PRINTER'S NO. 2647
No. 2097 Session of 1978
INTRODUCED BY BRUNNER AND POTT, MARCH 13, 1978
REFERRED TO COMMITTEE ON FINANCE, MARCH 13, 1978
AN ACT 1 Amending the act of March 4, 1971 (P.L.6, No.2), entitled "An 2 act relating to tax reform and State taxation by codifying 3 and enumerating certain subjects of taxation and imposing 4 taxes thereon; providing procedures for the payment, 5 collection, administration and enforcement thereof; providing 6 for tax credits in certain cases; conferring powers and 7 imposing duties upon the Department of Revenue, certain 8 employers, fiduciaries, individuals, persons, corporations 9 and other entities; prescribing crimes, offenses and 10 penalties," further providing for taxable income for 11 corporate net income tax purposes. 12 The General Assembly of the Commonwealth of Pennsylvania 13 hereby enacts as follows: 14 Section 1. Subclause 1 of clause (3) of section 401, act of 15 March 4, 1971 (P.L.6, No.2), known as the "Tax Reform Code of 16 1971," amended August 31, 1971 (P.L.362, No.93) and September 9, 17 1971 (P.L.437, No.105), is amended to read: 18 Section 401. Definitions.--The following words, terms, and 19 phrases, when used in this article, shall have the meaning 20 ascribed to them in this section, except where the context 21 clearly indicates a different meaning: 22 * * * 23 (3) "Taxable income." 1. In case the entire business of the
1 corporation is transacted within this Commonwealth, for any 2 taxable year which begins on or after January 1, 1971, taxable 3 income for the calendar year or fiscal year as returned to and 4 ascertained by the Federal Government, or in the case of a 5 corporation participating in the filing of consolidated returns 6 to the Federal Government, the taxable income which would have 7 been returned to and ascertained by the Federal Government if 8 separate returns had been made to the Federal Government for the 9 current and prior taxable years, subject, however, to any 10 correction thereof, for fraud, evasion, or error as finally 11 ascertained by the Federal Government: Provided, That additional 12 deductions shall be allowed from taxable income on account of 13 any dividends received from any other corporation but only to 14 the extent that such dividends are included in taxable income as 15 returned to and ascertained by the Federal Government: Provided 16 further, That additional deductions shall be allowed from 17 taxable income in an amount equal to the amount of any reduction 18 in an employer's deduction for wages and salaries as required by 19 section 280C of the Internal Revenue Code as a result of the 20 employer taking a credit for "new jobs" pursuant to section 44B 21 of the Internal Revenue Code: Provided further, That taxable 22 income will include the sum of the following tax preference 23 items as defined in section 57 of the Internal Revenue Code, as 24 amended, (i) excess investment interest; (ii) accelerated 25 depreciation on real property; (iii) accelerated depreciation on 26 personal property subject to a net lease; (iv) amortization of 27 certified pollution control facilities; (v) amortization of 28 railroad rolling stock; (vi) stock options; (vii) reserves for 29 losses on bad debts of financial institutions; (viii) and 30 capital gains but only to the extent that such preference items 19780H2097B2647 - 2 -
1 are not included in "taxable income" as returned to and 2 ascertained by the Federal Government. No deduction shall be 3 allowed for net operating losses sustained by the corporation 4 during any other fiscal or calendar year. In the case of 5 regulated investment companies as defined by the Internal 6 Revenue Code of 1954, as amended, "taxable income" shall be 7 investment company taxable income as defined in the aforesaid 8 Internal Revenue Code of 1954, as amended. In arriving at 9 "taxable income" for Federal tax purposes for any taxable year 10 beginning on or after January 1, 1971, any corporate net income 11 tax due to the Commonwealth pursuant to the provisions of this 12 article shall not be allowed as a deduction and the amount of 13 corporate tax so due and excluded from Federal taxable income 14 under the Internal Revenue Code shall not be apportioned but 15 shall be subject to tax at the rate imposed under this article. 16 * * * 17 Section 2. This act shall take effect immediately and shall 18 be retroactive to tax years commencing on or after January 1, 19 1977. B21L56CVV/19780H2097B2647 - 3 -