PRINTER'S NO. 3933
No. 2752 Session of 2000
INTRODUCED BY HERMAN, BENNINGHOFF, ARMSTRONG, BATTISTO,
E. Z. TAYLOR, HORSEY, EGOLF, TIGUE, FAIRCHILD, FARGO, FEESE,
GODSHALL, MAITLAND, NAILOR, SAYLOR, B. SMITH AND WILT,
SEPTEMBER 26, 2000
REFERRED TO COMMITTEE ON LOCAL GOVERNMENT, SEPTEMBER 26, 2000
AN ACT
1 Amending Title 53 (Municipalities Generally) of the Pennsylvania
2 Consolidated Statutes, providing for optional occupation tax
3 replacement.
4 The General Assembly of the Commonwealth of Pennsylvania
5 hereby enacts as follows:
6 Section 1. Chapter 84 of Title 53 of the Pennsylvania
7 Consolidated Statutes is amended by adding a subchapter to read:
8 SUBCHAPTER D
9 OPTIONAL OCCUPATION TAX REPLACEMENT
10 Sec.
11 8441. Definitions.
12 8442. Occupation tax replacement generally.
13 8443. Earned income tax rate limits.
14 8444. Occupation tax prohibited.
15 8445. Resolution required.
16 8446. Binding referendum.
17 8447. Nonapplicability of certain provisions.
1 § 8441. Definitions.
2 The following words and phrases when used in this subchapter
3 shall have the meanings given to them in this section unless the
4 context clearly indicates otherwise:
5 "Earned income tax." A tax on earned income and net profits
6 levied under section 13 of the Local Tax Enabling Act.
7 "Governing body." The board of county commissioners,
8 including the successor in function to the board of county
9 commissioners in a county which has adopted a home rule charter
10 under the former act of April 13, 1972 (P.L.184, No.62), known
11 as the Home Rule Charter and Optional Plans Law, under Subpart E
12 of Part III (relating to home rule and optional plan government)
13 or under Article XXXI-C of the act of July 28, 1953 (P.L.723,
14 No.230), known as the Second Class County Code, city council,
15 borough council, incorporated town council, board of township
16 commissioners, board of township supervisors, a governing
17 council of a home rule municipality or optional plan
18 municipality, a governing council of any similar general purpose
19 unit of government which may hereafter be created by statute or
20 a board of school directors of a school district.
21 "Occupation tax." A tax based upon an assessed valuation of
22 a particular trade, occupation or profession. The term includes
23 a tax imposed on a flat rate on all trades, occupations or
24 professions. The term does not include a tax upon persons
25 employed in a taxing district, commonly known as an occupational
26 privilege tax.
27 § 8442. Occupation tax replacement generally.
28 A political subdivision that levies an occupation tax may
29 replace the revenues provided by the occupation tax by
30 increasing the rate of the earned income tax as provided in this
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1 subchapter.
2 § 8443. Earned income tax rate limits.
3 (a) Maximum rate of tax.--For the first fiscal year
4 beginning after approval of the referendum required under
5 section 8446 (relating to binding referendum) and each fiscal
6 year thereafter, the governing body may levy the earned income
7 tax at a rate not exceeding the maximum rate established in this
8 subsection. The maximum rate shall be calculated using the
9 procedures in paragraphs (1) and (2):
10 (1) The governing body shall calculate, using actual
11 revenue collections for the most recently completed fiscal
12 year, the rate of the earned income tax rate necessary to
13 equal the revenues received from the occupation tax.
14 (2) The rate calculated under paragraph (1) shall be
15 added to the rate of the earned income tax in effect during
16 the most recently completed fiscal year. The sum of those
17 rates shall be the maximum rate of the earned income tax.
18 The maximum rate of the earned income tax calculated under this
19 subsection shall not be subject to the limits on the earned
20 income tax specified in section 8(3) of the Local Tax Enabling
21 Act.
22 (b) Other rates of taxation.--If a municipality or school
23 district, both of which impose an earned income tax on the same
24 individual under the Local Tax Enabling Act and both of which
25 are limited to or have agreed upon a division of the tax rate in
26 accordance with section 8(3) of the Local Tax Enabling Act,
27 receives voter approval under section 8446 and opts to increase
28 the rate of earned income tax in excess of that limit or
29 agreement, then the municipality or school district which does
30 not receive voter approval shall remain subject to that limit or
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1 agreement.
2 § 8444. Occupation tax prohibited.
3 For the first fiscal year beginning after approval of the
4 referendum required under section 8446 (relating to binding
5 referendum) and each fiscal year thereafter, a political
6 subdivision is prohibited from levying, assessing or collecting
7 an occupation tax. This section shall not apply to the
8 collection of delinquent occupation taxes.
9 § 8445. Resolution required.
10 The governing body may seek authority to increase the maximum
11 limits of the earned income tax by adopting a resolution to
12 place a referendum on the ballot pursuant to section 8446
13 (relating to binding referendum). The governing body shall
14 transmit a copy of the resolution to the appropriate election
15 officials. Prior to approving the resolution the governing body
16 shall:
17 (1) Give public notice of its intent to adopt the
18 resolution in the manner provided by section 4 of the Local
19 Tax Enabling Act.
20 (2) Conduct at least one public hearing regarding
21 eliminating the occupation tax and increasing the maximum
22 rate of the earned income tax.
23 § 8446. Binding referendum.
24 (a) Referendum to be held.--A political subdivision may
25 increase the maximum rate of the earned income tax only by
26 obtaining the approval of the electorate of the affected
27 political subdivision in a public referendum at the general or
28 municipal election preceding the fiscal year when the maximum
29 rate of the earned income tax will be increased. The election
30 officials shall cause a question to be placed on the ballot at
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1 the first general or municipal election occurring at least 90
2 days after their receipt of the resolution required in section
3 8445 (relating to resolution required).
4 (b) Contents of question.--The referendum question must
5 state the maximum rate of the earned income tax and that the
6 additional revenue generated by an increase in the earned income
7 tax will be used to eliminate the occupation tax. The question
8 shall be in clear language that is readily understandable by a
9 layperson. For the purpose of illustration, a referendum
10 question may be framed as follows:
11 Do you favor increasing the rate of the earned income tax
12 to a maximum of X%, with the requirement that the
13 increase be used to eliminate the occupation tax?
14 (c) Vote.--If a majority of the electors voting on the
15 question vote "yes," then the governing body shall be authorized
16 to implement an increase in the earned income tax pursuant to
17 section 8443 (relating to earned income tax rate limits) and
18 shall be required to eliminate the occupation tax as required by
19 section 8444 (relating to occupation tax prohibited). If a
20 majority of the electors voting on the question vote "no," the
21 governing body shall have no authority to increase the rate of
22 the earned income tax above the maximum rate otherwise provided
23 by law.
24 (d) Voting proceedings.--Proceedings under this section
25 shall be in accordance with the provisions of the act of June 3,
26 1937 (P.L.1333, No.320), known as the Pennsylvania Election
27 Code.
28 § 8447. Nonapplicability of certain provisions.
29 The provisions of Chapter 87 (relating to other subjects of
30 taxation) shall not apply to this subchapter.
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1 Section 2. This act shall take effect January 1, 2001.
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