PRINTER'S NO. 1995
No. 1686 Session of 1991
INTRODUCED BY LEVDANSKY, HECKLER, TRELLO, HAYES, KUKOVICH, NOYE,
ITKIN, FARGO, MIHALICH, ARGALL, HAYDEN, FLICK, VEON, NAHILL,
BLAUM, SAURMAN, D. W. SNYDER, FREEMAN, PISTELLA, FAIRCHILD,
McNALLY, BATTISTO, STISH, M. N. WRIGHT, NICKOL, MCHALE,
TIGUE, FAJT, KRUSZEWSKI, BUSH, LINTON, RITTER, MUNDY, STURLA,
STEELMAN, ROBINSON, CIVERA AND RICHARDSON, JUNE 17, 1991
REFERRED TO COMMITTEE ON FINANCE, JUNE 17, 1991
AN ACT
1 Amending the act of April 9, 1929 (P.L.177, No.175), entitled
2 "An act providing for and reorganizing the conduct of the
3 executive and administrative work of the Commonwealth by the
4 Executive Department thereof and the administrative
5 departments, boards, commissions, and officers thereof,
6 including the boards of trustees of State Normal Schools, or
7 Teachers Colleges; abolishing, creating, reorganizing or
8 authorizing the reorganization of certain administrative
9 departments, boards, and commissions; defining the powers and
10 duties of the Governor and other executive and administrative
11 officers, and of the several administrative departments,
12 boards, commissions, and officers; fixing the salaries of the
13 Governor, Lieutenant Governor, and certain other executive
14 and administrative officers; providing for the appointment of
15 certain administrative officers, and of all deputies and
16 other assistants and employes in certain departments, boards,
17 and commissions; and prescribing the manner in which the
18 number and compensation of the deputies and all other
19 assistants and employes of certain departments, boards and
20 commissions shall be determined," providing for the
21 submission to the General Assembly of information relating to
22 tax expenditures.
23 It is the intent of this act to provide a mechanism which
24 will enable the General Assembly to better determine those
25 programs, activities and groups which are receiving public
26 support subsidies as a result of tax expenditures. The General
1 Assembly recognizes that the present budgeting system fails to
2 accurately and totally reflect the true level of budgetary
3 support for such programs due to such tax expenditures and that,
4 as a result, undetermined amounts of indirect expenditures are
5 escaping public or legislative scrutiny. The loss of potential
6 revenue also causes a narrowing of tax bases which in turn
7 forces higher tax rates on the remaining taxpayers.
8 The General Assembly of the Commonwealth of Pennsylvania
9 hereby enacts as follows:
10 Section 1. The act of April 9, 1929 (P.L.177, No.175), known
11 as The Administrative Code of 1929, is amended by adding
12 sections to read:
13 Section 622. Tax Expenditures.--(a) As used in this section
14 "tax expenditure" shall mean a reduction in revenue that would
15 otherwise be collected by the Commonwealth as the result of an
16 exemption, reduction, deduction, limitation, exclusion, tax
17 deferral, discount, refund, commission, credit, preferential
18 rate or preferential treatment. "Tax expenditure" shall include,
19 but not be limited to, the following:
20 (1) Sales tax imposed by Article II of the act of March 4,
21 1971 (P.L.6, No.2), known as the "Tax Reform Code of 1971":
22 (i) The exclusions itemized in section 204, each of which
23 shall be considered a separate tax expenditure.
24 (ii) The exclusions described by section 201(c)(1) through
25 (5), (c.1) and (d)(1) through (12), each of which may be
26 combined with the related exclusion described in section 201(o)
27 and shall be considered a separate tax expenditure.
28 (iii) The exclusion described by section 201(k)(8)(A) and
29 (o)(4)(B)(i).
30 (iv) The exclusion described by section 201(k)(8)(B) and
19910H1686B1995 - 2 -
1 (o)(4)(B)(ii).
2 (v) The exclusion described by section 201(k)(8)(C) and
3 (o)(4)(B)(iii).
4 (vi) The exclusion described by section 201(k)(8)(D) and
5 (o)(4)(B)(iv).
6 (vii) The deduction described in section 201(g)(2).
7 (viii) The reduction authorized in section 201(g)(5).
8 (ix) The exclusions described in section 201(i)(1) through
9 (5), each of which shall be considered a separate tax
10 expenditure.
11 (x) The exclusion of household supplies described in section
12 201(m).
13 (xi) The exclusions of residential utility services itemized
14 in section 201(m), each of which shall be considered a separate
15 tax expenditure.
16 (xii) The exclusion of wearing apparel and shoes as
17 described in section 201(k)(4) and (o)(4).
18 (xiii) The exclusion described in section 201(o)(8).
19 (xiv) The reduction afforded by the computation provided for
20 in section 202(d) as opposed to the tax that would be due
21 computing it as required by section 203.
22 (xv) The reduction authorized in section 205(a).
23 (xvi) The reduction authorized in section 205(b).
24 (xvii) The credit authorized in section 206.
25 (xviii) The exclusions itemized in 61 Pa. Code § 31.6(a)
26 (relating to persons rendering nontaxable services), each of
27 which shall be considered a separate tax expenditure.
28 (xix) The exclusion of "permanent residents" from the tax
29 imposed by section 210.
30 (xx) The discount authorized by section 227.
19910H1686B1995 - 3 -
1 (xxi) Refunds resulting from petitions filed pursuant to
2 section 253(d).
3 (xxii) Nontaxation of the following items shall be
4 considered tax expenditures:
5 (A) Country club memberships.
6 (B) Services of stenographers and reporters.
7 (C) Accounting, auditing and bookkeeping services.
8 (D) Cable TV rental.
9 (E) Barbers', beauticians' and manicurists' services.
10 (F) Exterminators' services.
11 (G) Janitorial services.
12 (H) Computer and data processing services.
13 (I) Legal services.
14 (J) Services of abstractors, surveyors and architects.
15 (K) Engineering services.
16 (L) Doctors', dentists' and veterinary services.
17 (M) Stockbrokers' services.
18 (N) Real estate agents' services.
19 (O) Insurance agents' services.
20 (P) Services of financial institutions.
21 (Q) Advertising services.
22 (R) Consulting and management services.
23 (S) Research and public relation services.
24 (T) Collection agencies.
25 (U) Detective agencies.
26 (V) Parking lots and parking structures.
27 (W) Entertainers and entertainment groups.
28 (X) Admissions to places of amusement.
29 (Y) Chartered flights and pilots' services.
30 (Z) Campsite and trailer park rental.
19910H1686B1995 - 4 -
1 (AA) Funeral and mortuary services.
2 (BB) Storage charges.
3 (CC) Services of electricians, plumbers and heating and air
4 conditioning contractors.
5 (DD) Other services.
6 (2) Personal income tax imposed by Article III of the "Tax
7 Reform Code of 1971":
8 (i) Each exclusion itemized in section 301(d)(i) through
9 (vii).
10 (ii) Expenses allowed as a deduction against compensation
11 income pursuant to Article III.
12 (iii) Expenses other than depreciation allowed as a
13 deduction against net profits income pursuant to Article III.
14 (iv) Depreciation expenses allowed as a deduction against
15 net profits income pursuant to Article III.
16 (v) The exclusion from "net gains or income" of certain
17 gains on the sale of a principal residence by taxpayers fifty-
18 five years of age or older.
19 (vi) The exclusion from "net gains or income" of gains or
20 income derived from obligations statutorily free from tax under
21 acts of the General Assembly.
22 (vii) The exclusion from "net gains or income" of gains or
23 income derived from obligations statutorily free from tax under
24 the laws of the United States.
25 (viii) The exclusion from interest income of interest
26 statutorily free from tax under acts of the General Assembly.
27 (ix) The exclusion from interest income of interest
28 statutorily free from tax under acts of the United States.
29 (x) The exclusion from income of noncombat military pay.
30 (xi) The exclusion from income of scholarships, grants,
19910H1686B1995 - 5 -
1 fellowships and stipends.
2 (xii) The preferential rate authorized pursuant to section
3 304.
4 (xiii) The credit authorized pursuant to section 314.
5 (xiv) Tax credits taken against the personal income tax
6 pursuant to Article XVII-A.
7 (3) Corporate Net Income Tax imposed by Article IV of the
8 "Tax Reform Code of 1971":
9 (i) Deductions allowed pursuant to section 401(3)1(b).
10 (ii) Deductions allowed pursuant to section 401(3)1(c).
11 (iii) Each of the deductions allowed pursuant to section
12 401(3)1(d)(i) through (ix) shall be considered a separate tax
13 expenditure.
14 (iv) Deductions allowed pursuant to section 401(3)1(h).
15 (v) Deductions allowed pursuant to section 401(3)1(i).
16 (vi) Deductions allowed pursuant to section 401(3)4.
17 (vii) Tax credits taken against the Corporate Net Income Tax
18 pursuant to the act of November 29, 1967 (P.L.636, No.292),
19 known as the "Neighborhood Assistance Act."
20 (viii) Tax credits taken against the Corporate Net Income
21 Tax pursuant to Article XVII-A.
22 (ix) Exclusion of value or income from taxation as a result
23 of the application of the multiform concept.
24 (x) The exclusion of each of the classes of corporations
25 excluded from the definition in section 401(1).
26 (4) Capital Stock/Franchise Tax imposed by Article IV of the
27 "Tax Reform Code of 1971":
28 (i) Tax relief resulting from the exemption of capital stock
29 invested in a manufacturing, processing, research or development
30 plant and business pursuant to section 602.
19910H1686B1995 - 6 -
1 (ii) The preferential calculation afforded to holding
2 companies pursuant to section 602(e).
3 (iii) The preferential calculation afforded to regulated
4 investment companies pursuant to section 602(f).
5 (iv) The exemption of pollution control devices pursuant to
6 section 602.1.
7 (v) The exemption of family farm corporations pursuant to
8 section 602.2.
9 (vi) Tax credits against the Capital Stock/Franchise Tax
10 pursuant to the "Neighborhood Assistance Act."
11 (5) Bank Shares Tax imposed by Article VII of the "Tax
12 Reform Code of 1971":
13 (i) The personal property tax exemption granted to banks
14 which collect the Bank Shares Tax from their shareholders on
15 behalf of the Commonwealth as authorized in section 701.
16 (ii) The exclusion of United States obligations from the tax
17 as described in section 701.1.
18 (iii) Tax credits against this tax pursuant to the
19 Neighborhood Assistance Act.
20 (iv) Tax credits against this tax pursuant to Article XVII-
21 A.
22 (6) Title Insurance and Trust Companies Share Tax imposed by
23 Article VIII of the "Tax Reform Code of 1971":
24 (i) The exemption from the Corporate Net Income Tax and
25 Capital Stock/Franchise Tax granted to companies paying this tax
26 as authorized in section 801.
27 (ii) The exclusion of United States obligations from tax as
28 described in section 801.1.
29 (iii) Tax credits against this tax pursuant to the
30 "Neighborhood Assistance Act."
19910H1686B1995 - 7 -
1 (iv) Tax credits against this tax pursuant to Article XVII-
2 A.
3 (7) Insurance Premiums Tax imposed by Article IX of the "Tax
4 Reform Code of 1971":
5 (i) The exemption granted in section 901(1) to mutual
6 beneficial associations.
7 (ii) The exemptions granted in section 901(1) to
8 corporations organized under the act of June 21, 1937 (P.L.1948,
9 No.378), known as the "Nonprofit Hospital Plan Act," and the act
10 of June 27, 1939 (P.L.1125, No.399), known as the "Nonprofit
11 Medical, Osteopathic, Dental and Podiatry Service Corporation
12 Act."
13 (iii) Tax credits against this tax pursuant to the
14 "Neighborhood Assistance Act."
15 (iv) Tax credits against this tax pursuant to Article XVII-
16 A.
17 (8) Utility Gross Receipts Tax imposed by Article XI of the
18 "Tax Reform Code of 1971":
19 (i) The exemption of sales inside the limits of a
20 municipality owning or operating a public utility pursuant to
21 section 1101(f).
22 (ii) The exemption of certain receipts pursuant to section
23 1101(g).
24 (iii) Tax credits granted pursuant to section 1101.2.
25 (9) Liquid Fuels and Fuel Use Taxes:
26 (i) The exemptions itemized in section 1101-B of the "Tax
27 Reform Code of 1971" and applied against taxes collected
28 pursuant to Article XI-B of the "Tax Reform Code of 1971," the
29 act of May 21, 1931 (P.L.149, No.105), known as "The Liquid
30 Fuels Tax Act," the act of July 12, 1974 (P.L.458, No.161),
19910H1686B1995 - 8 -
1 entitled "An act imposing an additional State tax on certain
2 fuels; providing for collection, lien and administration of the
3 tax; and making an appropriation," the act of January 14, 1952
4 (1951 P.L.1965, No.550), known as the "Fuel Use Tax Act," and
5 Chapter 95 of Title 75 of the Pennsylvania Consolidated Statutes
6 (relating to taxes for highway maintenance and construction).
7 (10) Realty Transfer Tax imposed by Article XI-C of the "Tax
8 Reform Code of 1971":
9 (i) Each of the exemptions listed within section 1102-C.3.
10 (11) Cigarette Tax imposed by Article XII of the "Tax Reform
11 Code of 1971":
12 (i) Each of the exemptions itemized in section 1209(a).
13 (ii) The commission authorized pursuant to section 1216.
14 (12) Mutual Thrift Institutions Tax imposed by Article XV of
15 the "Tax Reform Code of 1971":
16 (i) The personal property tax exemption granted by section
17 1502(e).
18 (ii) The net operating loss carryover authorized by section
19 1502(d).
20 (iii) Tax credits taken against this tax pursuant to the
21 "Neighborhood Assistance Act."
22 (iv) Tax credits taken against this tax pursuant to Article
23 XVII-A.
24 (13) Oil Company Franchise Tax imposed by Chapter 95 of
25 Title 75 of the Pennsylvania Consolidated Statutes:
26 (i) The exclusion from the definition of "petroleum
27 products" in section 9501 of Title 75 of the Pennsylvania
28 Consolidated Statutes (relating to definitions) of products not
29 used for the generation of power to propel motor vehicles on the
30 public highways.
19910H1686B1995 - 9 -
1 (14) Motor Carriers Road Tax imposed by Chapter 96 of Title
2 75 of the Pennsylvania Consolidated Statutes (relating to motor
3 carriers road tax):
4 (i) The exemptions itemized in section 9910 (relating to
5 exemptions from tax).
6 (15) Inheritance Tax imposed by Chapter 17 of Title 72 of
7 the Pennsylvania Consolidated Statutes (relating to inheritance
8 and estate taxes):
9 (i) The exception provided in section 1708(b) (relating to
10 joint tenancy).
11 (ii) Each of the exemptions enumerated in section 1711(b)
12 through (r) (relating to transfers not subject to tax).
13 (iii) The preferential valuation described in section
14 1722(b) (relating to valuation of certain farmland).
15 (iv) The deductions authorized pursuant to section 1727
16 (relating to expenses).
17 (v) Interest abatements as a result of the extended payment
18 schedule authorized in section 1754(a) (relating to payment of
19 tax for small business transfers).
20 (16) Unemployment Compensation Contributions imposed by the
21 act of December 5, 1936 (2nd Sp.Sess., 1937 P.L.2897, No.1),
22 known as the "Unemployment Compensation Law":
23 (i) The limitation on the taxable wage base provided for in
24 section 4(x)(1).
25 (17) Utility Realty Tax imposed by Article XI-A of the "Tax
26 Reform Code of 1971":
27 (i) Each of the exemptions enumerated in the definition of
28 "utility realty" in section 1101-A.
29 (ii) The exemptions granted in section 1102-A(d).
30 (18) Gross Receipts Tax on Motor Carriers imposed by the act
19910H1686B1995 - 10 -
1 of June 22, 1931 (P.L.694, No.255), referred to as the Motor
2 Carriers Gross Receipts Tax Act:
3 (i) The preferential rate at which this tax is imposed
4 relative to other utility gross receipts taxed pursuant to
5 Article XI of the "Tax Reform Code of 1971."
6 (ii) The deduction authorized in section 3 for excise taxes
7 paid to local governments.
8 (iii) The credit authorized in section 3 for registration
9 fees paid to the Commonwealth.
10 (19) Marine Insurance Underwriting Profits Tax imposed by
11 the act of May 13, 1927 (P.L.998, No.486), entitled "An act
12 imposing a tax for State purposes on marine insurance
13 underwriting profits, and providing for the collection of such
14 tax":
15 (i) The preferential treatment afforded by taxing marine
16 insurers as required in this act rather than at the rate and in
17 the manner prescribed in Article IX of the "Tax Reform Code of
18 1971."
19 (20) Co-operative Agricultural Association Corporate Net
20 Income Tax imposed pursuant to the act of May 23, 1945 (P.L.893,
21 No.360), known as the "Co-operative Agricultural Association
22 Corporate Net Income Tax Act":
23 (i) The preferential treatment afforded by taxing Co-
24 operative Agricultural Associations on the base and at the rate
25 required in the Co-operative Agricultural Association Corporate
26 Net Income Tax Act rather than on the base and at the rate
27 prescribed by Article IV of the "Tax Reform Code of 1971."
28 (ii) Other exclusions from State taxes authorized pursuant
29 to section 3.
30 (iii) Exclusions from county taxes authorized pursuant to
19910H1686B1995 - 11 -
1 section 3.
2 (21) Electric Co-operative Corporation Tax imposed by the
3 act of June 21, 1937 (P.L.1969, No.389), known as the "Electric
4 Cooperative Corporation Act":
5 (i) The exemption from all other State taxes granted in
6 section 31.
7 (22) Malt Beverage Tax imposed by the act of May 5, 1933
8 (P.L.284, No.104), known as the "Malt Beverage Tax Law":
9 (i) The tax credit provided by section 10.1.
10 (23) Spirituous and Vinous Liquors Tax imposed by the act of
11 December 5, 1933 (Sp.Sess., P.L.38, No.6), known as the
12 "Spirituous and Vinous Liquor Tax Law":
13 (i) The exception granted in section 19.
14 (ii) Refunds available pursuant to section 21.
15 (24) Property Taxes:
16 (i) The reduction in tax resulting from assessment pursuant
17 to the act of December 19, 1974 (P.L.973, No.319), known as the
18 "Pennsylvania Farmland and Forest Land Assessment Act of 1974."
19 (ii) The exemption from tax required by section 2(c) of
20 Article VIII of the Constitution of Pennsylvania.
21 (iii) The exemptions granted pursuant to section 204 of the
22 act of May 22, 1933 (P.L.853, No.155), known as "The General
23 County Assessment Law," and section 202 of the act of May 21,
24 1943 (P.L.571, No.254), known as "The Fourth to Eighth Class
25 County Assessment Law."
26 (iv) The exemption granted pursuant to section 11 of the act
27 of July 7, 1947 (P.L.1414, No.549), known as the "Veterans'
28 Housing Authority Act."
29 (25) Vehicle registration fees imposed pursuant to Title 75
30 of the Pennsylvania Consolidated Statutes (relating to
19910H1686B1995 - 12 -
1 vehicles):
2 (i) The exemptions granted pursuant to section 1302(2), (3),
3 (9), (10), (11), (12), (14) and (16) (relating to vehicles
4 exempt from registration).
5 (ii) The exemption and preferential fees authorized pursuant
6 to section 1901 (relating to exemption of entities and vehicles
7 from fees), each of which shall constitute a tax expenditure.
8 (26) General exemptions:
9 (i) The exemptions granted pursuant to section 15 of the act
10 of March 31, 1949 (P.L.372, No.34), known as "The General State
11 Authority Act of one thousand nine hundred forty-nine."
12 (ii) The exemption granted pursuant to section 6307(b)
13 (relating to exemptions applicable to certificated professional
14 health care service corporations) of Title 40 of the
15 Pennsylvania Consolidated Statutes.
16 (iii) The exemptions granted pursuant to section 23 of the
17 act of May 28, 1937 (P.L.955, No.265), known as the "Housing
18 Authorities Law."
19 (iv) The exemptions granted pursuant to section 15 of the
20 act of May 2, 1945 (P.L.382, No.164), known as the "Municipality
21 Authorities Act of 1945."
22 (v) The exemptions granted pursuant to section 15 of the act
23 of June 5, 1947 (P.L.458, No.208), known as the "Parking
24 Authority Law."
25 (vi) The exemptions granted pursuant to section 17 of the
26 act of April 18, 1949 (P.L.604, No.128), known as the "State
27 Highway and Bridge Authority Act."
28 (vii) The exemptions granted pursuant to section 14 of the
29 act of July 5, 1947 (P.L.1217, No.498), known as the "State
30 Public School Building Authority Act."
19910H1686B1995 - 13 -
1 (27) Statutory exemptions, reductions, deductions,
2 limitations, exclusions, tax deferrals, discounts, refunds,
3 commissions, credits, preferential rates or preferential
4 treatments established after the effective date of this section.
5 (b) At the time required for the submission of the budget to
6 the General Assembly under section 613, the Governor shall also
7 submit to the General Assembly a tax expenditure plan for not
8 less than the prior fiscal year, the current fiscal year, this
9 budget year and the four (4) succeeding fiscal years, which plan
10 shall include the following information:
11 (1) The actual or estimated revenue loss to the Commonwealth
12 caused by each tax expenditure in each fiscal year covered by
13 the plan.
14 (2) The actual or estimated cost of administering and
15 implementing each tax expenditure for each fiscal year covered
16 by the plan.
17 (3) The actual or estimated number and description, in
18 reasonable detail, of taxpayers benefiting from each tax
19 expenditure in each fiscal year covered by the plan.
20 (4) The purpose of each tax expenditure in terms of desired
21 accomplishments.
22 (5) An assessment of each tax expenditure based on whether
23 or not each tax expenditure has been successful in meeting the
24 purpose for which it was enacted, and on whether each tax
25 expenditure is the most fiscally effective means of achieving
26 its purpose.
27 (c) Contents of the tax expenditure plan shall be as
28 follows:
29 (1) For the first fiscal year in which a tax expenditure
30 plan is required, the plan need only provide the required
19910H1686B1995 - 14 -
1 information for tax expenditures itemized in subsection (a)(1),
2 (5), (6), (7), (12), (16) and (19).
3 (2) For the second year in which a tax expenditure plan is
4 required, the plan need only provide the required information
5 for the tax expenditures itemized in subsection (a)(1), (3),
6 (4), (5), (6), (7), (8), (12), (16), (17), (19), (20) and (21).
7 (3) For the third year in which a tax expenditure plan is
8 required, the plan need only provide the required information
9 for the tax expenditures itemized in subsection (a)(1), (2),
10 (3), (4), (5), (6), (7), (8), (9), (12), (13), (14), (16), (17),
11 (18), (19), (20), (21) and (25).
12 (4) For the fourth year in which a tax expenditure plan is
13 required, the plan shall provide the required information for
14 all tax expenditures itemized in subsection (a).
15 (d) All data in the tax expenditure plan outlined in
16 subsection (c) shall be revised and updated every two years.
17 (e) The Secretary of the Budget may obtain the information
18 required for compliance with this section from all State
19 agencies in like manner as provided for budget information under
20 this article.
21 (f) The Secretary of the Budget is hereby authorized to
22 obtain such data as may be needed for compliance with this
23 section from the appropriate local government officials.
24 (g) The General Assembly recognizes that the exemption from
25 taxation accorded religious institutions is founded on
26 principles of church-state separation, and nothing in this
27 section is intended to express or imply that tax exemption
28 constitutes subsidization of the religious activities of such
29 institutions; nor shall this section be construed to authorize
30 the imposition of any additional requirements on such
19910H1686B1995 - 15 -
1 institutions relating to tax exemption.
2 Section 2. This act shall apply to the budget submitted for
3 the fiscal year next commencing after one year from the
4 effective date of this act and to each fiscal year thereafter.
5 Section 3. This act shall take effect immediately.
F4L71DGS/19910H1686B1995 - 16 -