto.
23 5. Any member that is a "controlled foreign corporation" as
24 defined in section 957 of the Internal Revenue Code of 1986 (26
25 U.S.C. § 957), to the extent the business income of that member
26 is income defined in section 952 of the Internal Revenue Code of
27 1986 (26 U.S.C. § 952), Subpart F income, not excluding lower-
28 tier subsidiaries' distributions of such income which were
29 previously taxed, determined without regard to Federal treaties,
30 and the apportionment factor related to that income; any item of
20050H1557B1932 - 36 -
1 income received by a controlled foreign corporation and the
2 apportionment factor related to such income shall be excluded if
3 the corporation establishes to the satisfaction of the Secretary
4 of Revenue that such income was subject to an effective rate of
5 income tax imposed by a foreign country greater than ninety per
6 cent of the maximum rate of tax specified in section 11 of the
7 Internal Revenue Code of 1986 (26 U.S.C. § 11).
8 6. The entire business income and apportionment factor of
9 any member that is not described in subclause 1, 2, 3, 4 and 5
10 and that is doing business in a tax haven. The business income
11 and apportionment factor of a corporation doing business in a
12 tax haven shall be excluded if the corporation establishes to
13 the satisfaction of the Secretary of Revenue that its income was
14 subject to an effective rate of income tax imposed by a country
15 greater than ninety per cent of the maximum rate of tax
16 specified in section 11 of the Internal Revenue Code of 1986 (26
17 U.S.C. § 11).
18 (10) "Commonly controlled group." For a corporation, the
19 corporation is a member of a group of two or more corporations
20 and more than fifty per cent of the voting stock of each member
21 of the group is directly or indirectly owned by a common owner
22 or by common owners, either corporate or noncorporate, or by one
23 or more of the member corporations of the group.
24 (11) "Separate company." A corporation that is not a member
25 of a unitary business that consists of two or more corporations.
26 (12) "Tax." Includes interest, penalties and additions to
27 tax unless a more limited meaning is disclosed by the context.
28 Section 17. Section 402(b) of the act, amended June 29, 2002
29 (P.L.559, No.89), is amended to read:
30 Section 402. Imposition of Tax.--* * *
20050H1557B1932 - 37 -
1 (b) The annual rate of tax on corporate net income imposed
2 by subsection (a) for taxable years beginning for the calendar
3 year or fiscal year on or after the dates set forth shall be as
4 follows:
5 Taxable Year Tax Rate
6 January 1, 1995, [and
7 each taxable
8 year thereafter]
9 through taxable
10 years beginning
11 December 31, 2006 9.99%
12 January 1, 2007, and
13 each taxable
14 year thereafter 7.90%
15 * * *
16 Section 18. Section 403 of the act, amended September 9,
17 1971 (P.L.437, No.105), June 23, 1982 (P.L.610, No.172), July 1,
18 1985 (P.L.78, No.29) and August 4, 1991 (P.L.97, No.22) and
19 repealed in part December 19, 1990 (P.L.834, No.198) is amended
20 to read:
21 Section 403. Reports and Payment of Tax.--(a) [For the
22 purpose of ascertaining the amount of tax payable under this
23 article, it] It shall be the duty of every corporation, liable
24 to pay tax under this article, on or before April 15, 1972, and
25 each year thereafter, to transmit to the department, upon a form
26 prescribed[, prepared and furnished] by the department, an
27 annual report under oath or affirmation of its president, vice-
28 president [or other principal officer, and of its], treasurer
29 [or] , assistant treasurer or other authorized officer, of net
30 income taxable under the provisions of this article. Such report
20050H1557B1932 - 38 -
1 shall set forth:
2 (1) A true copy of its return to the Federal Government of
3 the annual taxable income arising or accruing in the calendar or
4 fiscal year next preceding, or such part or portions of said
5 return, as the department may designate;
6 (2) If no return was filed with the Federal Government the
7 report made to the department shall show such information as
8 would have been contained in a return to the Federal Government
9 had one been made; and
10 (3) Such other information as the department may require.
11 Upon receipt of the report, the department shall promptly
12 forward to the Department of State, the names of the president,
13 vice-president, secretary and treasurer of the corporation and
14 the complete street address of the principal office of the
15 corporation for inclusion in the records of the Department of
16 State relating to corporation.
17 (a.1) (1) Each corporation subject to tax under this
18 article is required to file an annual report in accordance with
19 this section. Each corporation that is a member of a unitary
20 business that consists of two or more corporations, unless
21 excluded by the provisions of this article, shall file as part
22 of a combined annual report. The corporations of the unitary
23 business shall designate one member that is subject to tax under
24 this article to file the combined annual report and to act as
25 agent on behalf of all other corporations that are members of
26 the unitary business. Each corporation that is a member of a
27 unitary business is responsible for its tax liability under this
28 article.
29 (2) The oath or affirmation of the designated member's
30 president, vice president or other principal officer, and of its
20050H1557B1932 - 39 -
1 treasurer or assistant treasurer shall constitute the oath or
2 affirmation of each corporation that is a member of that unitary
3 business.
4 (3) The designated member shall transmit to the department
5 upon a form prescribed by the department, an annual combined
6 report under oath or affirmation of its president, vice
7 president or other principal officer, and of its treasurer or
8 assistant treasurer. Such report shall set forth:
9 (i) All corporations included in the unitary business.
10 (ii) All necessary data, both in the aggregate and for each
11 corporation of the unitary business, that sets forth the
12 determination of tax liability for each corporation of the
13 unitary business.
14 (iii) Any other information that the department may require.
15 (a.2) (1) Activities that evidence a significant flow of
16 value among commonly controlled corporations, include, but are
17 not limited to, the following:
18 (i) Assisting in the acquisition of equipment.
19 (ii) Assisting with filling personnel needs.
20 (iii) Lending funds or guaranteeing loans.
21 (iv) Interplay in the area of corporate expansion.
22 (v) Providing technical assistance.
23 (vi) Supervising.
24 (vii) Providing general operational guidance.
25 (viii) Providing overall operational strategic advice.
26 (ix) Common use of trade names and patents.
27 (2) Significant flow of value must be more than the flow of
28 funds arising out of passive investment and consists of more
29 than periodic financial oversight.
30 (a.3) (1) With respect to a commonly controlled group of
20050H1557B1932 - 40 -
1 corporations, the presence of any of these factors creates a
2 presumption of a unitary business:
3 (i) Corporations engaged in the same type of business.
4 (ii) Corporations engaged in different steps in a vertically
5 structured enterprise.
6 (iii) Strong centralized management of corporations.
7 (2) A corporation newly formed by a corporation that is a
8 member of a unitary business is rebuttably presumed to be a
9 member of the unitary business.
10 (3) A corporation that owns a controlling interest in two or
11 more corporations of a unitary business is rebuttably presumed
12 to be a member of the unitary business.
13 (4) A corporation that permits one or more other
14 corporations of a unitary business to substantially use its
15 patents, trademarks, service marks, logo-types, trade secrets,
16 copyrights or other proprietary assets or that is principally
17 engaged in loaning money to one or more other corporations of a
18 unitary business is rebuttably presumed to be a member of the
19 unitary business. This presumption only applies to a commonly
20 controlled group of corporations.
21 (a.4) As far as applicable to a specific unitary business,
22 unless there is a revision of applicable State law or unless a
23 corporation is not included under the provisions of this
24 article, there is a rebuttable presumption for all tax years
25 that begin in years 2007 and 2008 that a unitary business of two
26 or more corporations includes at least all corporations that are
27 part of a unitary business under the law of any state of the
28 United States for the same tax year.
29 (a.5) Unless an election is made to use a worldwide basis of
30 accounting, a corporation that is a member of a unitary business
20050H1557B1932 - 41 -
1 of two or more corporations must determine its business income
2 and apportionment factor upon a water's-edge basis. This basis
3 applies to all corporations of the unitary business. If an
4 election is made to use a worldwide basis of accounting, all
5 corporations of the unitary business must make the election,
6 upon a form, prescribed, prepared and furnished by the
7 department. This election binds all corporations of the unitary
8 business for the period of time that the election remains in
9 effect. An initial election is binding for a period of seven
10 years. Subsequent elections are binding for a period of five
11 years.
12 (b) [For the purpose of ascertaining the amount of tax
13 payable under this article for the taxable year 1971, and each
14 taxable year thereafter, it shall be the duty of every
15 corporation liable to pay tax under this article, on or before
16 April 30, 1971, and on or before the end of the fourth month
17 after the close of its previous fiscal year for fiscal year
18 taxpayers, and each year thereafter, to transmit in like form
19 and manner an additional tentative report and make payment
20 pursuant to the provisions of section 3003: Provided, That in
21 making such report and payment for the calendar year 1971 and
22 each year thereafter and for fiscal years commencing during the
23 calendar year 1971, and each year thereafter the tax base from
24 the immediate prior year, upon which the tentative tax
25 computation is to be made under said section 3003, shall be
26 computed as if the tax base for such immediate prior year had
27 been determined under the applicable provisions of the act of
28 March 4, 1971 (Act No.2). For taxable years commencing with
29 calendar year 1986 and for each taxable year through taxable
30 year 1991, corporations shall not report and pay tentative tax
20050H1557B1932 - 42 -
1 on account of the corporate net income tax, but shall, on or
2 before April 15 for calendar year taxpayers and on or before the
3 fifteenth day of the fourth month of the fiscal year for fiscal
4 year taxpayers, report and pay estimated corporate net income
5 tax pursuant to section 3003.2 of this act: Provided, however,
6 That tentative tax on account of any other tax which is imposed
7 as the result of the adoption by reference of this part or
8 section shall continue to be imposed. For taxable years
9 commencing on or after January 1, 1992, corporations shall
10 report and pay estimated tax pursuant to section 3003.2 on or
11 before March 15 for calendar year taxpayers and on or before the
12 fifteenth day of the third month for fiscal year taxpayers.] It
13 shall be the duty of each corporation liable to pay tax under
14 this article to pay estimated tax pursuant to section 3003.2 and
15 to make final payment of the tax due for the taxable year with
16 the annual report required by this section.
17 (c) The amount of all taxes, imposed under the provisions of
18 this article, not paid on or before the times as above provided,
19 shall bear interest as provided in section 806 of the act of
20 April 9, 1929 (P.L.343, No.176), known as "The Fiscal Code,"
21 from the date they are due and payable until paid, except that
22 if the taxable income has been, or is increased by the
23 Commissioner of Internal Revenue, or by any other agency or
24 court of the United States, interest shall be computed on the
25 additional tax due from thirty days after the corporation
26 receives notice of the change of income until paid: Provided,
27 however, That any corporation may pay the full amount of such
28 tax, or any part thereof, together with interest due to the date
29 of payment, without prejudice to its right to present and
30 prosecute [a] an administrative petition [for resettlement, a
20050H1557B1932 - 43 -
1 petition for review,] or an appeal to court. If it be thereafter
2 determined that such taxes were overpaid, the department shall
3 enter a credit to the account of such corporation, which may be
4 used by it in the manner prescribed by law.
5 (d) If the officers of any corporation shall neglect, or
6 refuse to make any report as herein required, or shall knowingly
7 make any false report, the following percentages of the amount
8 of the tax shall be added by the department to the tax
9 determined to be due on the first one thousand dollars ($1,000)
10 of tax ten per cent, on the next four thousand dollars ($4,000)
11 five per cent, and on everything in excess of five thousand
12 dollars ($5,000) one per cent, no such amounts added to the tax
13 shall bear any interest whatsoever.
14 (e) If any corporation closes its fiscal year not upon
15 December 31, but upon some other date, and reports to the
16 Federal Government as of such other date, or would so report
17 were it to make a return to the Federal Government, such
18 corporation shall certify such fact to the department, and shall
19 make the annual report, herein required, within thirty days
20 after the return to the Federal Government is due, or would be
21 due were it to be required of such corporation, subject in all
22 other respects to the provisions of this article. [The tentative
23 report required of such corporation shall be due not later than
24 four months after the end of the next preceding fiscal year.]
25 (f) If the corporation shall claim in its report that the
26 return made to the Federal Government was inaccurate, the amount
27 claimed by it to be the taxable income, taxable under this
28 article, and the basis of such claim of inaccuracy, shall be
29 fully specified.
30 Section 19. Section 404 of the act is amended to read:
20050H1557B1932 - 44 -
1 Section 404. Consolidated Reports.--(a) The department
2 shall not permit any corporation owning or controlling, directly
3 or indirectly, any of the voting capital stock of another
4 corporation or of other corporations, subject to the provisions
5 of this article, to make a consolidated report, showing the
6 combined net income.
7 (b) This section applies to taxable years beginning prior to
8 January 1, 2007.
9 Section 20. Section 406 of the act, amended September 9,
10 1971 (P.L.437, No.105), is amended to read:
11 Section 406. Changes Made by Federal Government.--(a) If
12 the amount of the taxable income, as returned by any corporation
13 to the Federal Government, is finally changed or corrected by
14 the Commission of Internal Revenue or by any other agency or
15 court of the United States, such corporation, within thirty days
16 after the receipt of such final change or correction, shall make
17 a corrected report, under oath or affirmation, to the department
18 showing such finally changed or corrected taxable income, upon
19 which the tax is required to be paid to the United States. In
20 case a corporation fails to file a report of such correction,
21 which results in an increase in taxable income within the time
22 prescribed, there shall be added to the tax, a penalty of five
23 dollars ($5) for every day during which such corporation is in
24 default, but the department may abate any such penalty in whole
25 or in part.
26 (b) If, as a result of such final change or correction,
27 there should be any change made in the amount of the taxable
28 income of any corporation upon which tax is imposed by this
29 article, the department shall have the power, and its duty shall
30 be to [resettle such taxes. Whenever a resettlement shall have
20050H1557B1932 - 45 -
1 been made hereunder, the department shall resettle the account
2 according to law, and shall credit or charge, as the case may
3 be, the amount resulting from such resettlement upon the current
4 accounts of the corporation with which it is made. The
5 resettlement shall be subject to audit and approval by the
6 Department of the Auditor General, as in the case of original
7 settlements, and in case of the failure of the two departments
8 to agree, the resettlement shall be submitted to the Board of
9 Finance and Revenue, as in the case of original settlements.]
10 determine and assess the taxpayer's unpaid or unreported
11 liability for tax due the Commonwealth, or to credit the
12 taxpayer's account as appropriate.
13 (c) Where a report of change, correction, or redetermination
14 of Federal income, or Federal tax, has been filed after [a
15 petition for review, or] an administrative or a judicial appeal
16 has been taken, such report shall be deemed a part of the
17 original annual report upon petition of the taxpayer at any
18 subsequent proceeding as though it had been filed with such
19 original report, and no separate [petition for review or] appeal
20 from [the resettlement] an assessment resulting from [such] the
21 report of change, correction, or redetermination shall be
22 necessary to the extent the identical issues for the taxable
23 year have been raised in the appeal.
24 (d) The provisions of this section shall not be construed so
25 as to permit [a resettlement] an assessment based upon the
26 allowance of any deduction on account of net operating losses,
27 sustained in other fiscal or calendar years, that are not
28 allowed as deductions under the definition of "taxable income"
29 as contained in this article.
30 (e) The provisions of this section shall apply to every
20050H1557B1932 - 46 -
1 corporation which was doing business in Pennsylvania in the year
2 for which the Federal income has been changed, irrespective of
3 whether or not such corporation has thereafter merged,
4 consolidated, withdrawn or dissolved. Any clearance certificate
5 issued by the department shall be conditioned upon the
6 requirement that in the event of a change in Federal income for
7 any year for which taxes have been paid to the Commonwealth, the
8 corporation or its successor or its officers or its directors
9 shall file with the department a report of change and pay any
10 additional State tax resulting therefrom.
11 Section 21. The heading of Part IV of Article IV of the act
12 is amended to read:
13 PART IV
14 [SETTLEMENT AND RESETTLEMENT]
15 ASSESSMENT AND COLLECTION OF TAX
16 Section 22. Section 407 of the act is amended by adding a
17 subsection to read:
18 Section 407. Settlement and Resettlement.--* * *
19 (e.1) This section applies to taxable years beginning prior
20 to January 1, 2007.
21 * * *
22 Section 23. The act is amended by adding sections to read:
23 Section 407.1. Assessments.--(a) If the department
24 determines that unpaid or unreported tax is due the
25 Commonwealth, the department shall issue an assessment.
26 (b) A notice of assessment and demand for payment shall be
27 mailed by certified mail to the taxpayer. The notice shall set
28 forth the basis of the assessment. The assessment shall be paid
29 to the department upon receipt of the notice of assessment.
30 Payment of the assessment shall be without prejudice to the
20050H1557B1932 - 47 -
1 right of the taxpayer to file a petition for reassessment in the
2 manner prescribed by Article XXVII.
3 (c) In the event that a taxpayer fails to file a report for
4 a tax governed by this article, the department may issue an
5 estimated assessment, based upon the records and information
6 available or that may come into the department's possession. If
7 prior to the filing of a report the department estimates that
8 additional unpaid or unreported tax is due the Commonwealth, the
9 department may issue additional estimated assessments.
10 (d) A notice of estimated assessment and demand for payment
11 shall be mailed by certified mail to the taxpayer. The
12 assessment shall be paid to the department upon receipt of the
13 notice of assessment. Payment of the estimated assessment does
14 not eliminate the taxpayer's obligation to file a report.
15 (e) A taxpayer shall have no right to petition for
16 reassessment, petition for refund or otherwise appeal a notice
17 of estimated assessment except as provided in subsection (f).
18 (f) The department shall remove an estimated assessment
19 within ninety days of the filing of a report and other
20 information required to determine the tax due the Commonwealth
21 whereupon the department may issue an assessment as provided in
22 subsection (a). Any tax due the Commonwealth that is included in
23 an estimated assessment shall retain its lien priority as of the
24 date of the estimated assessment to the extent such amount is
25 included with an assessment issued upon the review of the filed
26 report.
27 Section 407.2. Jeopardy Assessments.--(a) If the department
28 believes that the assessment or the collection of unpaid or
29 unreported tax will be jeopardized in whole or in part by delay,
30 it shall issue a jeopardy assessment.
20050H1557B1932 - 48 -
1 (b) If the department believes that a taxpayer intends to
2 depart from the Commonwealth, remove the taxpayer's property
3 from the Commonwealth, conceal himself or property of the
4 taxpayer from the Commonwealth, or to do any other act that may
5 prejudice or render wholly or partly ineffectual any action to
6 collect any tax for the prior or current tax periods unless the
7 action is brought without delay, the department shall declare
8 the current tax period of the taxpayer immediately terminated.
9 In this case, the department shall issue a jeopardy assessment
10 for the tax period declared terminated and for all prior tax
11 periods, whether or not the time otherwise allowed by law for
12 filing a report or paying the tax has expired.
13 (c) A notice of jeopardy assessment and demand for payment
14 shall be mailed by certified mail to the taxpayer. The notice of
15 jeopardy assessment shall include the amount of the bond or
16 other security required to stay collection of the assessment.
17 (d) The jeopardy assessment shall be paid to the department
18 upon receipt of the notice of jeopardy assessment. Payment of
19 the jeopardy assessment does not eliminate the taxpayer's
20 obligation to file a report. If prior to the filing of a report
21 the department estimates that additional unpaid tax is due the
22 Commonwealth, the department may issue additional jeopardy
23 assessments or estimated assessments pursuant to section 407.1.
24 (e) A jeopardy assessment is immediately due and payable,
25 and proceedings for collection may be commenced at once. The
26 following apply:
27 (1) The collection of the whole or any amount of a jeopardy
28 assessment may be stayed, at any time before the assessment
29 becomes final, by filing with the department a bond or other
30 security in such amounts as the department may deem necessary
20050H1557B1932 - 49 -
1 not exceeding one hundred twenty per cent of the tax for which
2 the stay is desired.
3 (2) Upon the filing of the bond or other security the
4 collection of the amount assessed that is covered by the bond or
5 other security shall be stayed. The taxpayer shall have the
6 right to waive the stay at any time in respect of the whole or
7 any part of the amount covered by the bond or other security. If
8 the taxpayer waives any part of the amount covered by the bond
9 or other security, then the bond or other security shall be
10 proportionately reduced upon payment of the amount waived. If
11 any portion of the jeopardy assessment is abated, the bond or
12 other security shall be proportionately reduced at the request
13 of the taxpayer.
14 (f) (1) A taxpayer may prevent a jeopardy assessment from
15 becoming final by filing a petition for reassessment with the
16 department within thirty days after the mailing date of the
17 notice of jeopardy assessment. The issues to be addressed in the
18 review of the petition shall include:
19 (i) Whether the making of the jeopardy assessment is
20 reasonable under the circumstances.
21 (ii) Whether the amount assessed as a result of the jeopardy
22 assessment is appropriate under the circumstances.
23 (2) The department shall issue a decision and order
24 disposing of a petition filed under paragraph (1) within sixty
25 days after receipt of the petition. Notice of the department's
26 decision and order disposing of the petition shall be mailed to
27 the petitioner.
28 (3) A taxpayer may file a petition for review of the
29 department's decision and order under paragraph (2) in
30 Commonwealth Court within 30 days after the following:
20050H1557B1932 - 50 -
1 (i) The mailing date of the department's notice of decision
2 and order on a petition for reassessment of a jeopardy
3 assessment.
4 (ii) If the petition is not disposed of by the department
5 within sixty days after receipt, the sixtieth day following the
6 date the petition was received by the department.
7 (4) If it is determined that the making of the jeopardy
8 assessment is unreasonable or that the amount assessed is
9 inappropriate, the assessment may be abated, the assessment may
10 be redetermined in whole or in part, or the department or the
11 taxpayer may be directed to take such other actions as may be
12 appropriate.
13 (g) Any determination made pursuant to a petition for
14 reassessment under this section shall be final and conclusive
15 upon exhaustion of the appeal rights provided in this section
16 and shall not be reviewed in any other proceeding.
17 (h) (1) In an action under this section involving the issue
18 of whether the making of a jeopardy assessment is reasonable
19 under the circumstances, the burden of proof in respect to such
20 issue shall be upon the department.
21 (2) In an action under this section involving the issue of
22 whether an amount assessed as a result of jeopardy assessment is
23 appropriate under the circumstances, the burden of proof in
24 respect of such issue shall be upon the taxpayer.
25 Section 407.3. Limitations on Assessments.--(a) Tax may be
26 assessed within three years after the date the report is filed.
27 (b) Tax may be assessed at any time if a taxpayer fails to
28 file a report required by law.
29 (c) Tax may be assessed at any time if the taxpayer files a
30 false or fraudulent report with intent to evade tax imposed by
20050H1557B1932 - 51 -
1 the tax laws of this Commonwealth.
2 (d) If at any time within the time limitations specified in
3 this section the department is not satisfied with its
4 determination of the taxpayer's liability, the department may
5 strike all, or any part of, a previously issued assessment or
6 may issue additional assessments of tax.
7 (e) The department may, within three years of the granting
8 of any refund or credit or within the period in which an
9 assessment could have been filed by the department with respect
10 to the taxable period for which the refund was granted,
11 whichever period shall last occur, file an assessment to recover
12 any refund or part thereof or credit or part thereof which was
13 erroneously made or allowed.
14 (f) For purposes of this section, a report filed before the
15 last day prescribed for filing shall be deemed to have been
16 filed on the last day.
17 Section 407.4. Extension of Limitation Period.--
18 Notwithstanding section 407.3, where, before the expiration of
19 the period prescribed in section 407.3, a taxpayer has consented
20 in writing that such period be extended, the amount of tax due
21 may be assessed at any time within the extended period. The
22 period so extended may be further extended by subsequent
23 consents in writing made before the expiration of the extended
24 period.
25 Section 24. Section 408(b) of the act, amended June 23, 1982
26 (P.L.610, No.172), is amended to read:
27 Section 408. Enforcement; Rules and Regulations;
28 Inquisitorial Powers of the Department.--* * *
29 (b) The department, or any agent authorized in writing by
30 it, is hereby authorized to examine the books, papers, and
20050H1557B1932 - 52 -
1 records, and to investigate the character of the business of any
2 corporation in order to verify the accuracy of any report made,
3 or if no report was made by such corporation, to ascertain and
4 [settle] assess the tax imposed by this article. Every such
5 corporation is hereby directed and required to give to the
6 department, or its duly authorized agent, the means, facilities,
7 and opportunity for such examinations and investigations, as are
8 hereby provided and authorized. Any information gained by the
9 department, as a result of any returns, investigations, or
10 verifications required to be made by this article, shall be
11 confidential, except for official purposes, and any person
12 divulging such information shall be guilty of a misdemeanor,
13 and, upon conviction thereof, shall be sentenced to pay a fine
14 of not less than one hundred dollars ($100) or more than one
15 thousand dollars ($1,000) and costs of prosecution, or to
16 undergo imprisonment for not more than six months, or both.
17 Nothing in this section shall preclude the department from
18 providing public information, as defined in section 403(a)(3),
19 to other government units. Any identification number provided by
20 the department to another governmental unit for governmental
21 purposes shall continue to be confidential information.
22 * * *
23 Section 25. The act is amended by adding sections to read:
24 Section 408.1. Collection of Tax.--The department shall
25 collect the taxes imposed by this article in the manner provided
26 by law for the collection of taxes imposed by the laws of this
27 Commonwealth.
28 Section 408.2. Actions to Collect Taxes; Defenses.--(a) The
29 department may initiate actions to collect any tax:
30 (1) Immediately, in the case of any amount related to tax
20050H1557B1932 - 53 -
1 reported as due the Commonwealth by the taxpayer that is not
2 paid by the due date for payment of the tax.
3 (2) After ninety days from the mailing date of a notice of
4 assessment, if no petition for reassessment has been filed.
5 (3) After ninety days from the mailing date of the
6 department's decision and order disposing of a petition for
7 reassessment, if no petition for review has been filed.
8 (4) After thirty days from the mailing date of the decision
9 and order of the Pennsylvania Tax Review Tribunal upon a
10 petition for review or from the expiration of the tribunal's
11 time for acting upon such petition, if no decision has been
12 made.
13 (5) Immediately, in all cases of judicial sales,
14 receiverships, assignments or bankruptcies.
15 (6) Immediately, in the case of jeopardy assessments as
16 provided by section 407.2.
17 (b) A taxpayer shall not be permitted to raise any defense
18 to the department's collection action that might have been
19 determined by the department, the Pennsylvania Tax Review
20 Tribunal or the courts if the taxpayer had properly pursued its
21 administrative remedies under this article.
22 Section 26. Section 1101(e) of the act, amended December 11,
23 1979 (P.L.499, No.107), is amended to read:
24 Section 1101. Imposition of Tax.--* * *
25 (e) Time to File Reports.--The time for filing annual
26 reports may be extended, estimated [settlements] assessments may
27 be made by the Department of Revenue if reports are not filed,
28 and the penalties for failing to file reports and pay the taxes
29 imposed under subsections (a) and (b) shall be as prescribed by
30 the laws defining the powers and duties of the Department of
20050H1557B1932 - 54 -
1 Revenue. In any case where the works of any corporation,
2 company, copartnership, association, joint-stock association,
3 limited partnership, person or persons are operated by another
4 corporation, company, copartnership, association, joint-stock
5 association, limited partnership, person or persons, the taxes
6 imposed under subsections (a) and (b) shall be apportioned
7 between the corporations, companies, copartnerships,
8 associations, joint-stock associations, limited partnerships,
9 person or persons in accordance with the terms of their
10 respective leases or agreements, but for the payment of the said
11 taxes the Commonwealth shall first look to the corporation,
12 company, copartnership, association, joint-stock association,
13 limited partnership, person or persons operating the works, and
14 upon payment by the said company, corporation, copartnership,
15 association, joint-stock association, limited partnership,
16 person or persons of a tax upon the receipts, as herein
17 provided, derived from the operation thereof, no other
18 corporation, company, copartnership, association, joint-stock
19 association, limited partnership, person or persons shall be
20 held liable for any tax imposed under subsections (a) and (b)
21 upon the proportion of said receipts received by said
22 corporation, company, copartnership, association, joint-stock
23 association, limited partnership, person or persons for the use
24 of said works.
25 * * *
26 Section 27. Sections 1111-C and 1112-C of the act, amended
27 July 2, 1986 (P.L.318, No.77), are amended to read:
28 Section 1111-C. [Determination] Assessment and Notice of
29 Tax; Review.--(a) If any person shall fail to pay any tax
30 imposed by this article for which he is liable, the department
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1 is hereby authorized and empowered to make [a determination] an
2 assessment of additional tax and interest due by such person
3 based upon any information within its possession or that shall
4 come into its possession. All of such [determinations]
5 assessments shall be made within three years after the date of
6 the recording of the document.
7 (b) Promptly after the date of such [determination]
8 assessment, the department shall send by certified mail a copy
9 thereof, including the basis of the assessment, to the person
10 against whom it was made. [Within ninety days after the date
11 upon which the copy of any such determination was mailed, such
12 person may file with the department a petition for
13 redetermination of such taxes. Every petition for
14 redetermination shall state specifically the reasons which the
15 petitioner believes entitle him to such redetermination, and it
16 shall be supported by affirmation that it is not made for the
17 purpose of delay and that the facts set forth therein are true.
18 It shall be the duty of the department within six months after
19 the date of filing of any petition for redetermination to
20 dispose of the petition. Notice of the action taken upon any
21 petition for redetermination shall be given to the petitioner
22 promptly after the date of redetermination by the department.
23 (c) Any person shall have the right to review by the Board
24 of Finance and Revenue and appeal in the same manner and within
25 the same time as provided by law in the case of capital stock
26 and franchise taxes imposed upon corporations.] Any taxpayer
27 against whom an assessment is made may petition the department
28 for a reassessment pursuant to Article XXVII.
29 Section 1112-C. Lien.--(a) Any tax determined to be due by
30 the department and remaining unpaid after demand for the same,
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1 and all penalties and interest thereon, shall be a lien in favor
2 of the Commonwealth upon the property, both real and personal,
3 of such person but only after said lien has been entered and
4 docketed of record by the prothonotary of the county where such
5 property is situated.
6 (a.1) At any time after it makes [a determination] an
7 assessment of additional tax, penalty or interest, the
8 department may transmit to the prothonotaries of the respective
9 counties certified copies of all liens for such taxes, penalties
10 and interest, and it shall be the duty of each prothonotary
11 receiving the lien to enter and docket the same of record in his
12 office, which lien shall be indexed as judgments are now
13 indexed. After the department's [determination] assessment
14 becomes final, a writ of execution may directly issue upon such
15 lien without the issuance and prosecution to judgment of a writ
16 of scire facias: Provided, That not less than ten days before
17 issuance of any execution on the lien, notice shall be sent by
18 certified mail to the taxpayer at his last known post office
19 address. No prothonotary shall require as a condition precedent
20 to the entry of such liens, the payment of any costs incident
21 thereto.
22 (b) The lien imposed hereunder shall have priority from the
23 date of its recording as aforesaid, and shall be fully paid and
24 satisfied out of the proceeds of any judicial sale of property
25 subject thereto before any other obligation, judgment, claim,
26 lien or estate to which said property may subsequently become
27 subject, except costs of the sale and of the writ upon which the
28 sale was made, and real estate taxes and municipal claims
29 against such property, but shall be subordinate to mortgages and
30 other liens existing and duly recorded or entered of record
20050H1557B1932 - 57 -
1 prior to the recording of the tax lien. In the case of a
2 judicial sale of property subject to a lien imposed hereunder
3 upon a lien or claim over which the lien imposed hereunder has
4 priority, as aforesaid, such sale shall discharge the lien
5 imposed hereunder to the extent only that the proceeds are
6 applied to its payment, and such lien shall continue in full
7 force and effect as to the balance remaining unpaid.
8 (c) The lien imposed hereunder shall continue for five years
9 from the date of its entry of record, and may be renewed and
10 continued in the manner now or hereafter provided for the
11 renewal of judgments, or as may be provided in the act of April
12 9, 1929 (P.L.343, No.176), known as "The Fiscal Code."
13 Section 28. Section 1113-C of the act, amended May 7, 1997
14 (P.L.85, No.7), is amended to read:
15 Section 1113-C. Refunds.--(a) Whenever the amount due upon
16 [determination, redetermination] assessment or review is less
17 than the amount paid to the department on account thereof, the
18 department shall enter a credit in the amount of such difference
19 to the account of the person who paid the tax.
20 (b) Where there has been no [determination] assessment of
21 unpaid tax, the department shall have the power, and its duty
22 shall be, to hear and decide any application for refund and,
23 upon the allowance of such application, to enter a credit in the
24 amount of the overpayment to the account of the person who paid
25 the tax. Such application must be filed under [section 3003.1]
26 Article XXVII.
27 Section 29. Section 1502(f) of the act, amended October 14,
28 1988 (P.L.737, No.106), is amended to read:
29 Section 1502. Imposition; Report and Payment of Tax;
30 Exemptions.--* * *
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1 (f) If any institution shall neglect or refuse to make any
2 report required by this article, such institution shall be
3 liable to a penalty of five thousand dollars ($5,000), which
4 shall be [settled] assessed in the same manner as the tax
5 imposed by this article is [settled] assessed.
6 Section 30. Section 2005 of the act, added December 22, 1989
7 (P.L.775, No.110), is amended to read:
8 Section 2005. Assessment by Department.--(a) If any person
9 shall fail to pay any tax imposed by this article for which he
10 is liable, the department is hereby authorized and empowered to
11 make an assessment of additional tax due by such person, based
12 upon any information within its possession, or that shall come
13 into its possession.
14 (b) Promptly after the date of such assessment, the
15 department shall send by [registered] certified mail a copy of
16 the assessment, including the basis of the assessment, to the
17 person against whom it was made. Within ninety days after the
18 date upon which the copy of any such assessment was mailed, such
19 person may file with the department a petition for reassessment
20 of such taxes. Every petition for reassessment shall state
21 specifically the reasons which the petitioner believes entitle
22 him to such reassessment, and it shall be supported by affidavit
23 that it is not made for the purpose of delay, and that the facts
24 set forth therein are true. It shall be the duty of the
25 department, within six months after the date of any assessment,
26 to dispose of any petition for reassessment. Notice of the
27 action taken upon any petition for reassessment shall be given
28 to the petitioner promptly after the date of reassessment by the
29 department.
30 (c) Within [sixty] ninety days after the date of mailing of
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1 notice by the department of the action taken on any petition for
2 reassessment filed with it, the person against whom such
3 assessment was made, may, by petition, request the [Board of
4 Finance and Revenue] Tax Review Tribunal to review such action.
5 Every petition for review filed hereunder shall state
6 specifically the reason upon which the petitioner relies, or
7 shall incorporate by reference the petition for reassessment in
8 which such reasons shall have been stated. The petition shall be
9 supported by affidavit that it is not made for the purpose of
10 delay, and that the facts therein set forth are true. If the
11 petitioner be a corporation, joint-stock association or limited
12 partnership, the affidavit must be made by one of the principal
13 officers thereof. A petition for review may be amended by the
14 petitioner at any time prior to the hearing, as hereinafter
15 provided. The [Board of Finance and Revenue] Tax Review Tribunal
16 shall act finally in disposition of such petitions filed with it
17 within six months after they have been received, and, in the
18 event of the failure of said [board] tribunal to dispose of any
19 such petition within six months, the action taken by the
20 department upon the petition for reassessment shall be deemed
21 sustained. The [Board of Finance and Revenue] Tax Review
22 Tribunal may sustain the action taken on the petition for
23 reassessment, or it may reassess the tax due upon such basis as
24 it shall deem according to law and equity. Notice of the action
25 of the [Board of Finance and Revenue] Tax Review Tribunal shall
26 be given by mail, or otherwise, to the department and to the
27 petitioner.
28 (d) In all cases of petitions for reassessment, review or
29 appeal, the burden of proof shall be upon the petitioner or
30 appellant, as the case may be.
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1 (e) Whenever any assessment of additional tax is not paid
2 within ninety days after the date of the assessment, if no
3 petition for reassessment has been filed, or within [sixty]
4 ninety days from the date of reassessment, if no petition for
5 review has been filed, or within [sixty] thirty days from the
6 date of the decision of the [Board of Finance and Revenue] Tax
7 Review Tribunal upon a petition for review, or the expiration of
8 the [board's] tribunal's time for acting upon such petition, if
9 no appeal has been made, and in all cases of judicial sales,
10 receiverships, assignments or bankruptcies, the department may
11 call upon the Office of Attorney General to collect such
12 assessment. In such event, in a proceeding for the collection of
13 such taxes, the person against whom they were assessed shall not
14 be permitted to set up any ground of defense that might have
15 been determined by the department, the [Board of Finance and
16 Revenue] Tax Review Tribunal or the courts. The department may
17 also certify to the Liquor Control Board, for such action as the
18 board may deem proper, the fact that any person has failed to
19 pay or duly appeal from such assessment of additional tax. The
20 department may also provide, adopt, promulgate and enforce such
21 rules and regulations, as may be appropriate, to prevent further
22 shipment or transportation of malt or brewed beverages into this
23 Commonwealth by any person against whom such unpaid assessment
24 shall have been made.
25 Section 31. Sections 2009(f) and 2181 of the act, amended
26 May 7, 1997 (P.L.85, No.7), are amended to read:
27 Section 2009. Refund of Tax.--* * *
28 (f) In each of the above cases the department shall pay or
29 issue to the manufacturer credits of sufficient value to cover
30 the refund. Such credits may be used by the manufacturer for the
20050H1557B1932 - 61 -
1 payment of any taxes due by him to the Commonwealth. The
2 procedure for refund in any case shall be completed by the
3 department within sixty days after the proper affidavits have
4 been filed with the department under section [3003.1] 2703.
5 Section 2181. Refund of Tax.--(a) A refund shall be made of
6 any tax to which the Commonwealth is not rightfully or equitably
7 entitled provided the Commonwealth determines the refund is due
8 or [application] a petition for refund is made [within the
9 appropriate time limit as set forth in subsection (d)] pursuant
10 to section 2703.
11 (b) Interest shall be paid on refundable tax at the same
12 rate as the interest rate on deficiencies provided for in
13 section 2143.
14 (c) Refund shall be made in cash to the party who paid the
15 tax or to his assignee or as directed by the court.
16 [(d) Application for refund of tax shall be made within
17 three years after:
18 (1) the court has rescinded its order and adjudication of
19 presumed death when the refund is claimed for tax paid on the
20 transfer of the estate of a presumed decedent who is later
21 determined to be alive;
22 (2) termination of litigation establishing a right to a
23 refund; no application for refund shall be necessary when the
24 litigation has been with the Commonwealth over liability for the
25 tax or the amount of tax due;
26 (3) it has been finally determined that the whole or any
27 part of an alleged deficiency tax, asserted by the Federal
28 Government beyond that admitted to be payable, and in
29 consequence of which an estate tax was paid under section 2117
30 was not payable;
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1 (4) a final judgment holding that a provision of this
2 article under which tax has been paid is unconstitutional or
3 that the interpretation of a provision of this article under
4 which tax has been paid was erroneous; or
5 (5) the date of payment, or the date of the notice of the
6 assessment of the tax, or the date the tax becomes delinquent,
7 whichever occurs later, in all other cases.
8 (e) An application for refund of tax shall be made to the
9 department.
10 (e.1) A petition to review the decision and order of the
11 department on a petition for refund may be made to the Board of
12 Finance and Revenue under this article.
13 (f) The action of the Board of Finance and Revenue on all
14 applications for refund of tax may be appealed as provided for
15 in 42 Pa.C.S. § 933 (relating to appeals from government
16 agencies).]
17 (g) As much of the moneys received as payment of tax under
18 this article as shall be necessary for the payment of the
19 refunds provided for in this article with interest is
20 appropriated for the payment of such refunds.
21 Section 32. The act is amended by adding articles to read:
22 ARTICLE XXVII
23 PROCEDURE AND ADMINISTRATION
24 Section 2701. Definitions.
25 The following words and phrases when used in this article
26 shall have the meanings given to them in this section unless the
27 context clearly indicates otherwise:
28 "Department." The Department of Revenue of the Commonwealth.
29 Section 2702. Petition for reassessment.
30 (a) General rule.--A taxpayer may file a petition for
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1 reassessment with the department within 90 days after the
2 mailing date of the notice of assessment.
3 (b) Special rule for shares taxes.--Notwithstanding any
4 provision of law to the contrary, section 2703(e) (relating to
5 petition for refund) shall constitute the exclusive method by
6 which an appeal from the assessment of the tax imposed by
7 Article VII (relating to bank and trust company shares tax) or
8 VIII (relating to title insurance companies shares tax) may be
9 made.
10 (c) Application to inheritance and estate taxes.--This
11 section shall not apply to the taxes imposed by Article XXI
12 (relating to inheritance tax). Part XI (relating to disputed
13 tax) of Article XXI shall provide the exclusive procedure for
14 protesting the appraisement and assessment of taxes imposed by
15 Article XXI.
16 Section 2703. Petition for refund.
17 (a) General rule.--A taxpayer may file a petition for refund
18 of tax with the department within three years after the report
19 was filed or within two years after payment, whichever is later.
20 Except as provided by section 407.1 (relating to assessments),
21 if no report is filed by the taxpayer, a taxpayer may file a
22 petition for refund of tax with the department within two years
23 after payment. If tax is required to be paid by means of a
24 stamp, a taxpayer may file a petition for refund of tax with the
25 department within three years after payment.
26 (b) Limit on amount of refund.--
27 (1) If a petition for refund is filed by the taxpayer
28 during the three-year period prescribed in subsection (a),
29 the amount of the refund shall not exceed the portion of the
30 tax paid within the period immediately preceding the filing
20050H1557B1932 - 64 -
1 of the petition, equal to three years plus the period of any
2 extension of time for filing the return. If the tax was
3 required to be paid by means of a stamp, the amount of the
4 refund shall not exceed the portion of the tax paid within
5 the three years immediately preceding the filing of the
6 petition.
7 (2) If the petition was not filed within the three-year
8 period prescribed in subsection (a), the amount of the refund
9 shall not exceed the portion of the tax paid within the two
10 years immediately preceding the filing of the petition.
11 (3) If no report was filed by the taxpayer, the amount
12 of the refund shall not exceed the portion of the tax paid
13 within the two years immediately preceding the filing of the
14 petition.
15 (c) Special rules applicable in case of extension
16 agreements.--If an agreement under the provisions of section 261
17 (relating to extension of limitation period), 349 (relating to
18 extension of limitation period) or 407.4 (relating to extension
19 of limitation period) extending the period for assessment of tax
20 is made within the period prescribed in subsection (a) for the
21 filing of a petition for refund, the following rules shall
22 apply:
23 (1) The period for filing a petition for refund provided
24 in subsections (a) and (b)(1), shall not expire prior to six
25 months after the expiration of the period within which an
26 assessment may be made pursuant to the agreement or any
27 extension thereof under the provisions of section 261, 349 or
28 407.4.
29 (2) If a petition is filed after the execution of the
30 agreement and within six months after the expiration of the
20050H1557B1932 - 65 -
1 period within which an assessment may be made pursuant to the
2 agreement or any extension thereof, the amount of the refund
3 shall not exceed the portion of the tax paid after the
4 execution of the agreement and before the filing of the claim
5 or the making of the credit or refund, as the case may be,
6 plus the portion of the tax paid within the period which
7 would be applicable under subsection (b)(2) if a claim had
8 been filed on the date the agreement was executed.
9 (3) This subsection shall not apply in the case of a
10 petition filed if no claim is filed, either:
11 (i) prior to the execution of the extension
12 agreement; or
13 (ii) more than six months after the expiration of
14 the period within which an assessment may be made
15 pursuant to the agreement or any extension thereof.
16 (d) Refund of inheritance and estate tax.--A taxpayer may
17 file a petition for refund of tax imposed by Article XXI
18 (relating to inheritance tax) with the department within three
19 years after any of the following:
20 (1) The court has rescinded its order and adjudication
21 of presumed death when the refund is claimed for tax paid on
22 the transfer of the estate of a presumed decedent who is
23 later determined to be alive.
24 (2) Termination of litigation establishing a right to a
25 refund. A petition for refund shall not be necessary when the
26 litigation has been with the Commonwealth over liability for
27 the tax or the amount of tax due.
28 (3) It has been finally determined that the whole or any
29 part of an alleged deficiency tax, asserted by the Federal
30 Government beyond that admitted to be payable, and in
20050H1557B1932 - 66 -
1 consequence of which an estate tax was paid under section
2 2117 (relating to estate tax) was not payable.
3 (4) The date of payment, or the date of the notice of
4 the assessment of the tax, or the date the tax becomes
5 delinquent, whichever occurs later, in all other cases.
6 (e) Special rule for shares taxes.--Upon sufficient cause
7 shown by a taxpayer that the payment of tax assessed under
8 Article VII (relating to bank and trust company shares tax) or
9 VIII (relating to title insurance companies shares tax) would
10 irreparably harm the taxpayer, the department may take
11 jurisdiction of a petition for refund challenging the assessed
12 tax without the tax being paid if the petition is filed within
13 two years after the mailing date of the assessment.
14 (f) Payment date.--For purposes of this section, any payment
15 of estimated tax, withholding of tax or other payment of tax
16 made prior to the due date for payment of the tax shall be
17 deemed to have been made on the due date for payment of the tax.
18 (g) Liquid fuels and fuels tax claims.--This section shall
19 not apply to claims for refund or reimbursement of liquid fuels
20 and fuels tax required to be submitted to the Board of Finance
21 and Revenue under 75 Pa.C.S. Ch. 90 (relating to liquid fuels
22 and fuels tax). The provisions of 75 Pa.C.S. § 9017 (relating to
23 refunds) shall provide the exclusive procedure for those claims.
24 (h) Construction.--For purposes of this section, the term
25 "report" shall be interpreted to include a tax return.
26 Section 2704. Petition procedure.
27 (a) Content of petition.--
28 (1) A petition for reassessment shall state:
29 (i) The tax type and tax periods included within the
30 petition.
20050H1557B1932 - 67 -
1 (ii) The amount of the tax that the taxpayer claims
2 to have been erroneously assessed.
3 (iii) The basis upon which the taxpayer claims that
4 the assessment is erroneous.
5 (2) A petition for refund shall state:
6 (i) The tax type and tax periods included within the
7 petition.
8 (ii) The amount of the tax that the taxpayer claims
9 to have been overpaid.
10 (iii) The basis of the taxpayer's claim for refund.
11 (3) The petition shall be supported by an affidavit by
12 the petitioner or the petitioner's authorized representative
13 that the petition is not made for the purpose of delay and
14 that the facts set forth in the petition are true.
15 (b) Request for hearing.--Upon written request of the
16 petitioner or when deemed necessary by the department, the
17 department shall schedule a hearing to review a petition. The
18 petitioner shall be notified by the department of the date, time
19 and place where the hearing will be held.
20 (c) Decision and order.--The department shall issue a
21 decision and order disposing of a petition on such basis as it
22 deems to be in accordance with law.
23 (d) Time limit for decision and order.--The department shall
24 issue a decision and order disposing of a petition within six
25 months after receipt of the petition. The petitioner and the
26 department may agree to extend the time period for the
27 department to dispose of the petition for one additional six-
28 month period. Notice of the department's decision and order
29 disposing of the petition shall be mailed to the petitioner.
30 (e) Exception to time limit for decision and order.--If at
20050H1557B1932 - 68 -
1 the time of the filing of a petition proceedings are pending in
2 a court of competent jurisdiction or at the Pennsylvania Tax
3 Review Tribunal wherein any claim made in the petition may be
4 established, the department, upon the written request of the
5 petitioner, may defer consideration of the petition until the
6 final judgment determining the question or questions involved in
7 the petition has been decided. If consideration of the petition
8 is deferred, the department shall issue a decision and order
9 disposing of the petition within six months after the final
10 judgment.
11 (f) Failure of department to take action.--The failure of
12 the department to dispose of the petition within the time period
13 provided for by subsection (d) or (e) shall act as a denial of
14 the petition. Notice of the department's failure to take action
15 and the denial of the petition shall be mailed to the
16 petitioner.
17 Section 2705. Review by Pennsylvania Tax Review Tribunal.
18 (a) Petition for review of a decision and order.--Within 90
19 days after the mailing date of the department's notice of
20 decision and order on a petition filed with it, a taxpayer may
21 petition the Pennsylvania Tax Review Tribunal to review the
22 decision and order of the department.
23 (b) Petition for review of denial by department's failure to
24 act.--A petition for review may be filed with the Pennsylvania
25 Tax Review Tribunal within 90 days after the mailing date of the
26 department's notice to the petitioner of its failure to dispose
27 of the petition within the time periods prescribed by section
28 2704(d) or (e) (relating to petition procedure).
29 Section 2706. Burden of proof.
30 In all cases of petitions filed pursuant to this article, the
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1 burden of proof shall be upon the petitioner or appellant, as
2 the case may be.
3 Section 2707. Compromise of tax appeals.
4 (a) Compromise of tax.--The department, with the approval of
5 the Attorney General, shall have the authority to compromise the
6 liability for tax disputed in any petition on terms as it
7 determines to be in the best interests of the Commonwealth.
8 (b) Compromise of penalties.--The department shall have the
9 authority to compromise the liability for interest or penalties
10 disputed in any petition on the terms as it determines to be in
11 the best interests of the Commonwealth.
12 ARTICLE XXVIII
13 TAX REVIEW TRIBUNAL
14 Section 2801. Definitions.
15 The following words and phrases when used in this article
16 shall have the meanings given to them in this section unless the
17 context clearly indicates otherwise:
18 "Department." The Department of Revenue of the Commonwealth.
19 "Judge." An administrative law judge appointed to the
20 Pennsylvania Tax Review Tribunal pursuant to section 2802
21 (relating to Tax Review Tribunal; establishment).
22 "Tribunal." The Tax Review Tribunal established in section
23 2802 (relating to Tax Review Tribunal; establishment).
24 Section 2802. Tax Review Tribunal; establishment.
25 (a) Establishment.--The Tax Review Tribunal is hereby
26 established as an administrative board in the Treasury
27 Department and independent from the department.
28 (b) Appointment of judges.--The tribunal shall consist of no
29 less than five qualified and competent administrative law
30 judges, including a chief administrative law judge. The
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1 administrative law judges shall be appointed by the State
2 Treasurer, with the approval of the Board of Finance and
3 Revenue. The State Treasurer, with the approval of the Board of
4 Finance and Revenue, shall have the power to appoint as many
5 additional qualified and competent administrative law judges as
6 may be necessary to fulfill the duties of the tribunal.
7 (c) Temporary appointees.--If the docket of the tribunal is
8 congested or any judge of the tribunal is absent or unable to
9 perform the duties of the office, the State Treasurer, with the
10 approval of the Board of Finance and Revenue, may appoint
11 qualified and competent persons who meet the minimum standards
12 established by this article to temporarily serve as
13 administrative law judges until the docket is no longer
14 congested or the judge returns to the judge's official duties.
15 (d) Term of office.--Administrative law judges shall be
16 appointed for terms of five years. The administrative law judges
17 initially appointed upon the establishment of the tribunal shall
18 be given terms of varying lengths so that all judges' terms do
19 not expire in the same year. However, no appointment shall be
20 for less than three years nor more than five years.
21 Administrative law judges may be reappointed upon the expiration
22 of their terms.
23 (e) Chief administrative law judge.--The State Treasurer,
24 with the approval of the Board of Finance and Revenue, shall
25 designate one of the administrative law judges as chief
26 administrative law judge. The chief administrative law judge
27 shall be responsible for assigning a hearing judge to every
28 cause, matter and proceeding coming before the tribunal. The
29 chief administrative law judge shall receive remuneration above
30 that of any other administrative law judge.
20050H1557B1932 - 71 -
1 (f) Continuation in office.--Once appointed each judge shall
2 continue in office until the judge's term expires and until a
3 successor has been appointed and qualified.
4 (g) Vacancy.--A vacancy in the tribunal occurring otherwise
5 than by expiration of a term shall be filled for the unexpired
6 term.
7 (h) Removal.--The State Treasurer, with approval of the
8 Board of Finance and Revenue, may remove an administrative law
9 judge, after notice and an opportunity to be heard, for neglect
10 of duty, inability to perform duties or malfeasance in office.
11 (i) Location of offices.--The offices of the tribunal shall
12 be located separate and apart from the department.
13 Section 2803. Qualifications of judges and prohibition.
14 (a) Requirements.--Each judge of the tribunal must meet and
15 maintain the following minimum requirements:
16 (1) Be a citizen of the United States.
17 (2) Be a resident of this Commonwealth.
18 (3) Be an attorney in good standing before the Supreme
19 Court of Pennsylvania.
20 (4) Have at least five years experience in a position
21 requiring substantial knowledge of Pennsylvania tax law and
22 the tax appeal process.
23 (b) Oath of office.--Before entering upon the duties of
24 office, a judge shall take and subscribe to an oath or
25 affirmation to faithfully discharge the duties of the office.
26 (c) Prohibition.--Each judge shall be devoted full time
27 during business hours to the duties of the office. No person,
28 while a judge, shall engage in any other gainful employment or
29 business nor hold another office or position of profit in a
30 government of this Commonwealth, any other state or the United
20050H1557B1932 - 72 -
1 States.
2 Section 2804. Administration.
3 (a) Executive administrator.--The State Treasurer, with
4 approval of the Board of Finance and Revenue, shall appoint an
5 executive administrator who shall be responsible for the day-to-
6 day administration and operation of the tribunal.
7 (b) Chief clerk.--The State Treasurer, with approval of the
8 Board of Finance and Revenue, shall appoint a chief clerk who
9 shall be responsible for recording all filings and maintaining a
10 record of all proceedings before the tribunal. The chief clerk
11 shall be responsible for certifying the record established at
12 the tribunal in the event of an appeal to Commonwealth Court.
13 (c) Expenditures.--The chief administrative law judge or his
14 designee may appoint and fix the compensation of accountants,
15 attorneys, stenographers and other employees and make other
16 expenditures, including expenditures for library, publications
17 and equipment, as necessary to permit the tribunal to
18 efficiently execute its functions.
19 (d) Limitation.--No employee of the tribunal shall act as
20 attorney, representative or accountant for others in a matter
21 involving any tax imposed or levied by the Commonwealth.
22 Section 2805. Jurisdiction of tribunal.
23 (a) Exclusive and final authority.--Except as permitted by
24 section 2817 (relating to appeals), the tribunal shall be the
25 sole, exclusive and final authority for the hearing, review and
26 determination of questions of law and fact arising under a
27 decision and order of the department pursuant to Article XXVII
28 (relating to procedure and administration). Notwithstanding any
29 other provision of law, the tribunal shall have jurisdiction
30 over all matters relating to decisions of the department mailed
20050H1557B1932 - 73 -
1 after December 31, 2006, regarding reassessment,
2 redetermination, resettlement or refund.
3 (b) Improper commencement.--Except as permitted by section
4 2817, no person shall contest any matter within the jurisdiction
5 of the tribunal in any action, suit or proceeding in
6 Commonwealth Court or any other court of the Commonwealth. If a
7 person attempts to do so, then the action, suit or proceeding
8 shall be transferred to the tribunal.
9 (c) Amounts asserted as due.--The taxpayer shall have the
10 right to have the taxpayer's case heard by the tribunal prior to
11 the payment of any of the amounts asserted as due by the
12 department and prior to the posting of any bond except in any
13 case:
14 (1) Involving the denial of a claim for refund.
15 (2) Where a bond is required by statute.
16 (d) Characterization of certain petitions.--If the taxpayer
17 pays all or part of the tax or other amount at issue before the
18 tribunal has rendered a decision, the tribunal shall treat the
19 taxpayer's petition as a protest of a denial of a claim for
20 refund of the amount paid without further action on the part of
21 the taxpayer.
22 (e) Constitutionality issues.--The tribunal shall decide
23 questions regarding the constitutionality of the application of
24 statutes to the taxpayer and the constitutionality of
25 regulations promulgated by the department but shall not have the
26 power to declare a statute unconstitutional on its face. A
27 taxpayer desiring to challenge the constitutionality of a
28 statute on its face may file a petition with the tribunal with
29 respect to all issues other than the constitutional challenge
30 and preserving the constitutional challenge until the entire
20050H1557B1932 - 74 -
1 matter, including the constitutional issue, is presented to the
2 Commonwealth Court.
3 Section 2806. Filing fees.
4 (a) Fees.--Upon filing a petition pursuant to Article XXVII
5 (relating to procedure and administration), the taxpayer shall
6 pay to the chief clerk a fee in the amount of $100, except that,
7 in case of a petition filed in the small claims division as
8 provided for in section 2816 (relating to small claims
9 division), the fee shall be $50. A similar fee shall be paid by
10 other parties making an appearance in the proceeding, except
11 that no fee shall be charged to a government body or government
12 official appearing in a representative capacity.
13 (b) Records related fees.--The tribunal may fix a fee, not
14 in excess of the fees charged and collected by the clerks of the
15 Commonwealth Court, for comparing or for preparing and comparing
16 a transcript of the record, or for copying any record, entry or
17 other paper and the comparison and certification thereof.
18 (c) Disposition of fees.--All fees and other moneys received
19 or collected by the tribunal shall be paid over to the State
20 Treasurer and shall be held in the General Fund as miscellaneous
21 receipts.
22 Section 2807. Pleadings.
23 (a) Commencement of proceeding.--A taxpayer may commence a
24 proceeding in the tribunal by filing a petition for review as
25 provided in Article XXVII (relating to procedure and
26 administration).
27 (b) Taxpayer election.--A taxpayer may elect to proceed in
28 the small claims division of the tribunal by filing a petition
29 in the form prescribed by the tribunal for small claims. A
30 taxpayer may not revoke an election to proceed in the small
20050H1557B1932 - 75 -
1 claims division and shall not have any further right to appeal
2 or bring suit.
3 (c) Answer.--The department shall file its answer with the
4 tribunal no later than 75 days after its receipt of the
5 tribunal's notification that the taxpayer has filed a petition.
6 Upon written request, the tribunal may grant up to 15 additional
7 days to file an answer. If the petitioner files an amended
8 petition as set forth in the preceding section, the department's
9 time period for filing its responsive pleading shall run from
10 the filing date of the amendment. The department shall serve a
11 copy on the taxpayer's representative or, if the taxpayer is not
12 represented, on the taxpayer, and shall file proof of service
13 with the answer. Material facts alleged in the petition, if not
14 expressly admitted or denied in the answer, shall be deemed
15 admitted. If the department fails to answer within the
16 prescribed time, all material facts alleged in the petition
17 shall be deemed admitted.
18 (d) Reply.--The taxpayer may file a reply in the tribunal
19 within 30 days after receipt of the answer. The taxpayer shall
20 serve a copy on the authorized representative of the department
21 and shall file proof of service with the reply. Material facts
22 alleged in the answer, if not expressly admitted or denied in
23 the reply, shall be deemed admitted. If the taxpayer does not
24 file a reply, all material facts alleged in the answer shall be
25 deemed denied. Upon the filing of a reply or 30 days after the
26 filing of the answer if no reply is filed, the controversy shall
27 be deemed at issue and scheduled for hearing.
28 (e) Amendment of pleading.--Either party may amend a
29 pleading once without leave at any time before the period for
30 responding to it expires. After expiration of the response
20050H1557B1932 - 76 -
1 period, a pleading may be amended only with the written consent
2 of the adverse party or with the permission of the tribunal. The
3 tribunal shall freely grant consent to amend upon such terms as
4 may be just. Except as otherwise ordered by the tribunal, there
5 shall be an answer or reply to an amended pleading if an answer
6 or reply is required to the pleading being amended. Filing of
7 the answer, or, if the answer has already been filed, the
8 amended answer, shall be made no later than 75 days after filing
9 of the amended petition. Filing of the reply or, if the reply
10 has already been filed, the amended reply, shall be made within
11 30 days after filing of the amended answer. The taxpayer may not
12 amend a petition after expiration of the time for filing a
13 petition, if the amendment would have the effect of conferring
14 jurisdiction on the tribunal over a matter which otherwise would
15 not come within its jurisdiction. An amendment of a pleading
16 shall relate back to the time of filing of the original pleading
17 unless the tribunal shall order otherwise either on motion of a
18 party or on the tribunal's own initiative.
19 Section 2808. Presiding judge.
20 (a) Requirements for presiding judge.--There shall preside
21 at the taking of evidence and conduct of all hearings one or
22 more administrative law judges assigned by the chief
23 administrative law judge as provided in section 2802 (relating
24 to Tax Review Tribunal; establishment). The functions of all
25 presiding judges shall be conducted in an impartial manner. Any
26 judge may at any time withdraw from a proceeding if the judge
27 deems himself disqualified, and the chief administrative law
28 judge may require a withdrawal upon the appeal of any party from
29 a decision of the presiding judge not to withdraw. Upon
30 disqualification of any judge, the chief administrative law
20050H1557B1932 - 77 -
1 judge shall assign the matter to another judge.
2 (b) Authority of presiding judge.--The presiding judge shall
3 have authority, subject to the provisions of this article and
4 the published rules of the tribunal, to:
5 (1) Administer oaths and affirmations.
6 (2) Issue subpoenas authorized by law.
7 (3) Rule upon offers of proof and receive relevant
8 evidence, take or cause depositions to be taken whenever the
9 ends of justice would be served thereby.
10 (4) Regulate the course of the hearing.
11 (5) Hold conferences for settlement or simplification of
12 the issues by consent of the parties.
13 (6) Dispose of procedural requests or similar matters.
14 (7) Make decisions or recommend decisions in conformity
15 within this article.
16 (8) Take any other action authorized by law or the rules
17 of the tribunal.
18 (c) Presiding judge to decide.--The same presiding judge
19 shall to the fullest extent possible preside at the reception of
20 all evidence in a particular case to which the judge has been
21 assigned. The same presiding judge who presides at the reception
22 of evidence shall issue the proposed decision and order on the
23 petition except where the presiding judge becomes unavailable to
24 the tribunal.
25 Section 2809. Procedures in general.
26 (a) Admissibility of evidence.--Any oral or documentary
27 evidence may be received, but the tribunal shall as a matter of
28 policy provide for the exclusion of irrelevant, immaterial or
29 unduly repetitious evidence.
30 (b) Submission of evidence.--A party is entitled to present
20050H1557B1932 - 78 -
1 the party's case or defense by oral or documentary evidence, to
2 submit rebuttal evidence and to conduct such cross-examination
3 as may be required for a full and true disclosure of the facts.
4 The tribunal may adopt rules for the submission of all or part
5 of the evidence in written form.
6 (c) Record, briefs and argument.--The transcript of a
7 hearing, the transcript of testimony and exhibits, together with
8 all papers and motions filed in the proceeding, constitutes the
9 exclusive record for decision. Briefing and oral argument shall
10 be held in accordance with rules established by the tribunal.
11 (d) Official notice of facts.--When the tribunal's decision
12 rests on official notice of a material fact not appearing in the
13 evidence in the record, upon notification that facts are about
14 to be or have been noticed, any party adversely affected shall
15 have the opportunity upon timely request to show that the facts
16 are not properly noticed or that alternative facts should be
17 noticed. The tribunal in its discretion shall determine whether
18 written presentations suffice or whether oral argument, oral
19 evidence or cross-examination is appropriate in the
20 circumstances. Nothing in this subsection shall affect the
21 application by the tribunal in appropriate circumstances of the
22 doctrine of judicial notice.
23 (e) Actions of parties and counsel.--A party who fails to be
24 represented at a scheduled conference or hearing after being
25 notified of the conference or hearing, shall be deemed to have
26 waived the opportunity to participate in the conference or
27 hearing and shall not be permitted thereafter to reopen the
28 disposition of any matter accomplished at the conference or
29 hearing, or to recall for further examination of witnesses who
30 were excused, unless the presiding judge shall determine that
20050H1557B1932 - 79 -
1 failure to be represented was unavoidable and that the interests
2 of the other parties would not be prejudiced by permitting the
3 reopening or further examination. If the actions of a party or
4 counsel in a proceeding shall be determined by a panel of
5 administrative law judges assigned by the chief administrative
6 law judge, after due notice and opportunity for hearing, to be
7 obstructive to the orderly conduct of the proceeding and
8 inimical to the public interest, the panel may reject any claim
9 for relief or dismiss any proceeding and, with respect to
10 counsel, may impose sanctions upon counsel or a party as
11 appropriate or bar further participation by that counsel in any
12 proceedings before the tribunal.
13 (f) Interlocutory appeals.--An interlocutory appeal from a
14 ruling of a presiding judge shall be allowed to a panel of
15 administrative law judges assigned by the chief administrative
16 law judge upon certification by the presiding judge that the
17 ruling involves a material question which should be resolved at
18 that time. Notwithstanding the presiding judge's certification,
19 the panel shall have the authority to dismiss summarily the
20 interlocutory appeal if it should appear that the certification
21 was improvident. An interlocutory appeal shall not result in a
22 stay of the proceedings except upon a finding by the presiding
23 judge or the panel that extraordinary circumstances exist.
24 Section 2810. Prehearing procedures.
25 (a) Conferences.--The presiding judge shall have the
26 authority to hold one or more prehearing conferences during the
27 course of the proceeding on the judge's motion or at the request
28 of a party to the proceeding. The presiding judge may direct the
29 parties to exchange their evidentiary exhibits and witness lists
30 at a prehearing conference. Where good cause exists, the parties
20050H1557B1932 - 80 -
1 may at any time amend, by deletion or supplementation, their
2 evidentiary exhibits and witness lists.
3 (b) Disclosure of information on witnesses.--At the
4 prehearing conference or at some other reasonable time prior to
5 the hearing as determined by rule of the tribunal or order of
6 the president judge, each party to the proceeding shall make
7 available to the other parties to the proceeding the names of
8 the witnesses the party expects to call and the subject matter
9 of the witnesses' expected testimony. Where good cause exists,
10 the parties shall have the right at any time to amend, by
11 deletion or supplementation, the list of names of the witnesses
12 the parties plan to call and the subject matter of the expected
13 testimony of those witnesses.
14 (c) Scheduling.--The presiding judge shall have the
15 authority to impose schedules on the parties to the proceeding
16 specifying the periods of time during which the parties may
17 pursue discovery. The schedules and time periods shall be set
18 with a view to accelerating disposition of the case to the
19 fullest extent consistent with fairness.
20 Section 2811. Oaths and subpoenas.
21 (a) Oaths.--Any employee of the tribunal designated in
22 writing for the purpose by the chief administrative law judge
23 may administer oaths.
24 (b) Subpoenas.--A judge or the chief clerk of the tribunal,
25 on the request of any party to the proceeding, shall have the
26 power to issue subpoenas requiring the attendance of witnesses
27 and giving of testimony and subpoenas duces tecum requiring the
28 production of any returns, books, papers, documents and
29 correspondence and other evidence pertaining to the matter under
30 inquiry in the manner prescribed by the Pennsylvania Rules of
20050H1557B1932 - 81 -
1 Civil Procedure.
2 Section 2812. Discovery.
3 (a) Informal discovery preferred.--The parties to a
4 proceeding shall make reasonable effort in good faith to achieve
5 discovery by informal means before invoking the formal discovery
6 mechanisms authorized by this article.
7 (b) Depositions.--Any party to the proceeding shall be able
8 to take depositions of witnesses upon oral examination or
9 written questions for purposes of discovering relevant,
10 unprivileged information. To that end, a party may obtain
11 subpoenas requiring the attendance of witnesses and the
12 production of returns, books, papers, documents, correspondence
13 and other evidence pertaining to the matter under inquiry.
14 (c) Interrogatories.--Any party to a proceeding may serve
15 written interrogatories upon any other party for purposes of
16 discovering relevant, unprivileged information. A party served
17 with interrogatories may, before the time prescribed by the
18 tribunal for answering the interrogatories, apply to the
19 presiding judge for the holding of a prehearing conference for
20 the mutual exchange of evidence exhibits and other information.
21 Each interrogatory which requests information not previously
22 supplied at a prehearing conference or hearing shall be answered
23 separately and fully in writing under oath unless it is objected
24 to, in which event the reasons for the objections shall be
25 stated in lieu of an answer. The party upon whom the
26 interrogatories have been served shall serve a copy of the
27 answers and objections within the time prescribed by the
28 tribunal unless otherwise specified, upon the party submitting
29 the interrogatories. The party submitting the interrogatories
30 may petition the presiding officer for an order compelling an
20050H1557B1932 - 82 -
1 answer to an interrogatory or interrogatories to which there has
2 been an objection or other failure to answer.
3 (d) Requests for admissions.--A party to a proceeding may
4 serve upon any other party a written request for the admission
5 of any relevant, unprivileged, undisputed facts, the genuineness
6 of any document described in the request, the admissibility of
7 evidence, the order of proof and other similar matters. The
8 parties shall stipulate, to the fullest extent to which complete
9 or qualified agreement can or fairly should be reached, all
10 matters not privileged which are relevant to the proceeding.
11 (e) Protective orders.--The presiding judge shall have the
12 authority, upon motion by a party or by the person from whom
13 discovery is sought, and for good cause shown, to make any order
14 which justice requires to protect the party or person.
15 (f) Fees and mileage costs.--Any witness subpoenaed or whose
16 deposition is taken shall receive fees and mileage costs.
17 (g) Other discovery.--The tribunal may provide for other
18 forms of discovery.
19 (h) Enforcement.--The tribunal may enforce its orders on
20 discovery and other procedural issues, among other means, by
21 deciding issues wholly or partly against the offending party.
22 Section 2813. Hearings.
23 (a) Proceedings.--Proceedings before the tribunal shall be
24 tried de novo and, to the extent permissible under the
25 Constitution of the United States and the Constitution of
26 Pennsylvania, without a jury.
27 (b) Role of tribunal.--Except as set forth in this article
28 or otherwise precluded by law, the tribunal shall take evidence,
29 conduct hearings and issue final and interlocutory decisions.
30 (c) Hearings to be public; exceptions.--
20050H1557B1932 - 83 -
1 (1) Except as set forth in paragraph (2), all hearings
2 of the tribunal shall be transcribed and open to the public.
3 (2) On motion of either party the tribunal shall issue a
4 protective order or an order closing part or all of the
5 hearing from the public when the party opposing disclosure of
6 certain information shows good cause to protect the
7 information from being disclosed to the public.
8 (d) Evidence.--The tribunal shall admit relevant evidence if
9 it is probative of a material fact in controversy. The tribunal
10 shall exclude irrelevant and unduly repetitious evidence. A rule
11 of privilege recognized by law applies.
12 (e) Testimony.--Testimony may be given only on oath or
13 affirmation.
14 (f) Pleadings to conform to proof.--The petition and other
15 pleadings in the proceeding shall be deemed to conform to the
16 proof presented at the hearing unless a party satisfies the
17 tribunal that presentation of the evidence would unfairly
18 prejudice the party in maintaining its position on the merits or
19 unless deeming the taxpayer's petition to conform to the proof
20 would confer jurisdiction on the tribunal over a matter that
21 would not otherwise come within its jurisdiction.
22 (g) Official reporting.--Proceedings before the tribunal,
23 except those before the small claims division as provided for in
24 section 2816 (relating to small claims division) shall be
25 officially reported. The Commonwealth shall pay the expense of
26 reporting from the appropriation for the tribunal.
27 Section 2814. Decisions.
28 (a) Decision in writing.--The tribunal shall render its
29 decision in writing, including a concise statement of the facts
30 found and the conclusions of law reached. The tribunal's
20050H1557B1932 - 84 -
1 decision shall, subject to law, grant the relief, invoke the
2 remedies and issue the orders as it deems appropriate to carry
3 out its decision.
4 (b) Failure to render decision.--If the tribunal fails to
5 render a decision within the prescribed time period, either
6 party may institute an action in mandamus to compel the issuance
7 of a decision.
8 (c) Precedent.--Except as provided in section 2816(k)
9 (relating to small claims division), the tribunal's
10 interpretation of a taxing statute subject to contest in one
11 case shall be followed by the tribunal in subsequent cases
12 involving the same statute, and its application of a statute to
13 the facts of one case shall be followed by the tribunal in
14 subsequent cases involving the same material facts unless the
15 tribunal's interpretation or application conflicts with that of
16 an appellate court or the tribunal provides satisfactory reasons
17 for reversing prior precedent, provided:
18 (1) It is necessarily involved and essential to the
19 determination of the case.
20 (2) There is a full consideration of the question by the
21 tribunal.
22 (3) The decision is a professed deliberate determination
23 of the question.
24 Section 2815. Proposed decision; review by panel.
25 (a) Proposed decision and order.--The presiding judge shall
26 issue a proposed decision and order, including proposed findings
27 of fact and conclusions of law, within six months after
28 submission of the last brief filed subsequent to completion of
29 the hearing or, if briefs are not submitted, then no later than
30 six months after completion of the hearing.
20050H1557B1932 - 85 -
1 (b) Final order; submission to panel.--The proposed decision
2 and order shall be subject to review by a panel of
3 administrative law judges assigned by the chief administrative
4 law judge upon the filing of exceptions pursuant to subsection
5 (c). The panel shall include the presiding judge that issued the
6 proposed decision and order. If no exceptions are filed, the
7 proposed decision and order shall become final, without further
8 action.
9 (c) Exceptions procedure.--
10 (1) Within 15 days of the issuance of the proposed
11 decision and order, a party may file exceptions to the
12 proposed decision and order including:
13 (i) alternative proposed findings of fact or
14 conclusions of law, if appropriate; and
15 (ii) the supporting reasons for the exceptions and
16 any alternative proposed findings of fact or conclusions
17 of law.
18 (2) Within 30 days of the filing of exceptions to the
19 proposed decision and order, the panel shall either:
20 (i) issue an order adopting the proposed decision
21 and order as the final decision and order of the
22 tribunal; or
23 (ii) issue an alternative decision and order,
24 including findings of fact and conclusions of law, as the
25 final decision and order of the tribunal.
26 (d) Record.--The record shall show the ruling on each
27 finding of fact, conclusion of law or exception presented. All
28 decisions and orders, including proposed decisions and orders,
29 are a part of the record and shall include a statement of:
30 (1) Findings and conclusions, and the reasons or basis
20050H1557B1932 - 86 -
1 for the findings and conclusions, on all material issues of
2 fact, law or discretion presented on the record.
3 (2) The appropriate rule, order, relief or denial
4 thereof.
5 (e) Decision final.--A final decision and order shall
6 finally decide the matters in controversy unless any party to
7 the matter timely appeals the decision as provided for in
8 section 2817 (relating to appeals).
9 (f) Effect.--A final decision and order shall have the same
10 effect and shall be enforced in the same manner as a judgment of
11 any court of competent jurisdiction.
12 Section 2816. Small claims division.
13 (a) Establishment.--There is hereby established a small
14 claims division of the tribunal.
15 (b) Judge to preside.--An administrative law judge assigned
16 by the chief administrative law judge as provided in section
17 2802 (relating to Tax Review Tribunal; establishment) shall
18 preside over proceedings within the jurisdiction of the small
19 claims division.
20 (c) Amounts in controversy.--If the taxpayer elects in its
21 petition for review filed pursuant to Article XXVII (relating to
22 procedure and administration) the small claims division shall
23 have jurisdiction over any proceeding with respect to any
24 calendar year for which the net amount of the tax deficiencies
25 and claimed refunds in controversy does not exceed $25,000,
26 exclusive of interest and penalties.
27 (d) Jurisdiction.--If the taxpayer elects in its petition
28 for review filed pursuant to Article XXVII and the department
29 agrees in its answer to the taxpayer's petition, the small
30 claims division shall have jurisdiction over any proceeding
20050H1557B1932 - 87 -
1 regardless of the amount in controversy.
2 (e) Answer.--No later than 30 days after receipt of notice
3 that the taxpayer has filed a petition in proper form or at
4 other times as the tribunal may order, the department shall file
5 with the tribunal an answer similar to that required by section
6 2807 (relating to pleadings).
7 (f) Withdrawal.--At any time prior to entry of judgment, a
8 taxpayer may withdraw a proceeding in the small claims division
9 by notifying the chief clerk of the tribunal in writing. A
10 withdrawal shall be with prejudice and shall not have the effect
11 of revoking the election to proceed in the small claims
12 division.
13 (g) Hearings informal.--Hearings in the small claims
14 division shall be informal, and the judge may receive evidence
15 as the judge deems appropriate for determination of the case.
16 Testimony shall be given under oath or affirmation.
17 (h) Time frame.--The presiding judge shall issue a final
18 decision and order, including findings of fact and conclusions
19 of law, within 90 days after the closing of the record.
20 (i) Record.--The record shall show the ruling on each
21 finding of fact and conclusion of law. All decisions and orders
22 are a part of the record and shall include a statement of:
23 (1) Findings and conclusions, and the reasons or basis
24 for the findings and conclusions, on all material issues of
25 fact, law or discretion presented on the record.
26 (2) The appropriate rule, order, relief or denial
27 thereof.
28 (j) Decision final.--A final decision and order of the small
29 claims division shall be conclusive upon all parties and may not
30 be appealed. A decision and order of the small claims division
20050H1557B1932 - 88 -
1 shall not be considered as precedent in any other case, hearing
2 or proceeding.
3 (k) Inapplicability.--Sections 2815 (relating to proposed
4 decision; review by panel), 2818 (relating to representation),
5 2819 (relating to publication of decisions) and this section
6 shall not apply to proceedings in the small claims division.
7 Section 2817. Appeals.
8 (a) Individual review.--The taxpayer or the department shall
9 be entitled to judicial review of a final decision of the
10 tribunal, except a final decision of the small claims division,
11 in accordance with the procedure for judicial review of
12 governmental determinations set forth in Pa.R.C.P. No. 1501
13 (relating to scope of chapter) through No. 1561 (relating to
14 disposition of petition for review).
15 (b) Review of interlocutory decision.--The taxpayer or the
16 department may obtain judicial review of an interlocutory
17 decision of the tribunal by filing a petition as provided in
18 Pa.R.A.P. Ch. 13 (relating to interlocutory appeals by
19 petition).
20 (c) Record.--The record on judicial review shall include the
21 decision and order of the tribunal, the stenographic transcript
22 of the hearing before the tribunal, the pleadings, exhibits,
23 documents and other items admitted into evidence.
24 Section 2818. Representation.
25 (a) Taxpayer.--Appearances in proceedings conducted by the
26 tribunal may be by the taxpayer or by an attorney admitted to
27 practice in this Commonwealth. Parties may also be represented
28 by an attorney who is a member of or is employed by an
29 accounting or other professional services firm, by an accountant
30 licensed in this Commonwealth or by an enrolled agent authorized
20050H1557B1932 - 89 -
1 to practice before the Internal Revenue Service provided the
2 representation does not constitute the unauthorized practice of
3 law as determined by the Supreme Court of this Commonwealth.
4 (b) Department.--The department shall be represented by its
5 authorized representative in all proceedings before the
6 tribunal.
7 Section 2819. Publication of decisions.
8 Except for decisions issued by the small claims division, the
9 chief clerk shall cause the final decisions of the tribunal to
10 be indexed and published in print or electronic format as it
11 deems best adapted for public convenience. Publications shall be
12 made permanently available and constitute the official reports
13 of the tribunal.
14 Section 2820. Service of process.
15 (a) Personal service.--The mailing by first class mail,
16 postage prepaid, to the address of the taxpayer, as given on the
17 taxpayer's petition, or to the address of the taxpayer's
18 representative of record, if any, or to the usual place of
19 business of the department, or its representative of record,
20 shall constitute personal service on the other party. The
21 tribunal may by rule prescribe that notice by other means shall
22 constitute personal service and may in any individual case order
23 that notice be given to additional persons or by other means.
24 (b) Date.--Mailing by registered or certified mail and
25 delivery by a private delivery service approved by the Internal
26 Revenue Service in accordance with section 7502(f) of the
27 Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. §
28 7502(f)), of any pleading, decision, order, notice or other
29 document in respect to proceedings before the tribunal shall be
30 deemed to have occurred on the date of mailing or the date of
20050H1557B1932 - 90 -
1 submission to the private delivery service.
2 Section 2821. Code of ethics.
3 (a) General rule.--The administrative law judges and the
4 officers and employees of the tribunal shall conform to the
5 following code of ethics. An administrative law judge, officer
6 or employee of the tribunal must:
7 (1) Avoid impropriety and the appearance of impropriety
8 in all activities.
9 (2) Perform all duties impartially and diligently.
10 (3) Not participate in any ex parte communications
11 regarding matters before the tribunal.
12 (4) Abstain publicly from expressing, other than in
13 public session, personal views on the merits of a matter
14 pending before the tribunal.
15 (5) Observe the standards of fidelity and diligence that
16 apply to the position of judge, office or employee.
17 (6) Disqualify himself from proceedings in which
18 impartiality might be reasonably questioned.
19 (7) Regulate extracurricular activities to minimize the
20 risk of conflict with official duties. An administrative law
21 judge, officer or employee of the tribunal may speak, write
22 or lecture, and any reimbursed expenses, honoraria, royalties
23 or other moneys received in connection therewith shall be
24 disclosed annually. Disclosure statements shall be filed with
25 the executive administrator of the tribunal and shall be open
26 to public inspection during the normal business hours of the
27 tribunal during the tenure of the administrative law judge,
28 officer or employee.
29 (8) Conform to additional rules as the tribunal may
30 prescribe.
20050H1557B1932 - 91 -
1 (b) Ex parte communications.--Ex parte communications
2 prohibited in this section shall mean any off-the-record
3 communications to or by any administrative law judge, officer or
4 employee of the tribunal regarding the merits or any fact in
5 issue of any matter pending before the tribunal.
6 (c) Removal for violation.--An administrative law judge,
7 officer or employee of the tribunal who violates the provisions
8 of subsection (a) shall be subject to removal from office after
9 notice and an opportunity to be heard.
10 (d) Construction.-- Nothing in this act shall be interpreted
11 to prohibit the administrative law judges, officers and
12 employees of the tribunal from serving in the Pennsylvania
13 National Guard and the reserves of the armed forces of the
14 United States while appointed to or employed by the tribunal.
15 Section 2822. Rules and forms.
16 The tribunal is authorized to promulgate and adopt all
17 reasonable rules, regulations and forms as may be necessary or
18 appropriate to carry out the intent and purposes of this
19 article.
20 Section 2823. Application of rules of administrative practice
21 and procedure.
22 Except where inconsistent with this article and the rules and
23 regulations adopted by the tribunal, the provisions of 2 Pa.C.S.
24 (relating to administrative law and procedure) and the rules and
25 regulations adopted under 2 Pa.C.S. are hereby incorporated by
26 reference and shall apply to all actions and proceedings before
27 the tribunal.
28 ARTICLE XXIX-C
29 TAX CLEARANCE FOR RENEWALS OF LICENSES,
30 PERMITS AND REGISTRATIONS
20050H1557B1932 - 92 -
1 Section 2901-C. Statement of policy.
2 The public has a right to be protected from unscrupulous or
3 fraudulent practices, and it depends on the licensing agencies
4 within the Commonwealth to provide a measure of security that
5 license applicants and licensees in good standing, as well as
6 other professionals, will conduct business fairly, honestly and
7 in compliance with applicable licensure requirements. Failure to
8 comply with the tax laws of this Commonwealth is considered
9 unprofessional conduct that is not in keeping with Commonwealth
10 standards for licensing.
11 Section 2902-C. Definitions.
12 The following words and phrases when used in this article
13 shall have the meanings given to them in this section unless the
14 context clearly indicates otherwise:
15 "Applicant." A person or entity that applies to a licensing
16 agency for a license or applies for renewal. In the case of the
17 transfer of an existing license, the transferor or the
18 transferee. The term includes a management company utilized by
19 such person, entity, transferor or transferee.
20 "Department." The Department of Revenue of the Commonwealth.
21 "Department of State." The Department of State, and any
22 licensing board, division or commission under the Bureau of
23 Professional and Occupational Affairs, and the Bureau of
24 Commissions and Legislation with respect to notaries public.
25 "Entity." An association, business trust, corporation,
26 estate, general partnership, government, joint venture
27 partnership, limited liability company, limited liability
28 partnership, restricted professional company, sole
29 proprietorship or trust.
30 "License." A license, permit, certificate, commission or
20050H1557B1932 - 93 -
1 registration granted or issued by a licensing agency that
2 confers benefits, privileges or rights to the licensee, permit
3 holder or registrant to practice a trade, profession or
4 occupation or to conduct a business activity within this
5 Commonwealth.
6 "Licensing agency." The Department of Revenue, the
7 Department of Labor and Industry, the Department of
8 Environmental Protection, the Department of Banking, the
9 Department of State, the Insurance Department or the
10 Pennsylvania Securities Commission.
11 "State tax." A tax liability, including interest, penalty
12 and additions of a taxpayer, licensee, employer or other person
13 imposed under this act, the act of December 5, 1936 (2nd
14 Sp.Sess., 1937 P.L.2897, No.1), known as the Unemployment
15 Compensation Law, or 75 Pa.C.S. § 9014 (relating to collection
16 of unpaid taxes).
17 "Tax delinquency." The condition by which a State tax, when
18 delinquent, is subject to collection action by the taxing agency
19 or the Office of Attorney General and is not subject to a timely
20 administrative or judicial appeal, a duly authorized deferred
21 payment plan or the jurisdiction of a bankruptcy court.
22 "Tax identification number." A Social Security number or
23 employer identification number.
24 "Taxing agency." The Department of Revenue or the Department
25 of Labor and Industry.
26 Section 2903-C. Tax identity information.
27 (a) General rule.--An applicant for the grant, renewal or
28 transfer of a license shall provide to the licensing agency,
29 other than as provided for in subsection (b), the applicant's or
30 entity's full name and tax identification number.
20050H1557B1932 - 94 -
1 (b) Pennsylvania Securities Commission.--An applicant for
2 the grant, renewal or transfer of a license issued by the
3 Pennsylvania Securities Commission shall comply with any
4 regulation or order adopted by the Pennsylvania Securities
5 Commission for the implementation of this article.
6 Section 2904-C. Confidentiality.
7 (a) General rule.--Upon the filing of an application with a
8 licensing agency for the grant, renewal or transfer of a
9 license, the applicant waives any confidentiality with respect
10 to State tax information regarding the applicant in the
11 possession of the taxing agency or the Office of Attorney
12 General, regardless of the source of that information, and
13 consents to the provision of that information to the licensing
14 agency by the taxing agency and the Office of Attorney General.
15 (b) Construction.--For the purpose of this section,
16 licensing agencies shall be deemed to be performing an official
17 tax purpose pursuant to the provisions of section 731 of the act
18 of April 9, 1929 (P.L.343, No.176), known as The Fiscal Code.
19 Section 2905-C. Request of tax status.
20 Upon receipt of an application for the grant, renewal or
21 transfer of a license, the licensing agency shall forward the
22 tax identity information provided by the applicant under section
23 2903-C (relating to tax identity information) to the department,
24 the Office of Attorney General and the Department of Labor and
25 Industry to determine the tax status of the applicant or
26 licensee. The taxing agency and the Office of Attorney General
27 may use reasonable parameters in determining whether an
28 applicant has filed required State tax reports or paid State tax
29 due. If there is a tax delinquency or a required report has not
30 been filed, the taxing agency may issue a notice to the
20050H1557B1932 - 95 -
1 licensing agency and to the licensee or applicant as provided in
2 section 2907-C (relating to notice requirements) specifying that
3 the applicant or licensee has not filed a required return or
4 paid a State tax.
5 Section 2906-C. Withholding of license.
6 Notwithstanding any law to the contrary, a license
7 application shall be deemed incomplete and a licensing agency
8 shall not approve any application for grant, renewal or transfer
9 of any license if a notice of tax delinquency is issued. As a
10 condition of licensure or continued licensure, unless otherwise
11 provided in section 2912-C (relating to exception for continued
12 licensure only) an applicant or licensee shall cure any tax
13 delinquency identified by a taxing agency by filing the
14 appropriate report, paying the appropriate tax or entering into
15 an agreement with the taxing agency for a periodic payment plan
16 prior to obtaining a license or renewal from a licensing agency.
17 Section 2907-C. Notice requirements.
18 Notice to a licensee or applicant for license or transfer of
19 license shall be as follows:
20 (1) Prior to the issuance of an order denying or
21 suspending a license or refusing to renew a license the
22 applicable taxing agency shall provide notice to the
23 applicant or licensee that specifies:
24 (i) Any reports which must be filed and any amounts
25 owed.
26 (ii) How, when and where the notice can be
27 contested.
28 (iii) Where payment may be made in order to cure the
29 tax delinquency or whom the individual may contact to
30 attempt to establish a payment plan.
20050H1557B1932 - 96 -
1 (iv) That the sole grounds for contesting the notice
2 are limited to mistaken identity of the licensee.
3 (v) That an order to deny an application for license
4 or to deny transfer of the license or to automatically
5 suspend the license will be issued by the licensing
6 agency 60 days after the issuance of the notice, unless
7 the delinquent report is filed, the State tax is paid or
8 a payment plan is approved by the applicable taxing
9 agency.
10 (vi) The appropriate procedures and time
11 requirements for requesting a hearing to which the
12 applicant or licensee may otherwise be entitled under the
13 licensing agency.
14 (vii) That further challenge following a license
15 suspension as a result of failure to cure a tax
16 delinquency shall require the applicant to post a bond as
17 set forth under section 2909-C (relating to bond
18 requirement on appeal).
19 (2) Any agreement providing for a periodic payment plan
20 entered into between the taxing agency and the applicant or
21 licensee shall specify that failure to comply with the
22 schedule of payments may result in the immediate suspension,
23 nonrenewal or denial of the license without further right to
24 a hearing.
25 (3) To contest the notice or obtain a periodic payment
26 plan, the licensee or applicant must contact the applicable
27 taxing agency not later than 20 days after issuance of the
28 notice. The grounds for contesting shall be limited to
29 mistaken identity. If, as determined by the taxing agency, a
30 mistake has occurred, the notice provided to the licensing
20050H1557B1932 - 97 -
1 agency under section 2905-C (relating to request of tax
2 status) shall be modified accordingly within 20 days of the
3 appropriate taxing agency being contacted.
4 (4) Any tax liability which has become final shall not
5 be subject to collateral attack in a proceeding by a
6 licensing agency.
7 Section 2908-C. Penalty for noncompliance.
8 A person that practices a trade, profession or occupation or
9 conducts a business activity without a license under this
10 section commits a misdemeanor. The penalty imposed under this
11 section shall be in addition to any other penalty imposed by
12 law.
13 Section 2909-C. Bond requirement on appeal.
14 If an applicant or licensee challenges any adverse action on
15 a license application or renewal as a result of failure to cure
16 a tax delinquency by appealing the matter to the Commonwealth
17 Court, the applicant shall post a bond with the court in the
18 amount of 120% of the liability at issue.
19 Section 2910-C. Ongoing enforcement.
20 If, during the effective period of any license, the licensee
21 fails to file any required State tax report, fails to pay any
22 collectible State tax due or defaults in a deferred payment
23 plan, the taxing agency or the Office of Attorney General, after
24 complying with section 2907-C (relating to notice requirements),
25 may notify the licensing agency which shall suspend or not renew
26 any license issued to the licensee. Notwithstanding the
27 provisions of any other statute, the license suspension or
28 nonrenewal shall be for an indefinite period of time and shall
29 remain in effect until the licensee files the required reports,
30 pays the State tax due or cures the deferred payment plan
20050H1557B1932 - 98 -
1 default.
2 Section 2911-C. Stay of process.
3 The appropriate taxing agency may stay the process for
4 suspension, nonrenewal or denial beyond the notice period
5 specified in section 2907-C(1)(v)(relating to notice
6 requirements) if additional time is required for it to process a
7 case or reach a payment plan with the licensee. The taxing
8 agency shall notify the licensing agency of the intent to stay
9 the suspension, nonrenewal or denial at least five working days
10 before the notice period has expired.
11 Section 2912-C. Exception for continued licensure only.
12 A licensing agency may make a determination that a license is
13 vital to prevent an immediate threat to the health, safety and
14 welfare of the public. The licensing agency shall notify the
15 applicable taxing agency of the determination. If this
16 determination is made, then notwithstanding the requirements of
17 this article, the licensing agency may use its discretion to
18 renew a license or to refrain from suspending a license but may
19 not grant a license to a new applicant until the applicant files
20 the required reports, pays the State tax due or cures the
21 deferred payment plan default.
22 Section 33. Section 3003.1 of the act is repealed.
23 Section 34. Section 3003.2(b) and (i) of the act, amended
24 June 29, 2002 (P.L.559, No.89) and December 23, 2003 (P.L.250,
25 No.46), are amended to read:
26 Section 3003.2. Estimated Tax.--* * *
27 (b) The following words, terms and phrases when used in this
28 section and section 3003.3 shall have the following meanings
29 ascribed to them:
30 (1) "Estimated tax." Estimated corporate net income tax,
20050H1557B1932 - 99 -
1 estimated capital stock and franchise tax, estimated mutual
2 thrift institution tax, estimated insurance premiums tax,
3 estimated gross receipts tax or estimated public utility realty
4 surcharge.
5 (2) "Estimated corporate net income tax." The amount which
6 the corporation estimates as the amount of tax imposed by
7 section 402 of Article IV for the taxable year.
8 (3) "Estimated capital stock and franchise tax." The amount
9 which the corporation estimates as the amount of tax imposed by
10 section 602 of Article VI for the taxable year.
11 (4) "Estimated mutual thrift institution tax." The amount
12 which the institution estimates as the amount of tax imposed by
13 section 1502 of Article XV for the taxable year.
14 (4.1) "Estimated insurance premiums tax." The amount which
15 the insurance company estimates as the amount of tax imposed by
16 section 902 of Article IX for the taxable year.
17 (4.2) "Estimated gross receipts tax." The amount which the
18 taxpayer estimates as the amount of tax imposed by section 1101
19 of Article XI for the taxable year.
20 (4.3) "Person." Any natural person, association, fiduciary,
21 partnership, corporation or other entity, including the
22 Commonwealth, its political subdivisions and instrumentalities
23 and public authorities. Whenever used in any clause prescribing
24 and imposing a penalty or imposing a fine or imprisonment, or
25 both, the term "person," as applied to an association, shall
26 include the members thereof and, as applied to a corporation,
27 the officers thereof.
28 (4.4) "Safe harbor base year." The taxpayer's second
29 preceding taxable year. If the second preceding taxable year is
30 less than twelve months, then the "safe harbor base year" shall
20050H1557B1932 - 100 -
1 mean the taxpayer's annualized second preceding taxable year. If
2 the taxpayer has filed only one previous report, the "safe
3 harbor base year" shall mean the first preceding taxable year.
4 If the first preceding taxable year is less than twelve months,
5 then the "safe harbor base year" shall mean the taxpayer's
6 annualized first preceding taxable year.
7 (4.5) "Estimated public utility realty surcharge." The
8 amount which the taxpayer estimates as the amount of surcharge
9 imposed by section 1111-A of Article XI-A for the taxable year.
10 (5) "Taxpayer." Any person required to pay a tax imposed by
11 Article IV, VI, IX, XI or XV of this act.
12 (6) "Total tax." The total tax liability of the taxpayer
13 for the tax period including the tax reported by the taxpayer
14 and settled, resettled or assessed by the department.
15 * * *
16 (i) Whenever the amount shown as due on the annual report,
17 including any [settlement] assessment of the [annual report] tax
18 period, is less than the amount paid to the department on
19 account of that amount under this article, the department shall
20 enter a credit in the amount of the difference to the account of
21 the taxpayer, which credit shall be immediately subject to
22 application, assignment or refund, at the request of the
23 taxpayer under section 1108 of the act of April 9, 1929
24 (P.L.343, No.176), known as "The Fiscal Code," or at the
25 initiative of the department. If the application, assignment or
26 refund of credit under this subsection results in an
27 underpayment of the tax due upon [settlement or resettlement]
28 assessment, interest shall be calculated on the amount of the
29 underpayment from the date credit was applied, assigned or
30 refunded.
20050H1557B1932 - 101 -
1 Section 35. Section 3003.3 of the act, amended May 7, 1997
2 (P.L.85, No.7) and December 23, 2003 (P.L.250, No.46), is
3 amended to read:
4 Section 3003.3. Underpayment of Estimated Tax.--(a) In case
5 of any underpayment of an installment of estimated tax by a
6 taxpayer, there shall be imposed interest for the taxable year
7 in an amount determined at the annual rate as provided by law
8 upon the amount of the underpayment for the period of the
9 underpayment, except that, in case of any substantial
10 underpayment of estimated tax by a taxpayer, such interest for
11 the taxable year shall be imposed in an amount determined at one
12 hundred twenty per cent of the annual rate as provided by law
13 upon the entire underpayment for the period of the substantial
14 underpayment. For the purpose of this subsection, a substantial
15 underpayment shall be deemed to exist for any period during
16 which the amount of the underpayment equals or exceeds twenty-
17 five per cent of the cumulative amount of installments of
18 estimated tax which would be required to be paid if the
19 estimated tax were equal to the amount as determined in
20 subsection (b)(1).
21 (b) (1) For purposes of this section, the amount of the
22 underpayment, if any, shall be the excess of:
23 (i) the cumulative amount of installments which would be
24 required to be paid as of each installment date as defined in
25 section 3003.2(c) if the estimated tax were equal to ninety per
26 cent of the tax shown on the report for the taxable year, except
27 that, if the [settled tax or, if the tax is resettled, the
28 resettled] total tax exceeds the tax shown on the report by ten
29 per cent or more, the amount of the underpayment shall be based
30 on ninety per cent of the amount of [such settled or resettled]
20050H1557B1932 - 102 -
1 the total tax; over
2 (ii) the cumulative amount of installments paid on or before
3 the last date prescribed for payment.
4 (2) If the [settled or resettled tax is used in calculating
5 the amount of underpayment, the amount of tax as settled or
6 resettled shall be utilized in determining] total tax is
7 revised, the amount of underpayment shall be recalculated
8 without the necessity of the filing of any petition by the
9 department or by the taxpayer.
10 (c) The period of the underpayment shall run from the date
11 the installment was required to be paid to whichever of the
12 following dates is the earlier:
13 (1) The fifteenth day of the fourth month following the
14 close of the taxable year.
15 (2) With respect to any portion of the underpayment, the
16 date on which such portion is paid.
17 (d) Notwithstanding the provisions of the preceding
18 subsections, other than as set forth in subsection (d.1),
19 interest with respect to any underpayment of any installment of
20 estimated tax shall not be imposed if the total amount of all
21 payments of estimated tax made on or before the last date
22 prescribed for the payment of such installment equals or exceeds
23 the amount which would have been required to be paid on or
24 before such date if the estimated tax were an amount equal to
25 the tax computed at the rates applicable to the taxable year,
26 including any minimum tax imposed, but otherwise on the basis of
27 the facts shown on the report of the taxpayer for, and the law
28 applicable to, the safe harbor base year, adjusted for any
29 changes to sections 401, 601, 602 and 1101 enacted for the
30 taxable year, if a report showing a liability for tax was filed
20050H1557B1932 - 103 -
1 by the taxpayer for the safe harbor base year. If the total
2 amount of all payments of estimated tax made on or before the
3 last date prescribed for the payment of such installment does
4 not equal or exceed the amount required to be paid per the
5 preceding sentence, but such amount is paid after the date the
6 installment was required to be paid, then the period of
7 underpayment shall run from the date the installment was
8 required to be paid to the date the amount required to be paid
9 per the preceding sentence is paid. Provided, that if the
10 [settled] total tax for the safe harbor base year exceeds the
11 tax shown on such report by ten per cent or more, the [settled]
12 total tax adjusted to reflect the current tax rate shall be used
13 for purposes of this subsection. [, except that, if the settled
14 tax is subsequently resettled, the amount of tax as resettled
15 shall be utilized in the application of this subsection without
16 the necessity of the filing of any petition by the department or
17 by the taxpayer.] In the event that the [settled or resettled]
18 total tax for the safe harbor base year exceeds the tax shown on
19 the report by ten per cent or more, interest resulting from the
20 utilization of such [settled or resettled] total tax in the
21 application of the provisions of this subsection shall not be
22 imposed if, within forty-five days of the mailing date of [such
23 settlement or resettlement] each assessment, payments are made
24 such that the total amount of all payments of estimated tax
25 equals or exceeds the amount which would have been required to
26 be paid on or before such date if the estimated tax were an
27 amount equal to such [settled or resettled] total tax adjusted
28 to reflect the current tax rate. In any case in which the
29 taxable year for which an underpayment of estimated tax may
30 exist is a short taxable year, in determining the tax shown on
20050H1557B1932 - 104 -
1 the report or the [settled or resettled] total tax for the safe
2 harbor base year, the tax will be reduced by multiplying it by
3 the ratio of the number of installment payments made in the
4 short taxable year to the number of installment payments
5 required to be made for the full taxable year.
6 (d.1) (1) Notwithstanding the provisions of subsections
7 (a), (b) and (c), interest with respect to any underpayment of
8 any installment of estimated corporate net income tax for any
9 tax year that begins in year 2007 or 2008 shall not be imposed
10 if the total amount of all payments of estimated corporate net
11 income tax made on or before the last date prescribed for the
12 payment of such installment equals or exceeds the amount which
13 would have been required to be paid on or before such date if
14 the estimated tax were an amount equal to the tax shown on the
15 report of the taxpayer for the safe harbor base year, if a
16 report showing a liability for tax was filed by the taxpayer for
17 the safe harbor base year.
18 (2) If the total amount of all payments of estimated tax
19 made on or before the last date prescribed for the payment of
20 such installment does not equal or exceed the amount required to
21 be paid under paragraph (1), but such amount is paid after the
22 date the installment was required to be paid, then the period of
23 underpayment shall run from the date the installment was
24 required to be paid to the date the amount required to be paid
25 under paragraph (1) is paid.
26 (3) If the total tax for the safe harbor base year exceeds
27 the tax shown on such report by ten per cent or more, the total
28 tax shall be used for purposes of this subsection. In the event
29 that the total tax for the safe harbor base year exceeds the tax
30 shown on the report by ten per cent or more, interest resulting
20050H1557B1932 - 105 -
1 from the utilization of the total tax in the application of the
2 provisions of this subsection shall not be imposed if, within
3 forty-five days of the mailing date of a notice from the
4 department increasing the total tax, payments are made such that
5 the total amount of all payments of estimated tax equals or
6 exceeds the amount which would have been required to be paid on
7 or before such date if the estimated tax were an amount equal to
8 the total tax.
9 (4) In any case in which the taxable year for which an
10 underpayment of estimated tax may exist is a short taxable year,
11 in determining the tax shown on the report or the total tax for
12 the safe harbor base year, the tax shall be reduced by
13 multiplying it by the ratio of the number of installment
14 payments made in the short taxable year to the number of
15 installment payments required to be made for the full taxable
16 year.
17 (d.2) (1) If there is a substantial underpayment, as
18 defined in subsection (a), of any installment of estimated
19 corporate net income tax or estimated capital stock/franchise
20 tax for any taxable year beginning in 2007 or 2008, there shall
21 be imposed additional interest in an amount determined at one
22 hundred twenty per cent of the annual rate as provided by law
23 upon the entire underpayment for the period of the substantial
24 underpayment.
25 (2) The additional interest imposed by this subsection is in
26 addition to any other interest imposed on underpayments by this
27 section.
28 Section 36. Sections 3003.5(a) and 3003.6 of the act, added
29 June 16, 1994 (P.L.279, No.48), are amended to read:
30 Section 3003.5. Refund Petitions.--(a) Effective January 1,
20050H1557B1932 - 106 -
1 1995, petitions for refund of taxes, penalties, fines, additions
2 and other moneys collected by the Department of Revenue except
3 those claims for refunds of liquid fuels taxes paid by political
4 subdivisions, farmers, nonpublic schools not operated for
5 profit, volunteer fire companies, volunteer rescue squads,
6 volunteer ambulance services, users of liquid fuel in propeller-
7 driven aircraft or engines and agencies of the Federal
8 Government and of the Commonwealth and the Boat Fund of the
9 Pennsylvania Fish and Boat Commission shall be heard and
10 determined by the Department of Revenue as provided in the act
11 of April 9, 1929 (P.L.343, No.176), known as "The Fiscal Code,"
12 and the Department of Revenue shall thereafter have, except as
13 set forth in Article XXVII, the powers and duties formerly
14 granted to the Board of Finance and Revenue with respect to such
15 refunds. Also effective January 1, 1995, the Board of Finance
16 and Revenue shall no longer have the power and duty to hear and
17 determine any petition for refund of taxes, penalties, fines,
18 additions or other moneys collected by the Department of
19 Revenue, except that thereafter the board may either hear and
20 determine any such petitions filed with it prior to January 1,
21 1995, or it may transfer such petitions to the Department of
22 Revenue.
23 * * *
24 Section 3003.6. Timely Filing.--A taxpayer shall be deemed
25 to have timely filed a [petition for resettlement, a] petition
26 for reassessment[, a petition for redetermination] or any other
27 protest relating to the assessment of tax or any other matter
28 relating to any tax imposed by this act if the letter
29 transmitting the petition is received by the Department of
30 Revenue or is postmarked by the United States Postal Service on
20050H1557B1932 - 107 -
1 or prior to the final day on which the petition is required to
2 be filed.
3 Section 37. The act is amended by adding a section to read:
4 Section 3003.16. Assessments to be Made by Department of
5 Revenue.--(a) Parts IV, V, VI and VII of Article IV shall apply
6 to:
7 (1) The tax imposed by the act of May 23, 1945 (P.L.893,
8 No.360), known as the "Co-operative Agricultural Association
9 Corporate Net Income Tax Act." The reference to petition for
10 resettlement in section 4 of the "Co-operative Agricultural
11 Association Corporate Net Income Tax Act" shall be interpreted
12 as petition for reassessment.
13 (2) The State admissions tax and the pari-mutuel wagering
14 tax imposed by sections 208 and 222 of the act of December 17,
15 1981 (P.L.435, No.135), known as the "Race Horse Industry Reform
16 Act."
17 (3) All taxes, fees, additions, bonuses, costs, penalties or
18 charges collected by the Department of Revenue either:
19 (i) subject to settlement or determination by the Department
20 of Revenue prior to the effective date of this section; or
21 (ii) for which no other method for the establishment of the
22 unpaid or unreported liability to be collected by the department
23 is provided by law.
24 (b) The powers conferred upon the Department of Revenue by
25 this section shall be in addition to, but not exclusive of, any
26 powers heretofore or hereafter conferred upon the department by
27 law.
28 (c) This section shall not apply to the following:
29 (1) The procedure for collection of moneys due the
30 Commonwealth by county or city officers as provided by Article
20050H1557B1932 - 108 -
1 IX of the act of April 9, 1929 (P.L.343, No.176), known as "The
2 Fiscal Code."
3 (2) The taxes imposed by 75 Pa.C.S. Chs. 90 (relating to
4 liquid fuels and fuels tax), 95 (relating to taxes for highway
5 maintenance and construction) and 96 (relating to motor carriers
6 road tax).
7 Section 38. The amendment of sections 301 and 303 of the act
8 shall not be construed to extend the limitations of sections 348
9 and 3003.1 of the act.
10 Section 39. (a) Sections 6, 7, 8 and 9 of the act of May
11 23, 1945 (P.L.893, No.360), known as the Co-operative
12 Agricultural Association Corporate Net Income Tax Act, are
13 repealed.
14 (b) All other acts and parts of acts are repealed insofar as
15 they are inconsistent with this act.
16 Section 40. This act shall apply as follows:
17 (1) The addition of Articles XXVII and XXVIII of the act
18 shall apply to all decisions and orders of the Department of
19 Revenue mailed after December 31, 2006, regarding a petition
20 for reassessment, redetermination, resettlement or refund.
21 (2) Except as set forth in paragraph (3), the amendment
22 or addition of sections 301(a), (d), (h.1), (h.2), (h.3), (q)
23 and (s.3) and 303(a.4), (a.5) and (a.6) of the act shall
24 apply to taxable years beginning after December 31, 2002.
25 (3) References to section 409A(a)(2), (3) and (4) of the
26 Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. §
27 409A(a)(2), (3) and (4)) in sections 301 and 303 of the act
28 shall apply to taxable years beginning after December 31,
29 2004.
30 (4) The amendment or addition of the following
20050H1557B1932 - 109 -
1 provisions shall apply to taxable years beginning after
2 December 31, 2006:
3 (i) Section 401(3)1(a) and (b), 2 and 4(c)(5), (7),
4 (8), (9), (10), (11) and (12) of the act.
5 (ii) Section 402(b) of the act.
6 (iii) Section 403 of the act.
7 (iv) Section 406 of the act.
8 (v) Section 407.1 of the act.
9 (vi) Section 407.2 of the act.
10 (vii) Section 407.3 of the act.
11 (viii) Section 407.4 of the act.
12 (ix) Section 408(b) of the act.
13 (x) Section 408.1 of the act.
14 (xi) Section 408.2 of the act.
15 (xii) Section 1101(e) of the act.
16 (xiii) Section 1502(f) of the act.
17 (xiv) Section 3003.2(b) and (i) of the act.
18 (xv) Section 3003.3 of the act.
19 (xvi) Section 3003.6 of the act.
20 (xvii) Section 3003.16 of the act.
21 (5) The repeal under section 39(a) of this act shall
22 apply to taxable years beginning on or after January 1, 2007.
23 Section 41. This act shall take effect as follows:
24 (1) The addition of Article III Pt. VII-B of the act
25 shall take effect January 1, 2006.
26 (2) The addition of Article XXVIII of the act shall take
27 effect July 1, 2006.
28 (3) The amendment, addition or repeal of the following
29 provisions shall take effect January 1, 2007:
30 (i) Section 230 of the act.
20050H1557B1932 - 110 -
1 (ii) Section 232 of the act.
2 (iii) Section 234 of the act.
3 (iv) Section 247.1 of the act.
4 (v) Section 250 of the act.
5 (vi) Section 251 of the act.
6 (vii) Section 252 of the act.
7 (viii) Section 253 of the act.
8 (ix) Section 254 of the act.
9 (x) Section 256 of the act.
10 (xi) Section 338 of the act.
11 (xii) Section 339 of the act.
12 (xiii) Section 340 of the act.
13 (xiv) Section 341 of the act.
14 (xv) Section 350 of the act.
15 (xvi) Section 1111-C of the act.
16 (xvii) Section 1112-C of the act.
17 (xviii) Section 1113-C of the act.
18 (xix) Section 2005 of the act.
19 (xx) Section 2009 of the act.
20 (xxi) Section 2181 of the act.
21 (xxii) Article XXVII of the act.
22 (xxiii) Section 3003.1 of the act.
23 (xxiv) Section 3003.5 of the act.
24 (xxv) Section 39(a) of this act.
25 (6) The remainder of this act shall take effect July 1,
26 2005, or immediately, whichever is later.
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