PRINTER'S NO. 596
No. 568 Session of 1999
INTRODUCED BY WENGER, JUBELIRER, HART, PICCOLA, CONTI, ROBBINS,
GERLACH, KUKOVICH, EARLL, DENT, MADIGAN, PUNT, KASUNIC, BELL,
MOWERY, SALVATORE, COSTA, HELFRICK, WAUGH, SCHWARTZ, WHITE,
GREENLEAF, STOUT, MELLOW, THOMPSON, WAGNER, RHOADES,
BRIGHTBILL, HOLL, BOSCOLA, SLOCUM AND LEMMOND, MARCH 12, 1999
REFERRED TO FINANCE, MARCH 12, 1999
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 the definition of "small
11 corporation" for income tax purposes.
12 The General Assembly of the Commonwealth of Pennsylvania
13 hereby enacts as follows:
14 Section 1. Section 301(s.2) of the act of March 4, 1971
15 (P.L.6, No.2), known as the Tax Reform Code of 1971, amended May
16 7, 1997 (P.L.85, No.7), is amended to read:
17 Section 301. Definitions.--The following words, terms and
18 phrases when used in this article shall have the meaning
19 ascribed to them in this section except where the context
20 clearly indicates a different meaning. Unless specifically
21 provided otherwise, any reference in this article to the
1 Internal Revenue Code shall include the Internal Revenue Code of
2 1986 (Public Law 99-514, 26 U.S.C. § 1 et seq.)[, as amended to
3 January 1, 1997]:
4 * * *
5 (s.2) "Small corporation" means any corporation which has a
6 valid election in effect under subchapter S of Chapter 1 of the
7 Internal Revenue Code of 1986.[, as amended to January 1, 1997,
8 and which does not have passive investment income in excess of
9 twenty-five per cent of its gross receipts. For purposes of this
10 clause, "passive investment income" means gross receipts derived
11 from royalties, rents, dividends, interest, annuities and sales
12 or exchanges of stock or securities (gross receipts from such
13 sales or exchanges being taken into account only to the extent
14 of gains therefrom). For purposes of determining whether a
15 corporation qualifies as a small corporation for purposes of
16 this article, (i) a qualified Subchapter S subsidiary owned by a
17 small corporation shall not be treated as a separate
18 corporation, and all gross receipts and passive investment
19 income of such qualified Subchapter S subsidiary shall be
20 treated as earned by the parent corporation; and (ii) all
21 intercorporate payments or distributions between the parent
22 corporation and any qualified Subchapter S subsidiary owned by
23 such corporation shall be eliminated.]
24 * * *
25 Section 2. This act shall take effect in 60 days.
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