PRIOR PRINTER'S NO. 210                        PRINTER'S NO. 445

THE GENERAL ASSEMBLY OF PENNSYLVANIA


HOUSE BILL

No. 190 Session of 1971


        INTRODUCED BY MESSRS. FINEMAN, IRVIS, ENGLEHART,
           PRENDERGAST, MRS. ANDERSON, MESSRS. E. B. DAVIS AND
           KAUFMAN, FEBRUARY 2, 1971

        AS AMENDED ON THIRD CONSIDERATION, HOUSE OF REPRESENTATIVES,
           FEBRUARY 12, 1971

                                     AN ACT

     1  Relating to tax reform and State taxation by codifying and
     2     enumerating certain subjects of taxation and imposing taxes
     3     thereon; providing procedures for the payment, collection,
     4     administration and enforcement thereof; providing for tax
     5     credits in certain cases; conferring powers and imposing
     6     duties upon the Department of Revenue, certain employers,
     7     fiduciaries, individuals, persons, corporations and other
     8     entities; prescribing crimes, offenses and penalties.

     9     The General Assembly of the Commonwealth of Pennsylvania
    10  hereby enacts as follows:
    11                             ARTICLE I
    12                            SHORT TITLE
    13     Section 101.  Short Title.--This act shall be known and may
    14  be cited as the "Tax Reform Code of 1971."
    15                             ARTICLE II
    16                         TAX FOR EDUCATION
    17                               PART I
    18                            DEFINITIONS
    19     Section 201.  Definitions.--The following words, terms and
    20  phrases when used in this Article II shall have the meaning

     1  ascribed to them in this section, except where the context
     2  clearly indicates a different meaning:
     3     (a)  "Soft drinks."  All nonalcoholic beverages, whether
     4  carbonated or not, such as soda water, ginger ale, coca cola,
     5  lime cola, pepsi cola, Dr. Pepper, fruit juice when plain or
     6  carbonated water, flavoring or syrup is added, carbonated water,
     7  orangeade, lemonade, root beer or any and all preparations,
     8  commonly referred to as "soft drinks," of whatsoever kind, and
     9  are further described as including any and all beverages,
    10  commonly referred to as "soft drinks," which are made with or
    11  without the use of any syrup. The term "soft drinks" shall not
    12  include natural fruit or vegetable juices or their concentrates,
    13  or non-carbonated fruit juice drinks containing not less than
    14  twenty-five per cent by volume of natural fruit juices or of
    15  fruit juice which has been reconstituted to its original state,
    16  or natural concentrated fruit or vegetable juices reconstituted
    17  to their original state, whether any of the foregoing natural
    18  juices are frozen or unfrozen, sweetened or unsweetened,
    19  seasoned with salt or spice or unseasoned, nor shall the term
    20  "soft drinks" include coffee, coffee substitutes, tea, cocoa,
    21  natural fluid milk or non-carbonated drinks made from milk
    22  derivatives.
    23     (b)  "Maintaining a place of business in this Commonwealth."
    24     (1)  Having or maintaining within this Commonwealth, directly
    25  or by a subsidiary, an office, distribution house, sales house,
    26  warehouse, service enterprise or other place of business, or any
    27  agent of general or restricted authority irrespective of whether
    28  the place of business or agent is located here permanently or
    29  temporarily or whether the person or subsidiary maintaining such
    30  place of business or agent is authorized to do business within
    19710H0190B0445                  - 2 -

     1  this Commonwealth; or
     2     (2)  The engaging in any activity as a business within this
     3  Commonwealth by any person, directly or by a subsidiary, in
     4  connection with the lease, sale or delivery of tangible personal
     5  property or the performance of services thereon for use, storage
     6  or consumption including, but not limited to, having,
     7  maintaining or using any office, distribution house, sales
     8  house, warehouse or other place of business, any stock of goods
     9  or any solicitor, salesman, agent or representative under its
    10  authority, at its direction or with its permission, regardless
    11  of whether the person or subsidiary is authorized to do business
    12  in this Commonwealth.
    13     (3)  Regularly or substantially soliciting orders within this
    14  Commonwealth in connection with the lease, sale or delivery of
    15  tangible personal property to or the performance thereon of
    16  services for residents of this Commonwealth by means of
    17  catalogues or other advertising, whether such orders are
    18  accepted within or without this Commonwealth.
    19     (c)  "Manufacture."  The performance as a business of those    <--
    20  operations which transform personal property into a form,
    21  composition and character substantially different from that in
    22  which it was acquired whether for sale or use by the
    23  manufacturer. For the purposes of this act, the term
    24  "manufacture" shall include:
    25     (C)  "MANUFACTURE."  THE PERFORMANCE OF MANUFACTURING,         <--
    26  FABRICATING, COMPOUNDING, PROCESSING OR OTHER OPERATIONS,
    27  ENGAGED IN AS A BUSINESS, WHICH PLACE ANY PERSONAL PROPERTY IN A
    28  FORM, COMPOSITION OR CHARACTER DIFFERENT FROM THAT IN WHICH IT
    29  IS ACQUIRED WHETHER FOR SALE OR USE BY THE MANUFACTURER, AND
    30  SHALL INCLUDE, BUT NOT LIMITED TO--
    19710H0190B0445                  - 3 -

     1     (1)  EVERY OPERATION COMMENCING WITH THE FIRST PRODUCTION
     2  STAGE AND ENDING WITH THE COMPLETION OF PERSONAL PROPERTY HAVING
     3  THE PHYSICAL QUALITIES (INCLUDING PACKAGING, IF ANY, PASSING TO
     4  THE ULTIMATE CONSUMER) WHICH IT HAS WHEN TRANSFERRED BY THE
     5  MANUFACTURER TO ANOTHER;
     6     (1) (2)  Printing; THE PUBLISHING OF BOOKS, NEWSPAPERS,        <--
     7  MAGAZINES AND OTHER PERIODICALS AND PRINTING;
     8     (2) (3)  Refining, exploring, mining and quarrying for, or     <--
     9  otherwise extracting from the earth any natural resources,
    10  minerals and mineral aggregates;
    11     (3) (4)  Building, rebuilding, repairing and making additions  <--
    12  to, or replacements in or upon vessels designed for commercial
    13  use of registered tonnage of fifty tons or more when produced
    14  upon special order of the purchaser, or when rebuilt, repaired
    15  or enlarged, or when replacements are made upon order of, or for
    16  the account of the owner;
    17     (4) (5)  Research having as its objective the production of a  <--
    18  new or an improved (i) product or utility service, or (ii)
    19  method of producing a product or utility service, but in either
    20  case not including market research or research having as its
    21  objective the improvement of administrative efficiency.
    22     The term "manufacture," shall not include constructing,
    23  altering, servicing, repairing or improving real estate or
    24  repairing, servicing or installing personal property.
    25     (d)  "Processing." The performance of the following
    26  activities when engaged in as a business enterprise:
    27     (1)  The cooking or freezing of fruits, vegetables,
    28  mushrooms, fish, seafood, meats or poultry, when the person
    29  engaged in such business packages such property in sealed
    30  containers for wholesale distribution.
    19710H0190B0445                  - 4 -

     1     (2)  The scouring, carbonizing, cording, combing, throwing,
     2  twisting or winding of natural or synthetic fibers, or the
     3  spinning, bleaching, dyeing, printing or finishing of yarns or
     4  fabrics, when such activities are performed prior to sale to the
     5  ultimate consumer.
     6     (3)  The electroplating, galvanizing, enameling, anodizing,
     7  coloring, finishing, impregnating or heat treating of metals or
     8  plastics for sale or in the process of manufacturing.
     9     (4)  The rolling, drawing or extruding of ferrous and non-
    10  ferrous metals.
    11     (5)  The fabrication for sale of ornamental or structural
    12  metal or of metal stairs, staircases, gratings, fire escapes or
    13  railings (not including fabrication work done at the
    14  construction site).
    15     (6)  The preparation of animal feed or poultry feed for sale.
    16     (7)  The production, processing and bottling of non-alcoholic
    17  beverages for wholesale distribution.
    18     (8)  The operation of a saw mill or planing mill for the
    19  production of lumber or lumber products for sale.
    20     (9)  The milling for sale of flour or meal from grains.
    21     (10)  The slaughtering and dressing of animals for meat to be
    22  sold or to be used in preparing meat products for sale, and the
    23  preparation of meat products including lard, tallow, grease,
    24  cooking and inedible oils for wholesale distribution.
    25     (11)  The processing of used lubricating oils.
    26     (12)  THE BROADCASTING OF RADIO AND TELEVISION PROGRAMS OF     <--
    27  LICENSED COMMERCIAL OR EDUCATIONAL STATIONS.
    28     (e)  "Person."  Any natural person, association, fiduciary,
    29  partnership, corporation or other entity, including the
    30  Commonwealth of Pennsylvania, its political subdivisions and
    19710H0190B0445                  - 5 -

     1  instrumentalities and public authorities. Whenever used in any
     2  clause prescribing and imposing a penalty or imposing a fine or
     3  imprisonment, or both, the term "person," as applied to an
     4  association, shall include the members thereof and, as applied
     5  to a corporation, the officers thereof.
     6     (f)  "Purchase at retail."
     7     (1)  The acquisition for a consideration of the ownership,
     8  custody or possession of tangible personal property other than
     9  for resale by the person acquiring the same when such
    10  acquisition is made for the purpose of consumption or use,
    11  whether such acquisition shall be absolute or conditional, and
    12  by whatsoever means the same shall have been effected.
    13     (2)  The acquisition of a license to use or consume, and the
    14  rental or lease of tangible personal property, other than for
    15  resale regardless of the period of time the lessee has
    16  possession or custody of the property.
    17     (3)  The obtaining for a consideration of those services
    18  described in subclauses (2), (3) and (4) of clause (k) of this
    19  section other than for resale.
    20     (4)  A retention after March 7, 1956, of possession, custody
    21  or a license to use or consume pursuant to a rental contract or
    22  other lease arrangement (other than as security), other than for
    23  resale.
    24     The term "purchase at retail" with respect to "liquor" and
    25  "malt or brewed beverages" shall include the purchase of
    26  "liquor" from any "Pennsylvania Liquor Store" by any person for
    27  any purpose, and the purchase of "malt or brewed beverages" from
    28  a "manufacturer of malt or brewed beverages," "distributor" or
    29  "importing distributor" by any person for any purpose, except
    30  purchases from a "manufacturer of malt or brewed beverages" by a
    19710H0190B0445                  - 6 -

     1  "distributor" or "importing distributor" or purchases from an
     2  "importing distributor" by a "distributor" within the meaning of
     3  the "Liquor Code." The term "purchase at retail" shall not
     4  include any purchase of "malt or brewed beverages" from a
     5  "retail dispenser" or any purchase of "liquor" or "malt or
     6  brewed beverages" from a person holding a "retail liquor
     7  license" within the meaning of and pursuant to the provisions of
     8  the "Liquor Code," but shall include any purchase or acquisition
     9  of "liquor" or "malt or brewed beverages" other than pursuant to
    10  the provisions of the "Liquor Code."
    11     (g)  "Purchase price."
    12     (1)  The total value of anything paid or delivered, or
    13  promised to be paid or delivered, whether it be money or
    14  otherwise, in complete performance of a sale at retail or
    15  purchase at retail, as herein defined, without any deduction on
    16  account of the cost or value of the property sold, cost or value
    17  of transportation, cost or value of labor or service, interest
    18  or discount paid or allowed after the sale is consummated, any
    19  other taxes imposed by the Commonwealth of Pennsylvania or any
    20  other expense EXCEPT THAT THERE SHALL BE EXCLUDED ANY SEPARATELY  <--
    21  STATED DEPOSIT CHARGE FOR RETURNABLE CONTAINERS.
    22     (2)  There shall be deducted from the purchase price the
    23  value of any personal property actually taken in trade or
    24  exchange within this Commonwealth in lieu of the whole or any
    25  part of the purchase price. For the purpose of this subsection,
    26  the amount allowed by reason of personal property actually taken
    27  in trade or exchange shall be considered the value of such
    28  property.
    29     (3)  In determining the purchase price on the sale or use of
    30  taxable tangible personal property where, because of affiliation
    19710H0190B0445                  - 7 -

     1  of interests between the vendor and purchaser, or irrespective
     2  of any such affiliation, if for any other reason the purchase
     3  price declared by the vendor or taxpayer on the taxable sale or
     4  use of such tangible personal property is, in the opinion of the
     5  department, not indicative of the true value of the article or
     6  the fair price thereof, the department shall, pursuant to
     7  uniform and equitable rules, determine the amount of
     8  constructive purchase price upon the basis of which the tax
     9  shall be computed and levied. Such rules shall provide for a
    10  constructive amount of purchase price for each such sale or use
    11  which would naturally and fairly be charged in an arms-length
    12  transaction in which the element of common interest between the
    13  vendor or purchaser is absent or if no common interest exists,
    14  any other element causing a distortion of the price or value is
    15  likewise absent. For the purpose of this clause where a taxable
    16  sale or purchase at retail transaction occurs between a parent
    17  and a subsidiary, affiliate or controlled corporation of such
    18  parent corporation, there shall be a rebuttable presumption,
    19  that because of such common interest such transaction was not at
    20  arms-length.
    21     (4)  Where there is a transfer or retention of possession or
    22  custody, whether it be termed a rental, lease, service or
    23  otherwise, of tangible personal property including, but not
    24  limited to linens, aprons, motor vehicles, trailers, tires,
    25  industrial office and construction equipment, and business
    26  machines the full consideration paid or delivered to the vendor
    27  or lessor shall be considered the purchase price, even though
    28  such consideration be separately stated and be designated as
    29  payment for processing, laundering, service, maintenance,
    30  insurance, repairs, depreciation or otherwise. Where the vendor
    19710H0190B0445                  - 8 -

     1  or lessor supplies or provides an employe to operate such
     2  tangible personal property, the value of the labor thus supplied
     3  may be excluded and shall not be considered as part of the
     4  purchase price if separately stated. There shall also be
     5  included as part of the purchase price the value of anything
     6  paid or delivered, or promised to be paid or delivered by a
     7  lessee, whether it be money or otherwise, to any person other
     8  than the vendor or lessor by reason of the maintenance,
     9  insurance or repair of the tangible personal property which a
    10  lessee has the possession or custody of under a rental contract
    11  or lease arrangement.
    12     (5)  With respect to the tax imposed by subsection (b) of
    13  section 202 upon any tangible personal property originally
    14  purchased by the user of such property six months or longer
    15  prior to the first taxable use of such property within the
    16  Commonwealth, such user may elect to pay tax on a substituted
    17  base determined by considering the purchase price of such
    18  property for tax purposes to be equal to the prevailing market
    19  price of similar personal property at the time and place of such
    20  first use within the Commonwealth. Such election must be made by
    21  filing a notice thereof in the form specified by the department
    22  and reporting such tax liability and paying the proper tax due
    23  plus all accrued penalties and interest, if there be any, within
    24  one year of the due date of such report and payment, as provided
    25  for by subsections (a) and (c) of section 217 of this article.
    26     (6)  The purchase price of "liquor" purchased from a           <--
    27  "Pennsylvania Liquor Store" by a "retail liquor licensee," and
    28  the purchase price of "malt or brewed beverages" purchased from
    29  any person by a "retail dispenser" shall, for the purpose of
    30  this article, be a constructive average retail price for such
    19710H0190B0445                  - 9 -

     1  liquor or malt or brewed beverage, as shall be determined by the
     2  Pennsylvania Liquor Control Board, and the tax thereon shall be
     3  computed and paid upon said constructive average retail price,
     4  rather than upon the price actually paid by the "retail liquor
     5  licensee" or "retail dispenser".
     6     (h)  "Purchaser."  Any person who acquires, for a
     7  consideration, the ownership, custody or possession by sale,
     8  lease or otherwise, of tangible personal property, or who
     9  obtains services in exchange for a purchase price but not
    10  including an employer who obtains services from his employes in
    11  exchange for wages or salaries when such services are rendered
    12  in the ordinary scope of their employment.
    13     (i) "Resale."
    14     (1)  Any transfer of ownership, custody or possession of
    15  tangible personal property for a consideration, including the
    16  grant of a license to use or consume and transactions where the
    17  possession of such property is transferred but where the
    18  transferor retains title only as security for payment of the
    19  selling price whether such transaction be designated as bailment
    20  lease, conditional sale or otherwise.
    21     (2)  The physical incorporation of personal property as an
    22  ingredient or constituent into other personal property, which is
    23  to be sold in the regular course of business or the performance
    24  of those services described in subclauses (2), (3) and (4) of
    25  clause (k) of this section upon personal property which is to be
    26  sold in the regular course of business.
    27     The term "resale" shall not include any sale of "malt or
    28  brewed beverages" by a "retail dispenser," or any sale of
    29  "liquor" or "malt or brewed beverages" by a person holding a
    30  "retail liquor license" within the meaning of the "Liquor Code."
    19710H0190B0445                 - 10 -

     1     (j) "Resident."
     2     (1)  Any natural person (i) who is domiciled in the
     3  Commonwealth, or (ii) who maintains a permanent place of abode
     4  within the Commonwealth and spends in the aggregate more than
     5  sixty days of the year within the Commonwealth.
     6     (2)  Any corporation (i) incorporated under the laws of this
     7  Commonwealth, or (ii) authorized to do business or doing
     8  business within this Commonwealth, or (iii) maintaining a place
     9  of business within this Commonwealth.
    10     (3)  Any association, fiduciary, partnership or other entity
    11  (i) domiciled in this Commonwealth, or (ii) authorized to do
    12  business or doing business within this Commonwealth, or (iii)
    13  maintaining a place of business within this Commonwealth.
    14     (k)  "Sale at retail."
    15     (1)  Any transfer, for a consideration, of the ownership,
    16  custody or possession of tangible personal property, including
    17  the grant of a license to use or consume whether such transfer
    18  be absolute or conditional and by whatsoever means the same
    19  shall have been effected.
    20     (2)  The rendition of the service of printing or imprinting
    21  of tangible personal property for a consideration for persons
    22  who furnish, either directly or indirectly the materials used in
    23  the printing or imprinting.
    24     (3)  The rendition for a consideration of the service of--
    25     (i)  Washing, cleaning, waxing, polishing or lubricating of
    26  motor vehicles of another, whether or not any tangible personal
    27  property is transferred in conjunction therewith; and
    28     (ii)  Inspecting motor vehicles pursuant to the mandatory
    29  requirements of "The Vehicle Code."
    30     (4)  The rendition for a consideration of the service of
    19710H0190B0445                 - 11 -

     1  repairing, altering, mending, pressing, fitting, dyeing,
     2  laundering, drycleaning or cleaning tangible personal property
     3  other than wearing apparel or shoes, or applying or installing
     4  tangible personal property as a repair or replacement part of
     5  other personal property except wearing apparel or shoes for a
     6  consideration, whether or not the services are performed
     7  directly or by any means other than by coin-operated equipment
     8  and whether or not any tangible personal property is transferred
     9  in conjunction therewith, except such services as are rendered
    10  in the construction, reconstruction, remodeling, repair or
    11  maintenance of real estate: Provided, however, That this
    12  subclause shall not be deemed to impose tax upon such services
    13  in the preparation for sale of new items which are excluded from
    14  the tax under clause (26) of section 204, or upon diaper
    15  service.
    16     (5)  Any retention after March 7, 1956, of possession,
    17  custody or a license to use or consume pursuant to a rental
    18  contract or other lease arrangement (other than as security).
    19     (6)  Any retention of possession, custody or a license to use
    20  or consume tangible personal property or any further obtaining
    21  of services described in subclauses (2), (3) and (4) of this
    22  clause after April 15, 1959, pursuant to a rental or service
    23  contract or other arrangement (other than as security).
    24     (7)  Any retention of possession, custody or a license to use
    25  or consume tangible personal property or any further obtaining
    26  of services described in subclauses (2), (3) and (4) of this
    27  clause after August 20, 1959, pursuant to a rental or service
    28  contract or other arrangement (other than as security).
    29     (8)  Any retention of possession, custody or a license to use
    30  or consume tangible personal property or any further obtaining
    19710H0190B0445                 - 12 -

     1  of services described in subclauses (2), (3) and (4) of this
     2  clause pursuant to a rental or service contract or other
     3  arrangement (other than as security).
     4     The term "sale at retail" shall not include (i) any such
     5  transfer of tangible personal property or rendition of services
     6  for the purpose of resale, or (ii) such rendition of services or
     7  the transfer of tangible personal property which under authority  <--
     8  of Federal law may be expensed by the purchaser thereof for
     9  Federal tax purposes, and are to be used or consumed by such THE  <--
    10  TRANSFER OF TANGIBLE PERSONAL PROPERTY INCLUDING, BUT NOT
    11  LIMITED TO, MACHINERY AND EQUIPMENT AND PARTS THEREFOR AND
    12  SUPPLIES TO BE USED OR CONSUMED BY THE purchaser directly in any
    13  of the operations of--
    14     (A)  The manufacture of personal property;
    15     (B)  Farming, dairying, agriculture, horticulture or
    16  floriculture when engaged in as a business enterprise. The term
    17  "farming" shall include the propagation and raising of ranch
    18  raised fur-bearing animals.
    19     (C)  The producing, delivering or rendering of a public
    20  utility service, or in constructing, reconstructing, remodeling,
    21  repairing or maintaining the facilities used in such service,
    22  whether or not such facilities constitute real estate: Provided,
    23  however, "real estate" shall not include buildings;
    24     (D)  The processing of personal property as defined in clause
    25  (d) of this section.
    26     The exclusions provided in paragraphs (A), (B), (C) and (D)
    27  shall not apply to any vehicle required to be registered under
    28  The Vehicle Code, except those vehicles used directly by a
    29  public utility engaged in business as a common carrier, or to
    30  maintenance facilities or to materials or supplies to be used or
    19710H0190B0445                 - 13 -

     1  consumed in any construction, reconstruction, remodeling, repair
     2  or maintenance of real estate.
     3     The exclusions provided in paragraphs (A), (B), (C) and (D)
     4  shall not apply to tangible personal property or services to be
     5  used or consumed in managerial sales or other nonoperational
     6  activities, nor to the purchase or use of tangible personal
     7  property or services by any person other than the person
     8  directly using the same in the operations described in
     9  paragraphs (A), (B), (C) and (D) herein.
    10     The exclusion provided in paragraph (C) shall not apply to
    11  (i) construction materials used to construct, reconstruct,
    12  remodel, repair or maintain facilities not used directly by the
    13  purchaser in the production, delivering or rendition of public
    14  utility service, even though such materials may be expensed for   <--
    15  Federal tax purposes or (ii) tools and equipment used but not
    16  installed in the maintenance of facilities used in the
    17  production, delivering or rendition of a public utility service.
    18  even though such tools and equipment may be expensed for Federal  <--
    19  tax purposes.
    20     (9)  Where tangible personal property or services are
    21  utilized for purposes constituting a "sale at retail" and for
    22  purposes excluded from the definition of "sale at retail," it
    23  shall be presumed that said property is subject to tax, unless
    24  the user prove that the purposes which constitute a "sale at
    25  retail" are minimal.
    26     (10)  The term "sale at retail" with respect to "liquor" and
    27  "malt or brewed beverages" shall include the sale of "liquor" by
    28  any "Pennsylvania liquor store" to any person for any purpose,
    29  and the sale of "malt or brewed beverages" by a "manufacturer of
    30  malt or brewed beverages," "distributor" or "importing
    19710H0190B0445                 - 14 -

     1  distributor" to any person for any purpose, except sales by a
     2  "manufacturer of malt or brewed beverages" to a "distributor" or
     3  "importing distributor" or sales by an "importing distributor"
     4  to a "distributor" within the meaning of the "Liquor Code." The
     5  term "sale at retail" shall not include any sale of "malt or
     6  brewed beverages" by a "retail dispenser" or any sale of
     7  "liquor" or "malt or brewed beverages" by a person holding a
     8  "retail liquor license"  within the meaning of and pursuant to
     9  the provisions of the "Liquor Code," but shall include any sale
    10  of "liquor" or "malt or brewed beverages" other than pursuant to
    11  the provisions of the "Liquor Code."
    12     (l)  "Storage."  Any keeping or retention of tangible
    13  personal property within this Commonwealth for any purpose
    14  including the interim keeping, retaining or exercising any right
    15  or power over such tangible personal property.
    16     (m)  "Tangible personal property."  Corporeal personal
    17  property including, but not limited to, goods, wares,
    18  merchandise, steam and natural and manufactured and bottled gas
    19  for non-residential use, electricity for non-residential use,
    20  intrastate telephone and telegraph service for non-residential
    21  use, spirituous or vinous liquor and malt or brewed beverages
    22  and soft drinks; but the term shall not include household
    23  supplies purchased at retail establishments for residential
    24  consumption, including but not limited to, soaps, detergents,
    25  cleaning and polishing preparations, paper goods, household
    26  wrapping supplies and items of similar nature, or sanitary
    27  napkins, tampons or similar items used for feminine hygiene. Nor
    28  shall said term include steam, natural and manufactured and
    29  bottled gas, fuel oil, electricity or intrastate telephone or
    30  telegraph service when purchased solely for residential use.
    19710H0190B0445                 - 15 -

     1     (n)  "Taxpayer."  Any person required to pay or collect the
     2  tax imposed by this article.
     3     (o) "Use."
     4     (1)  The exercise of any right or power incidental to the
     5  ownership, custody or possession of tangible personal property
     6  and shall include, but not be limited to transportation, storage
     7  or consumption.
     8     (2)  The obtaining by a purchaser of the service of printing
     9  or imprinting of tangible personal property when such purchaser
    10  furnishes, either directly or indirectly, the articles used in
    11  the printing or imprinting.
    12     (3)  The obtaining by a purchaser of the services of (i)
    13  washing, cleaning, waxing, polishing or lubricating of motor
    14  vehicles whether or not any tangible personal property is
    15  transferred to the purchaser in conjunction with such services,
    16  and (ii) inspecting motor vehicles pursuant to the mandatory
    17  requirements of "The Vehicle Code."
    18     (4)  The obtaining by a purchaser of the service of
    19  repairing, altering, mending, pressing, fitting, dyeing,
    20  laundering, drycleaning or cleaning tangible personal property
    21  other than wearing apparel or shoes or applying or installing
    22  tangible personal property as a repair or replacement part of
    23  other personal property other than wearing apparel or shoes,
    24  whether or not the services are performed directly or by any
    25  means other than by means of coin-operated equipment, and
    26  whether or not any tangible personal property is transferred to
    27  the purchaser in conjunction therewith, except such services as
    28  are obtained in the construction, reconstruction, remodeling,
    29  repair or maintenance of real estate: Provided, however, That
    30  this subclause shall not be deemed to impose tax upon such
    19710H0190B0445                 - 16 -

     1  services in the preparation for sale of new items which are
     2  excluded from the tax under clause (26) of section 204, or upon
     3  diaper service: And provided further, That the term "use" shall
     4  not include--
     5     (A)  Any tangible personal property acquired and kept,
     6  retained or over which power is exercised within this
     7  Commonwealth on which the taxing of the storage, use or other
     8  consumption thereof is expressly prohibited by the Constitution
     9  of the United States or which is excluded from tax under other
    10  provisions of this article.
    11     (B)  Tangible personal property, supplies or the obtaining of  <--
    12  the services described in subclauses (2), (3) and (4) of this
    13  clause, which property, supplies and services under authority of
    14  Federal law may be expensed by the user thereof for Federal tax
    15  purposes and which are used or consumed by the purchaser
    16  directly in any of the operations of--
    17     (B)  THE USE OR CONSUMPTION OF TANGIBLE PERSONAL PROPERTY,     <--
    18  INCLUDING BUT NOT LIMITED TO MACHINERY AND EQUIPMENT AND PARTS
    19  THEREFOR, AND SUPPLIES OR THE OBTAINING OF THE SERVICES
    20  DESCRIBED IN SUBCLAUSES (2), (3) AND (4) OF THIS CLAUSE DIRECTLY
    21  IN ANY OF THE OPERATIONS OF--
    22     (i)  The manufacture of personal property;
    23     (ii)  Farming, dairying, agriculture, horticulture or
    24  floriculture when engaged in as a business enterprise;
    25     (iii)  The producing, delivering or rendering of a public
    26  utility service, or in constructing, reconstructing, remodeling,
    27  repairing or maintaining the facilities used in such service,
    28  whether or not such facilities constitute real estate: Provided,
    29  however, "real estate" shall not include buildings;
    30     (iv)  The processing of personal property as defined in
    19710H0190B0445                 - 17 -

     1  subclause (d) of this section.
     2     The exclusions provided in subparagraphs (i), (ii), (iii) and
     3  (iv) shall not apply to any vehicle required to be registered
     4  under The Vehicle Code except vehicles directly used by a public
     5  utility engaged in the business as a common carrier or
     6  maintenance facilities, or to materials or supplies to be used
     7  or consumed in any construction, reconstruction, remodeling,
     8  repair or maintenance of real estate. The exclusions provided in
     9  subparagraphs (i), (ii), (iii) and (iv) shall not apply to
    10  tangible personal property or services to be used or consumed in
    11  managerial sales or other nonoperational activities, nor to the
    12  purchase or use of tangible personal property by any person
    13  other than the person directly using the same in the aforesaid
    14  operations.
    15     The exclusion provided in subparagraph (iii) shall not apply
    16  to (A) construction materials used to construct, reconstruct,
    17  remodel, repair or maintain facilities not used directly in the
    18  production, delivering or rendition of public utility service,
    19  even though under Federal law such materials may be expensed for  <--
    20  Federal tax purposes, or (B) tools and equipment used but not
    21  installed in the maintenance of facilities used directly in the
    22  production, delivering or rendition of a public utility service.
    23  even though under Federal law such items may be expensed for      <--
    24  Federal tax purposes.
    25     (5)  Where tangible personal property or services are
    26  utilized for purposes constituting a "use," as herein defined,
    27  and for purposes excluded from the definition of "use," it shall
    28  be presumed that said property is subject to tax unless the user
    29  prove that the purposes which constitute a "use" as herein
    30  defined are minimal.
    19710H0190B0445                 - 18 -

     1     (6)  The term "use" with respect to "liquor" and "malt or
     2  brewed beverages" shall include the purchase of "liquor" from
     3  any "Pennsylvania liquor store" by any person for any purpose
     4  and the purchase of "malt or brewed beverages" from a
     5  "manufacturer of malt or brewed beverages," "distributor" or
     6  "importing distributor" by any person for any purpose, except
     7  purchases from a "manufacturer of malt or brewed beverages" by a
     8  "distributor" or "importing distributor," or purchases from an
     9  "importing distributor" by a "distributor" within the meaning of
    10  the "Liquor Code." The term "use" shall not include any purchase
    11  of "malt or brewed beverages" from a "retail dispenser" or any
    12  purchase of "liquor" or "malt or brewed beverages" from a person
    13  holding a "retail liquor license" within the meaning of and
    14  pursuant to the provisions of the "Liquor Code," but shall
    15  include the exercise of any right or power incidental to the
    16  ownership, custody or possession of "liquor" or "malt or brewed
    17  beverages" obtained by the person exercising such right or power
    18  in any manner other than pursuant to the provisions of the
    19  "Liquor Code."
    20     (7)  The use of tangible personal property purchased at
    21  retail upon which the services described in subclauses (2), (3)
    22  and (4) of this clause have been performed shall be deemed to be
    23  a use of said services by the person using said property.
    24     (p)  "Vendor."  Any person maintaining a place of business in
    25  this Commonwealth, selling or leasing tangible personal
    26  property, or rendering services, the sale or use of which is
    27  subject to the tax imposed by this article.
    28     (q)  "Department."  The Department of Revenue of the
    29  Commonwealth of Pennsylvania.
    30                              PART II
    19710H0190B0445                 - 19 -

     1                         IMPOSITION OF TAX
     2     Section 202.  Imposition of Tax.--(a) There is hereby imposed
     3  upon each separate sale at retail of tangible personal property
     4  or services, as defined herein, within this Commonwealth a tax
     5  of six per cent of the purchase price, which tax shall be
     6  collected by the vendor from the purchaser, and shall be paid
     7  over to the Commonwealth as herein provided.
     8     (b)  There is hereby imposed upon the use, on and after the
     9  effective date of this act, within this Commonwealth of tangible
    10  personal property purchased at retail on or after March 7, 1956,
    11  and on those services described herein purchased at retail on
    12  and after April 15, 1959, a tax of six per cent of the purchase
    13  price, which tax shall be paid to the Commonwealth by the person
    14  who makes such use as herein provided, except that such tax
    15  shall not be paid to the Commonwealth by such person where he
    16  has paid the tax imposed by subsection (a) of this section or
    17  has paid the tax imposed by this subsection (b) to the vendor
    18  with respect to such use. The tax at the rate of six per cent
    19  imposed by this subsection shall not be deemed applicable where
    20  the tax has been incurred at the rate of three per cent or three
    21  and one-half per cent or four per cent or five per cent under
    22  this subsection prior to this amendment. THE PROVISIONS OF "THE   <--
    23  TAX ACT OF 1963 FOR EDUCATION."
    24     (c)  Notwithstanding any other provisions of this article,
    25  the tax with respect to non-residential intrastate telephone
    26  service and intrastate telegraph service within the meaning of
    27  clause (m) of section 201 of this article shall, except for
    28  telegrams paid for in cash at telegraph offices, be computed at
    29  the rate of six per cent upon the total amount billed to
    30  customers periodically for such services, irrespective of
    19710H0190B0445                 - 20 -

     1  whether such billing is based upon a flat rate or upon a message
     2  unit charge.
     3     Section 203.  Computation of Tax.--The amount of tax imposed
     4  by section 202 of this article shall be computed as follows:
     5     (a)  If the purchase price is ten cents (10¢) or less, no tax
     6  shall be collected.
     7     (b)  If the purchase price is eleven cents (11¢) or more but
     8  less than eighteen cents (18¢), one cent (1¢) shall be
     9  collected.
    10     (c)  If the purchase price is eighteen cents (18¢) or more
    11  but less than thirty-five cents (35¢), two cents (2¢) shall be
    12  collected.
    13     (d)  If the purchase price is thirty-five cents (35¢) or more
    14  but less than fifty-one cents (51¢), three cents (3¢) shall be
    15  collected.
    16     (e)  If the purchase price is fifty-one cents (51¢) or more
    17  but less than sixty-eight cents (68¢), four cents (4¢) shall be
    18  collected.
    19     (f)  If the purchase price is sixty-eight cents (68¢) or more
    20  but less than eighty-five cents (85¢), five cents (5¢) shall be
    21  collected.
    22     (g)  If the purchase price is eighty-five cents (85¢) or more
    23  but less than one dollar and one cent ($1.01), six cents (6¢)
    24  shall be collected.
    25     (h)  If the purchase price is more than one dollar ($1.00),
    26  six per centum of each dollar of purchase price plus the above
    27  bracket charges upon any fractional part of a dollar in excess
    28  of even dollars shall be collected.
    29                              PART III
    30                        EXCLUSIONS FROM TAX
    19710H0190B0445                 - 21 -

     1     Section 204.  Exclusions from Tax.--The tax imposed by
     2  section 202 shall not be imposed upon
     3     (1)  The sale at retail or use of tangible personal property
     4  (other than motor vehicles, trailers, semi-trailers, motor
     5  boats, aircraft or other similar tangible personal property
     6  required under either Federal law or laws of this Commonwealth
     7  to be registered or licensed) or services sold by or purchased
     8  from a person not a vendor in an isolated transaction or sold by
     9  or purchased from a person who is a vendor but is not a vendor
    10  with respect to the tangible personal property or services sold
    11  or purchased in such transaction: Provided, That inventory and
    12  stock in trade so sold or purchased, shall not be excluded from
    13  the tax by the provisions of this subsection.
    14     (2)  The use of tangible personal property purchased by a
    15  nonresident person outside of, and brought into this
    16  Commonwealth for use therein for a period not to exceed seven
    17  days, or for any period of time when such nonresident is a
    18  tourist or vacationer and, in either case not consumed within
    19  the Commonwealth.
    20     (3)  The use of tangible personal property purchased outside
    21  this Commonwealth for use outside this Commonwealth by a then
    22  nonresident natural person or a business entity not actually
    23  doing business within this Commonwealth, who later brings such
    24  tangible personal property into this Commonwealth in connection
    25  with his establishment of a permanent business or residence in
    26  this Commonwealth: Provided, That such property was purchased
    27  more than six months prior to the date it was first brought into
    28  this Commonwealth or prior to the establishment of such business
    29  or residence, whichever first occurs. This exclusion shall not
    30  apply to tangible personal property temporarily brought into
    19710H0190B0445                 - 22 -

     1  Pennsylvania for the performance of contracts for the
     2  construction, reconstruction, remodeling, repairing and
     3  maintenance of real estate.
     4     (4)  The sale at retail or use of supplies and materials to
     5  be used in the fulfillment of contracts for the construction,
     6  reconstruction, remodeling, repairing, maintenance or sale of
     7  real estate when such contract was entered into
     8     (i)  Prior to March 7, 1956, and is at a fixed price not
     9  subject to change or modification by reason of the tax imposed
    10  by this act; or
    11     (ii)  Pursuant to the obligation of a bid or bids submitted
    12  prior to March 7, 1956, which bid or bids could not be altered
    13  or withdrawn on or after that date and which bid or bids and
    14  contract entered into pursuant thereto are at a fixed price not
    15  subject to change or modification by reason of the tax imposed
    16  by the act in effect prior to this article.
    17     Provided, however, That notice of such contract or bid by
    18  reason of which an exclusion is claimed under this subsection
    19  (4) must be given by the taxpayer to the department on or before
    20  June 15, 1956.
    21     (5)  The sale at retail or use of materials to be
    22  incorporated into and made a part of real estate pursuant to a
    23  contract for the construction, reconstruction, remodeling,
    24  repairing, maintenance or sale of such real estate, when the
    25  contract is, either at a fixed price not subject to change or
    26  modification, or entered into pursuant to the obligation of a
    27  formal written bid which cannot be altered or withdrawn, and, in
    28  either case, such contract was entered into or such bid made on
    29  or after March 7, 1956, but prior to April 15, 1959, shall be
    30  exempt from the additional one-half of one per cent of tax
    19710H0190B0445                 - 23 -

     1  imposed by section 201 of the Tax Act of 1963 for Education as
     2  amended April 15, 1959 (P.L.20), and from the additional one-
     3  half of one per cent of tax imposed by section 201 of the Tax
     4  Act of 1963 for Education as amended August 20, 1959 (P.L.729),
     5  and from the additional one per cent of tax imposed by section
     6  201 of the Tax Act of 1963 for Education as amended May 29, 1963
     7  (P.L.49) and from the additional one per cent of tax imposed by
     8  section 201 of the Tax Act of 1963 for Education as amended
     9  January 1, 1968 (P.L.918): Provided, however, That the exemption
    10  granted by this clause shall not be claimed by the purchaser
    11  from any vendor but shall be claimed only by the filing of a
    12  refund petition with the department.
    13     (6)  The sale at retail or use of materials to be
    14  incorporated into and made a part of real estate pursuant to a
    15  contract for the construction, reconstruction, remodeling,
    16  repairing, maintenance or sale of such real estate when the
    17  contract is, either at a fixed price not subject to change or
    18  modification, or entered into pursuant to the obligation of a
    19  formal written bid which cannot be altered or withdrawn, and, in
    20  either case, such contract was entered into or such bid made on
    21  or after April 15, 1959, but prior to August 20, 1959, shall be
    22  exempt from the additional one-half of one per cent of tax
    23  imposed by section 201 of the Tax Act of 1963 for Education as
    24  amended August 20, 1959 (P.L.729), and from the additional one
    25  per cent of tax imposed by section 201 of the Tax Act of 1963
    26  for Education as amended May 29, 1963 (P.L.49) and from the
    27  additional one per cent of tax imposed by section 201 of the Tax
    28  Act of 1963 for Education as amended January 1, 1968 (P.L.918):
    29  Provided, however, That the exemption granted by this clause
    30  shall not be claimed by the purchaser from any vendor but shall
    19710H0190B0445                 - 24 -

     1  be claimed only by the filing of a refund petition with the
     2  department.
     3     (7)  The sale at retail or use of materials to be
     4  incorporated into and made a part of real estate pursuant to a
     5  contract for the construction, reconstruction, remodeling,
     6  repairing, maintenance or sale of such real estate when the
     7  contract is, either at a fixed price not subject to change or
     8  modification, or entered into pursuant to the obligation of a
     9  formal written bid which cannot be altered or withdrawn, and, in
    10  either case, such contract was entered into or such bid made on
    11  or after August 20, 1959, but prior to June 1, 1963 shall be
    12  exempt from the additional one per cent of tax imposed by
    13  section 201 of the Tax Act of 1963 for Education as amended May
    14  29, 1963 (P.L.49) and from the additional one per cent of the
    15  tax imposed by section 201 of the Tax Act of 1963 for Education
    16  as amended January 1, 1968 (P.L.918): Provided, however, That
    17  the exemption granted by this clause shall not be claimed by the
    18  purchaser, from any vendor but shall be claimed only by the
    19  filing of a refund petition with the department.
    20     (8)  The sale at retail or use of materials to be
    21  incorporated into and made a part of real estate pursuant to a
    22  contract for the construction, reconstruction, remodeling,
    23  repairing, maintenance or sale of such real estate when the
    24  contract is, either at a fixed price not subject to change or
    25  modification, or entered into pursuant to the obligation of a
    26  formal written bid which cannot be altered or withdrawn, and, in
    27  either case, such contract was entered into or such bid made on
    28  or after June 1, 1963, but prior to January 1, 1968, shall be
    29  exempt from the additional one per cent of tax imposed by
    30  section 201 of the Tax Act of 1963 for Education as amended
    19710H0190B0445                 - 25 -

     1  January 1, 1968 (P.L.918): Provided, however, That the exemption
     2  granted by this clause shall not be claimed by the purchaser
     3  from any vendor but shall be claimed only by the filing of a
     4  refund petition with the department.
     5     (9)  The sale at retail or use of tangible personal property
     6  or services subject to tax under this article, but which prior
     7  to the effective date of this article were excluded from tax
     8  under the provisions of the "Tax Act of 1963 for Education"
     9  shall be excluded from the tax imposed by this article, provided
    10  such sale at retail or use occurred pursuant to and in
    11  fulfillment of a written fixed price sales or construction
    12  contract or formal bid entered into on or after January 1, 1968,
    13  but prior to the effective date of this article by the person
    14  who otherwise would be subject to tax under this article and
    15  another, and which contract or bid cannot be altered, modified
    16  or withdrawn by the parties. The exclusion from tax provided
    17  herein shall not be claimed by any person from a vendor but
    18  shall be claimed only by the filing of a refund petition with
    19  the department as provided in this article.
    20     (10)  The sale at retail to or use by (i) any charitable
    21  organization, volunteer firemen's organization or nonprofit
    22  educational institution, or (ii) a religious organization for
    23  religious purposes of tangible personal property or services:
    24  Provided, however, That the exclusion of this clause shall not
    25  apply with respect to any tangible personal property or services
    26  used in any unrelated trade or business carried on by such
    27  organization or institution or with respect to any materials,
    28  supplies and equipment used in the construction, reconstruction,
    29  remodeling, repairs and maintenance of any real estate, except
    30  materials and supplies when purchased by such organizations or
    19710H0190B0445                 - 26 -

     1  institutions for routine maintenance and repairs.
     2     (11)  The sale at retail, or use of gasoline and other motor
     3  fuels, the sales of which are otherwise subject to excise taxes
     4  under the act of May 21, 1931 (P.L.194), known as the "Liquid
     5  Fuels Tax Act," and the act of January 14, 1952 (P.L.1965),
     6  known as the "Fuel Use Tax Act."
     7     (12)  The sale at retail to, or use by the United States,
     8  this Commonwealth or its instrumentalities or political
     9  subdivisions of tangible personal property or services.
    10     (13)  The sale at retail, or use of wrapping paper, wrapping
    11  twine, bags, cartons, tape, rope, labels, nonreturnable
    12  containers and all other wrapping supplies, when such use is
    13  incidental to the delivery of any personal property, except that
    14  any charge for wrapping or packaging shall be subject to tax at
    15  the rate imposed by section 202.
    16     (14)  Sale at retail or use of vessels designed for
    17  commercial use of registered tonnage of fifty tons or more when
    18  produced by the builders thereof upon special order of the
    19  purchaser;
    20     (15)  Sale at retail of tangible personal property or
    21  services used or consumed in building, rebuilding, repairing and
    22  making additions to or replacements in and upon vessels designed
    23  for commercial use of registered tonnage of fifty tons or more
    24  upon special order of the purchaser, or when rebuilt, repaired
    25  or enlarged, or when replacements are made upon order of or for
    26  the account of the owner.
    27     (16)  The sale at retail or use of tangible personal property
    28  or services to be used or consumed for ship cleaning or
    29  maintenance or as fuel, supplies, ships' equipment, ships'
    30  stores or sea stores on vessels to be operated principally
    19710H0190B0445                 - 27 -

     1  outside the limits of the Commonwealth.
     2     (17)  The sale at retail or use of prescription or non-
     3  prescription medicines, drugs or medical supplies, crutches and
     4  wheelchairs for the use of cripples and invalids, artificial
     5  limbs, artificial eyes and artificial hearing devices when
     6  designed to be worn on the person of the purchaser or user,
     7  false teeth and materials used by a dentist in dental treatment,
     8  eyeglasses when especially designed or prescribed by an
     9  ophthalmologist, oculist or optometrist for the personal use of
    10  the owner or purchaser and artificial braces and supports
    11  designed solely for the use of crippled persons.
    12     (18)  The sale at retail or use of coal.
    13     (19)  The sale at retail or use of supplies and materials to
    14  be used exclusively in the fulfillment of a contract for the
    15  construction, reconstruction, remodeling, repairing or
    16  maintenance of real estate, when such contract was entered into
    17  prior to March 7, 1956, between the person who would otherwise
    18  be subject to the tax and a municipal authority, incorporated
    19  under the "Municipality Authorities Act of 1945": Provided, That
    20  notice of a claim of exemption under this clause is received by
    21  the department within fifteen days after the effective date of
    22  this clause.
    23     (20)  The sale at retail or use of materials to be
    24  incorporated into and made a part of real estate pursuant to a
    25  contract for the construction, reconstruction, remodeling,
    26  repairing or maintenance of such real estate, when the contract
    27  was entered into on or after March 7, 1956, but prior to April
    28  15, 1959, between the person who would otherwise be subject to
    29  the tax and a municipal authority, incorporated under the
    30  "Municipality Authorities Act of 1945," shall be exempt from the
    19710H0190B0445                 - 28 -

     1  additional one-half of one per cent of tax imposed by section
     2  201 of the Tax Act of 1963 for Education as amended April 15,
     3  1959 (P.L.20), and from the additional one-half of one per cent
     4  of tax imposed by section 201 of the Tax Act of 1963 for
     5  Education as amended August 20, 1959 (P.L.729), and from the
     6  additional one per cent of tax imposed by section 201 of the Tax
     7  Act of 1963 for Education, as amended May 29, 1963 (P.L.49) and
     8  from the additional one per cent of tax imposed by section 201
     9  of the Tax Act of 1963 for Education as amended January 1, 1968
    10  (P.L.918): Provided, however, That the exemption granted by this
    11  clause shall not be claimed by the purchaser from any vendor but
    12  shall be claimed only by the filing of a refund petition with
    13  the department.
    14     (21)  The sale at retail or use of materials to be
    15  incorporated into and made a part of real estate pursuant to a
    16  contract for the construction, reconstruction, remodeling,
    17  repairing or maintenance of such real estate, when the contract
    18  was entered into on or after April 15, 1959, but prior to August
    19  20, 1959, between the person who would otherwise be subject to
    20  the tax and a municipal authority, incorporated under the
    21  "Municipality Authorities Act of 1945," shall be exempt from the
    22  additional one-half of one per cent of tax imposed by section
    23  201 of the Tax Act of 1963 for Education as amended August 20,
    24  1959 (P.L.729), and from the additional one per cent of tax
    25  imposed by section 201 of the Tax Act of 1963 for Education, as
    26  amended May 29, 1963 (P.L.49) and from the additional one per
    27  cent of tax imposed by section 201 of the Tax Act of 1963 for
    28  Education as amended January 1, 1968 (P.L.918): Provided,
    29  however, That the exemption granted by this clause shall not be
    30  claimed by the purchaser from any vendor but shall be claimed
    19710H0190B0445                 - 29 -

     1  only by the filing of a refund petition with the department.
     2     (22)  The sale at retail or use of materials to be
     3  incorporated into and made a part of real estate pursuant to a
     4  contract for the construction, reconstruction, remodeling,
     5  repairing or maintenance of such real estate when the contract
     6  was entered into on or after August 20, 1959, but prior to June
     7  1, 1963, between the person who would otherwise be subject to
     8  the tax and a municipal authority, incorporated under the
     9  "Municipality Authorities Act of 1945," shall be exempt from the
    10  additional one per cent of tax imposed by section 201 of the Tax
    11  Act of 1963 for Education as amended May 29, 1963 (P.L.49) and
    12  from the additional one per cent of the tax imposed by section
    13  201 of the Tax Act of 1963 for Education, as amended January 1,
    14  1968 (P.L.918): Provided, however, That the exemption granted by
    15  this clause shall not be claimed by the purchaser from any
    16  vendor but shall be claimed only by the filing of a refund
    17  petition with the department.
    18     (23)  The sale at retail or use of materials to be
    19  incorporated into and made a part of real estate pursuant to a
    20  contract for the construction, reconstruction, remodeling,
    21  repairing or maintenance of such real estate, when the contract
    22  was entered into on or after June 1, 1963, but prior to January
    23  1, 1968, between the person who would otherwise be subject to
    24  the tax and a municipal authority incorporated under the
    25  "Municipality Authorities Act of 1945," shall be exempt from the
    26  additional one per cent of tax imposed by section 201 of the Tax
    27  Act of 1963 for Education, as amended January 1, 1968 (P.L.918):
    28  Provided, however, That the exemption granted by this clause
    29  shall not be claimed by the purchaser from any vendor but shall
    30  be claimed only by the filing of a refund petition with the
    19710H0190B0445                 - 30 -

     1  department.
     2     (24)  The sale at retail or use of motor vehicles, trailers
     3  and semi-trailers, or bodies attached to the chassis thereof,
     4  sold to a nonresident of Pennsylvania to be used outside of
     5  Pennsylvania and which are registered in a state other than
     6  Pennsylvania within twenty days after delivery to the vendee.
     7     (25)  The sale at retail or use of water.
     8     (26)  The sale at retail or use of all vesture, wearing
     9  apparel, raiments, garments, footwear and other articles of
    10  clothing worn or carried on or about the human body but all
    11  accessories, ornamental wear, formal day or evening apparel, and
    12  articles made of fur on the hide or pelt or any material
    13  imitative of fur and articles of which such fur, real, imitation
    14  or synthetic, is the component material of chief value, but only
    15  if such value is more than three times the value of the next
    16  most valuable component material, and sporting goods and
    17  clothing not normally used or worn when not engaged in sports
    18  shall not be excluded from the tax.
    19     (27)  The sale at retail or use or the rendition of or the     <--
    20  obtaining by a purchaser of the service of printing or
    21  imprinting of mail order catalogs and direct mail advertising
    22  materials.
    23     (28) (27)  The sale at retail or use of cigarettes.            <--
    24     (29) (28)  The sale at retail or use of religious              <--
    25  publications sold by religious groups and Bibles and religious
    26  articles.
    27     (30) (29)  The sale at retail or use of food and beverages     <--
    28  for human consumption including candy, gum and similar
    29  confections, except that this exclusion shall not apply with
    30  respect to--
    19710H0190B0445                 - 31 -

     1     (i)  Soft drinks;
     2     (ii)  Malt and brewed beverages and spirituous and vinous
     3  liquors;
     4     (iii)  Food and beverages (except when purchased at, or from
     5  a school or church in the ordinary course of activities of such
     6  organization) when the purchase price of the total transaction
     7  is more than fifty cents (50¢), when purchased (i) from persons
     8  engaged in the business of catering, or (ii) from persons
     9  engaged in the business of operating restaurants, cafes, lunch
    10  counters, private and social clubs, taverns, dining cars, hotels
    11  and other eating places. For the purpose of this subclause
    12  (iii), beverages shall not include malt and brewed beverages and
    13  spirituous and vinous liquors, but shall include soft drinks,
    14  and the price of such soft drinks shall be considered together
    15  with the price of other beverages and food in determining
    16  whether the purchase price of the total transaction is more than
    17  fifty cents (50¢).
    18     (31) (30)  The sale at retail or use of periodicals and        <--
    19  publications which are published at regular intervals not
    20  exceeding three months, circulated among the general public and
    21  containing matters of general interest and reports of current
    22  events.
    23     (32) (31)  The sale at retail or use of caskets and burial     <--
    24  vaults for human remains and markers and tombstones for human
    25  graves.
    26     (33) (32)  The sale at retail or use of flags of the United    <--
    27  States of America and the Commonwealth of Pennsylvania.
    28     (34) (33)  The sale at retail or use of textbooks for use in   <--
    29  schools, colleges and universities, either public or private
    30  when purchased in behalf of or through such schools, colleges or
    19710H0190B0445                 - 32 -

     1  universities provided such institutions of learning are
     2  recognized by the Department of Education.
     3     Section 205.  Alternate Imposition of Tax; Credits.--If any
     4  person actively and principally engaged in the business of
     5  selling new or used motor vehicles, trailers or semi-trailers,
     6  and registered with the department in the "dealer's class,"
     7  acquires a motor vehicle, trailer or semi-trailer for the
     8  purpose of resale, and prior to such resale, uses the motor
     9  vehicle, trailer or semi-trailer for a taxable use under this
    10  act during a period not exceeding one year from the date of
    11  acquisition to the date of resale, such person may, upon notice
    12  to the department within ten days of the commencement of such
    13  use, elect to pay a tax equal to six per cent of the fair rental
    14  value of the motor vehicle, trailer or semi-trailer during such
    15  use. Should such motor vehicle, trailer or semi-trailer be used
    16  for a taxable use after a period of one year, the taxpayer shall
    17  be liable for a tax on the fair market value of such motor
    18  vehicle, trailer or semi-trailer at the time of acquisition, but
    19  shall be allowed a credit equal to the tax paid pursuant to the
    20  election provided for in this section. This section shall not
    21  apply to the use of a vehicle as a wrecker, parts truck,
    22  delivery truck or courtesy car.
    23     Section 206.  Credit Against Tax.--A credit against the tax
    24  imposed by this act shall be granted with respect to tangible
    25  personal property or services purchased for use outside the
    26  Commonwealth equal to the tax paid to another state by reason of
    27  the imposition by such other state of a tax similar to the tax
    28  imposed by this article: Provided, however, That no such credit
    29  shall be granted unless such other state grants substantially
    30  similar tax relief by reason of the payment of tax under this
    19710H0190B0445                 - 33 -

     1  act.
     2                              PART IV
     3                              LICENSES
     4     Section 208.  Licenses.--(a) Every person maintaining a place
     5  of business in this Commonwealth, selling or leasing services or
     6  tangible personal property, the sale or use of which is subject
     7  to tax and who has not hitherto obtained a license from the
     8  department, shall, prior to the beginning of business
     9  thereafter, make application to the department, on a form
    10  prescribed by the department, for a license. If such person
    11  maintains more than one place of business in this Commonwealth,
    12  the license shall be issued for the principal place of business
    13  in this Commonwealth.
    14     (b)  The department shall, after the receipt of an
    15  application, issue the license applied for under subsection (a)
    16  of this section. The license shall be nonassignable and of
    17  permanent duration.
    18     (c)  Any person who, upon the expiration of sixty days after
    19  the effective date of this act, shall maintain a place of
    20  business in this Commonwealth for the purpose of selling or
    21  leasing services or tangible personal property, the sale or use
    22  of which is subject to tax, without having first been licensed
    23  by the department pursuant to the provisions of this section,
    24  shall be guilty of a summary offense, and upon conviction
    25  thereof in a summary proceeding, shall be sentenced to pay a
    26  fine of not less than one hundred dollars ($100) nor more than
    27  three hundred dollars ($300), and in default thereof, to undergo
    28  imprisonment of not less than five days nor more than thirty
    29  days. The penalties imposed by this section shall be in addition
    30  to any other penalties imposed by this article.
    19710H0190B0445                 - 34 -

     1     (d)  Failure of any person to obtain a license shall not
     2  relieve him of liability to pay the tax imposed by this article.
     3                               PART V
     4                        HOTEL OCCUPANCY TAX
     5     Section 209.  Definitions.--(a) For the purposes of this part
     6  V only, the following words, terms and phrases shall have the
     7  meaning ascribed to them in this subsection, except where the
     8  context clearly indicates a different meaning:
     9     (1)  "Hotel."  A building or buildings in which the public
    10  may, for a consideration, obtain sleeping accommodations. The
    11  term "hotel" shall not include any charitable, educational or
    12  religious institution summer camp for children, hospital or
    13  nursing home.
    14     (2)  "Occupant."  A person (other than a "permanent
    15  resident," as defined herein,) who, for a consideration, uses,
    16  possesses or has a right to use or possess any room or rooms in
    17  a hotel under any lease, concession, permit, right of access,
    18  license or agreement.
    19     (3)  "Occupancy."  The use or possession or the right to the
    20  use or possession by any person (other than a "permanent
    21  resident,") of any room or rooms in a hotel for any purpose or
    22  the right to the use or possession of the furnishings or to the
    23  services and accommodations accompanying the use and possession
    24  of the room or rooms.
    25     (4)  "Operator."  Any person operating a hotel.
    26     (5)  "Permanent resident."  Any occupant who has occupied or
    27  has the right to occupancy of any room or rooms in a hotel for
    28  at least thirty consecutive days.
    29     (6)  "Rent."  The consideration received for occupancy valued
    30  in money, whether received in money or otherwise, including all
    19710H0190B0445                 - 35 -

     1  receipts, cash, credits and property or services of any kind or
     2  nature, and also any amount for which the occupant is liable for
     3  the occupancy without any deduction therefrom whatsoever.
     4     (b)  The following words, terms and phrases and words, terms
     5  and phrases of similar import, when used in parts IV and VI of
     6  this article for the purposes of those parts only, shall, in
     7  addition to the meaning ascribed to them by section 201 of this
     8  article, have the meaning ascribed to them in this subsection,
     9  except where the context clearly indicates a different meaning:
    10     (1)  "Maintaining a place of business in this Commonwealth,"
    11  being the operator of a hotel in this Commonwealth.
    12     (2)  "Purchase at retail," occupancy.
    13     (3)  "Purchase price," rent.
    14     (4)  "Purchaser," occupant.
    15     (5)  "Sale at retail," the providing of occupancy to an
    16  occupant by an operator.
    17     (6)  "Tangible personal property," occupancy.
    18     (7)  "Vendor," operator.
    19     (8)  "Services," occupancy.
    20     (9)  "Use," occupancy.
    21     Section 210.  Imposition of Tax.--There is hereby imposed an
    22  excise tax of six per cent of the rent upon every occupancy of a
    23  room or rooms in a hotel in this Commonwealth, which tax shall
    24  be collected by the operator from the occupant and paid over to
    25  the Commonwealth as herein provided.
    26     Section 211.  Seasonal Tax Returns.--Notwithstanding any
    27  other provisions in this act, the department may, by regulation,
    28  waive the requirement for the filing of quarterly returns in the
    29  case of any operator whose hotel is operated only during certain
    30  seasons of the year, and may provide for the filing of returns
    19710H0190B0445                 - 36 -

     1  by such persons at times other than those provided by section
     2  221.
     3                              PART VI
     4                    PROCEDURE AND ADMINISTRATION
     5                             CHAPTER I
     6                              RETURNS
     7     Section 215.  Persons Required to Make Returns.--Every person
     8  required to pay tax to the department or collect and remit tax
     9  to the department shall file returns with respect to such tax.
    10     Section 216.  Form of Returns.--The returns required by
    11  section 215 shall be on forms prescribed by the department, and
    12  shall show such information with respect to the taxes imposed by
    13  this article as the department may reasonably require.
    14                             CHAPTER II
    15                 TIME AND PLACE FOR FILING RETURNS
    16     Section 217.  Time for Filing Returns.--(a) Monthly,
    17  Bimonthly and Quarterly Returns:
    18     (1)  For the year in which this article becomes effective and
    19  in each year thereafter a return shall be filed quarterly by
    20  every licensee on or before the last day of April, July, October
    21  and January for the three months ending the last day of March,
    22  June, September and December, except as hereinafter provided.
    23     (2)  For the year in which this article becomes effective,
    24  and in each year thereafter, a return shall be filed monthly
    25  with respect to each month by every licensee whose total tax
    26  reported, or in the event no report is filed, the total tax
    27  which should have been reported, for the third calendar quarter
    28  of the preceding year equals or exceeds six hundred dollars
    29  ($600). Such returns shall be filed on or before the fifteenth
    30  day of the second month succeeding the month with respect to
    19710H0190B0445                 - 37 -

     1  which the return is made, except that the return due for the
     2  month of April, of each year, shall be filed on or before the
     3  twentieth day of May next following and the return due for the
     4  month of May of each year shall be filed on or before the
     5  twentieth day of June next following. Any licensee required to
     6  file monthly returns hereunder shall be relieved from filing
     7  quarterly returns.
     8     (3)  For the year in which this article becomes effective,
     9  and for each year thereafter, every licensee required to file a
    10  quarterly return for the second calendar quarter shall file a
    11  single return for the months of April and May on or before the
    12  fifteenth day of June next following. The filing of such return
    13  shall not relieve the licensee of the duty to file a return on
    14  or before the last day of July next following and to remit
    15  therewith tax for the month of June.
    16     (b)  Annual Returns.  For the calendar year 1971, and for
    17  each year thereafter, no annual return shall be filed, except as
    18  may be required by rules and regulations of the department
    19  promulgated and published at least sixty days prior to the end
    20  of the year with respect to which the returns are made. Where
    21  such annual returns are required licensees shall not be required
    22  to file such returns prior to the sixty-first day of the year
    23  succeeding the year with respect to which the returns are made.
    24     (c)  Other Returns. Any person, other than a licensee, liable
    25  to pay to the department any tax under this article, shall file
    26  a return on or before the last day of the month succeeding the
    27  month in which such person becomes liable for the tax.
    28     (d)  Small Taxpayers. The department, by regulation, may
    29  waive the requirement for the filing of quarterly return in the
    30  case of any licensee whose individual tax collections do not
    19710H0190B0445                 - 38 -

     1  exceed seventy-five dollars ($75) per calendar quarter and may
     2  provide for reporting on a less frequent basis in such cases.
     3     Section 218.  Extension of Time for Filing Returns.--The
     4  department may, on written application and for good cause shown,
     5  grant a reasonable extension of time for filing any return
     6  required under this part. However, the time for making a return
     7  shall not be extended for more than three months.
     8     Section 219.  Place for Filing Returns.--Returns shall be
     9  filed with the department at its main office or at any branch
    10  office which it may designate for filing returns.
    11                            CHAPTER III
    12                           PAYMENT OF TAX
    13     Section 221.  Payment.--When a return of tax is required
    14  under this part, the person required to make the return shall
    15  pay the tax to the department.
    16     Section 222.  Time of Payment.--(a) Monthly, Bimonthly and
    17  Quarterly Payments. The tax imposed by this article and incurred
    18  or collected by a licensee shall be due and payable by the
    19  licensee on the day the return is required to be filed under the
    20  provisions of section 217 and such payment must accompany the
    21  return for such preceding period,
    22     (b)  Annual Payments. If the amount of tax due for the
    23  preceding year as shown by the annual return of any taxpayer is
    24  greater than the amount already paid by him in connection with
    25  his monthly or quarterly returns he shall send with such annual
    26  return a remittance for the unpaid amount of tax for the year.
    27     (c)  Other Payments. Any person other than a licensee liable
    28  to pay any tax under this article shall remit the tax at the
    29  time of filing the return required by this article.
    30     Section 223.  Other Times for Payment.--In the event that the
    19710H0190B0445                 - 39 -

     1  department authorizes a taxpayer to file a return at other times
     2  than those specified in section 217, the tax due shall be paid
     3  at the time such return is filed.
     4     Section 224.  Place for Payment.--The tax imposed by this
     5  article shall be paid to the department at the place fixed for
     6  filing the return.
     7     Section 225.  Tax Held in Trust for the Commonwealth.--All
     8  taxes collected by any person from purchasers in accordance with
     9  this article and all taxes collected by any person from
    10  purchasers under color of this article which have not been
    11  properly refunded by such person to the purchaser shall
    12  constitute a trust fund for the Commonwealth, and such trust
    13  shall be enforceable against such person, his representatives
    14  and any person (other than a purchaser to whom a refund has been
    15  made properly) receiving any part of such fund without
    16  consideration, or knowing that the taxpayer is committing a
    17  breach of trust: Provided, however, That any person receiving
    18  payment of a lawful obligation of the taxpayer from such fund
    19  shall be presumed to have received the same in good faith and
    20  without any knowledge of the breach of trust. Any person, other
    21  than a taxpayer, against whom the department makes any claim
    22  under this section shall have the same right to petition and
    23  appeal as is given taxpayers by any provisions of this part.
    24     Section 226.  Local Receivers of Use Tax.--Beginning on and
    25  after the effective date of this article, in every county,
    26  except in counties of the first class, the county treasurer is
    27  hereby authorized to receive use tax due and payable under the
    28  provisions of this article from any person other than a
    29  licensee. The receiving of such taxes shall be pursuant to rules
    30  and regulations promulgated by the department and upon forms
    19710H0190B0445                 - 40 -

     1  furnished by the department. Each county treasurer shall remit
     2  to the department all use taxes received under the authority of
     3  this section minus the costs of administering this provision not
     4  to exceed one per cent of the amount of use taxes received,
     5  which amount shall be retained in lieu of any commission
     6  otherwise allowable by law for the collection of such tax.
     7     Section 227.  Discount.--If a return is filed by a licensee
     8  and the tax shown to be due thereon less any discount is paid
     9  all within the time prescribed, the licensee shall be entitled
    10  to credit and apply against the tax payable by him a discount of
    11  one per cent of the amount of the tax collected by him on and
    12  after the effective date of this article, as compensation for
    13  the expense of collecting and remitting the same and as a
    14  consideration of the prompt payment thereof.
    15                             CHAPTER IV
    16                  ASSESSMENT AND COLLECTION OF TAX
    17     Section 230.  Assessment.--The department is authorized and
    18  required to make the inquiries, determinations and assessments
    19  of the tax (including interest, additions and penalties) imposed
    20  by this article.
    21     Section 231.  Mode and Time of Assessment.--(a) Underpayment
    22  of Tax. Within a reasonable time after any return is filed, the
    23  department shall examine it and, if the return shows a greater
    24  tax due or collected than the amount of tax remitted with the
    25  return, the department shall issue an assessment for the
    26  difference, together with an addition of three per cent of such
    27  difference, which shall be paid to the department within ten
    28  days after a notice of the assessment has been mailed to the
    29  taxpayer. If such assessment is not paid within ten days, there
    30  shall be added thereto and paid to the department an additional
    19710H0190B0445                 - 41 -

     1  three per cent of such difference for each month thereof during
     2  which the assessment remains unpaid, but the total of all
     3  additions shall not exceed eighteen per cent of the difference
     4  shown on the assessment.
     5     (b)  Understatement of Tax. If the department determines that
     6  any return or returns of any taxpayer understates the amount of
     7  tax due, it shall determine the proper amount and shall
     8  ascertain the difference between the amount of tax shown in the
     9  return and the amount determined, such difference being
    10  hereafter sometimes referred to as the "deficiency." A notice of
    11  assessment for the deficiency and the reasons therefor shall
    12  then be sent to the taxpayer. The deficiency shall be paid to
    13  the department within thirty days after a notice of the
    14  assessment thereof has been mailed to the taxpayer.
    15     (c)  Failure to File Return. In the event that any taxpayer
    16  fails to file a return required by this article, the department
    17  may make an estimated assessment (based on information
    18  available) of the proper amount of tax owing by the taxpayer. A
    19  notice of assessment in the estimated amount shall be sent to
    20  the taxpayer. The tax shall be paid within thirty days after a
    21  notice of such estimated assessment has been mailed to the
    22  taxpayer.
    23     (d)  Authority to Establish Effective Rates by Business
    24  Classification. The department is authorized to make the studies
    25  necessary to compute effective rates by business classification,
    26  based upon the ratio between the tax required to be collected
    27  and taxable sales and to use such rates in arriving at the
    28  apparent tax liability of a taxpayer.
    29     Any assessment based upon such rates shall be prima facie
    30  correct, except that such rate shall not be considered where a
    19710H0190B0445                 - 42 -

     1  taxpayer establishes that such rate is based on a sample
     2  inapplicable to him.
     3     Section 232.  Reassessment.--Any taxpayer against whom an
     4  assessment is made may petition the department for a
     5  reassessment. Notice of an intention to file such a petition
     6  shall be given to the department within thirty days of the date
     7  the notice of assessment was mailed to the taxpayer, except that
     8  the department for due cause may accept such notice within
     9  ninety days of the date the notice of assessment was mailed. The
    10  department by registered mail shall supply the taxpayer with a
    11  statement setting forth in reasonable detail the basis of the
    12  assessment within thirty days after receipt of the taxpayer's
    13  notice of intention to file a petition for reassessment. A
    14  petition for reassessment shall thereafter be filed within
    15  thirty days after such basis of assessment has been mailed to
    16  the taxpayer. Such petition shall set forth in reasonable detail
    17  the grounds upon which the taxpayer claims that the assessment
    18  is erroneous or unlawful, in whole or in part, and shall be
    19  accompanied by an affidavit or affirmation that the facts
    20  contained therein are true and correct and that the petition is
    21  not interposed for delay. An extension of time for filing the
    22  petition may be allowed for cause but in no case shall such
    23  extension exceed one hundred twenty days. The department shall
    24  hold such hearings as may be necessary for the purpose, at such
    25  times and places as it may determine, and each taxpayer who has
    26  duly filed such petition for reassessment shall be notified by
    27  the department of the time when, and the place where, such
    28  hearing in his case will be held.
    29     It shall be the duty of the department, within six months
    30  after receiving a filed petition for reassessment, to dispose of
    19710H0190B0445                 - 43 -

     1  the issue raised by such petition and mail notice of the
     2  department's decision to the petitioner: Provided, however, That
     3  the taxpayer and the department may, by stipulation, extend such
     4  disposal time by not more than six additional months.
     5     Section 233.  Assessment to Recover Erroneous Refunds.--The
     6  department may, within two years of the granting of any refund
     7  or credit, or within the period in which an assessment could
     8  have been filed by the department with respect to the
     9  transaction pertaining to which the refund was granted,
    10  whichever period shall last occur, file an assessment to recover
    11  any refund or part thereof or credit or part thereof which was
    12  erroneously made or allowed.
    13     Section 234.  Review by Board of Finance and Revenue.--Within
    14  sixty days after the date of mailing of notice by the department
    15  of the decision on any petition for reassessment filed with it,
    16  the person against whom such assessment was made may, by
    17  petition, request the Board of Finance and Revenue to review
    18  such decision. The failure of the department to notify the
    19  petitioner of a decision within the time provided for by section
    20  232 shall act as a denial of such petition, and a petition for
    21  review may be filed with the Board of Finance and Revenue within
    22  one hundred twenty days of the date prior to which the
    23  department should have mailed to the petitioner its notice of
    24  decision. Every petition for review filed hereunder shall state
    25  specifically the reasons on which the petitioner relies, or
    26  shall incorporate by reference the petition for reassessment in
    27  which the reasons are stated. The petition shall be supported by
    28  affidavit that it is not made for the purpose of delay and that
    29  the facts set forth therein are true. The Board of Finance and
    30  Revenue shall act finally in disposing of petitions filed with
    19710H0190B0445                 - 44 -

     1  it within six months after they have been received. In the event
     2  of the failure of the board to dispose of any petition within
     3  six months, the action taken by the department, upon the
     4  petition for reassessment, shall be sustained. The Board of
     5  Finance and Revenue may sustain the action taken by the
     6  department on the petition for reassessment, or it may reassess
     7  the tax due on such basis as it deems according to law. The
     8  board shall give notice of its action to the department and to
     9  the petitioner.
    10     Section 235.  Appeal to Commonwealth Court.--Any person
    11  aggrieved by the decision of the Board of Finance and Revenue or
    12  by the board's failure to act upon a petition for review within
    13  six months may, within sixty THIRTY days, appeal to the           <--
    14  Commonwealth Court from the decision of the board or of the
    15  department, as the case may be, in the manner now or hereafter
    16  provided by law for appeals in the case of tax settlements.
    17     Section 236.  Burden of Proof.--In all cases of petitions for
    18  reassessment, review or appeal, the burden of proof shall be
    19  upon the petitioner or appellant, as the case may be.
    20     Section 237.  Collection of Tax.--(a) Collection by
    21  Department. The department shall collect the tax in the manner
    22  provided by law for the collection of taxes imposed by the laws
    23  of this Commonwealth.
    24     (b)  Collection by Persons Maintaining a Place of Business in
    25  the Commonwealth. (1) Every person maintaining a place of
    26  business in this Commonwealth and selling or leasing tangible
    27  personal property or services, the sale or use of which is
    28  subject to tax shall collect the tax from the purchaser or
    29  lessee at the time of making the sale or lease, and shall remit
    30  the tax to the department.
    19710H0190B0445                 - 45 -

     1     (2)  Any person required under this article to collect tax
     2  from another person, who shall fail to collect the proper amount
     3  of such tax, shall be liable for the full amount of the tax
     4  which he should have collected.
     5     (c)  Exemption Certificates. If the tax does not apply to the
     6  sale or lease of tangible personal property or services, the
     7  purchaser or lessee shall furnish to the vendor a certificate
     8  indicating that the sale is not legally subject to the tax. The
     9  certificate shall be in substantially such form as the
    10  department may, by regulation, prescribe. Where the tangible
    11  personal property or service is of a type which is never subject
    12  to the tax imposed or where the sale or lease is in interstate
    13  commerce, such certificate need not be furnished. Where a series
    14  of transactions are not subject to tax, a purchaser or user may
    15  furnish the vendor with a single exemption certificate in
    16  substantially such form and valid for such period of time as the
    17  department may, by regulation, prescribe. An exemption
    18  certificate, which is complete and regular and on its face
    19  discloses a valid basis of exemption if taken in good faith,
    20  shall relieve the vendor from the liability imposed by this
    21  section. An exemption certificate accepted by a vendor from a
    22  natural person domiciled within this Commonwealth or any
    23  association, fiduciary, partnership, corporation or other
    24  entity, either authorized to do business within this
    25  Commonwealth or having an established place of business within
    26  this Commonwealth, in the ordinary course of the vendor's
    27  business, which on its face discloses a valid basis of exemption
    28  consistent with the activity of the purchaser and character of
    29  the property or service being purchased, shall be presumed to be
    30  taken in good faith and the burden of proving otherwise shall be
    19710H0190B0445                 - 46 -

     1  on the Department of Revenue.
     2     (d)  Direct Payment Permits. The department may authorize a
     3  purchaser or lessee who acquires tangible personal property or
     4  services under circumstances which make it impossible at the
     5  time of acquisition to determine the manner in which the
     6  tangible personal property or service will be used, to pay the
     7  tax directly to the department, and waive the collection of the
     8  tax by the vendor. No such authority shall be granted or
     9  exercised, except upon application to the department, and the
    10  issuance by the department, in its discretion, of a direct
    11  payment permit. If a direct payment permit is granted, its use
    12  shall be subject to conditions specified by the department, and
    13  the payment of tax on all acquisitions pursuant to the permit
    14  shall be made directly to the department by the permit holder.
    15     Section 238.  Collection of Tax on Motor Vehicles, Trailers
    16  and Semi-Trailers.--Notwithstanding the provisions of clause (1)
    17  of subsection (b) of section 237 of this article, tax due on the
    18  sale at retail or use of a motor vehicle, trailer or semi-
    19  trailer required by law to be registered with the department
    20  under the provisions of "The Vehicle Code" shall be paid by the
    21  purchaser or user directly to the department upon application to
    22  the department for an issuance of a certificate of title upon
    23  such motor vehicle, trailer or semi-trailer. The department
    24  shall not issue a certificate of title until the tax has been
    25  paid, or evidence satisfactory to the department has been given
    26  to establish that tax is not due. The department may cancel or
    27  suspend any record of certificate of title or registration of a
    28  motor vehicle, trailer or semi-trailer when the check received
    29  in payment of the tax on such vehicle is not paid upon demand.
    30  Such tax shall be considered as a first encumbrance against such
    19710H0190B0445                 - 47 -

     1  vehicle and the vehicle may not be transferred without first
     2  payment in full of such tax and any interest additions or
     3  penalties which shall accrue thereon in accordance with this
     4  article.
     5     Section 239.  Precollection of Tax.--The department may, by
     6  regulation, authorize or require particular categories of
     7  vendors selling tangible personal property for resale to
     8  precollect from the purchaser the tax which such purchaser will
     9  collect upon making a sale at retail of such tangible personal
    10  property: Provided, however, That the department, pursuant to
    11  this section, may not require a vendor to precollect tax from a
    12  purchaser who purchases for resale more than one thousand
    13  dollars ($1,000) worth of tangible personal property from such
    14  vendor per year. In any case in which a vendor has been
    15  authorized to prepay the tax to the person from whom he
    16  purchased the tangible personal property for resale such vendor
    17  so authorized to prepay the tax may, under the regulations of
    18  the department, be relieved from his duty to secure a license if
    19  such duty shall arise only by reason of his sale of the tangible
    20  personal property with respect to which he is, under
    21  authorization of the department, to prepay the tax. The vendor,
    22  on making a sale at retail of tangible personal property with
    23  respect to which he has prepaid the tax, must separately state
    24  at the time of resale the proper amount of tax on the
    25  transaction, and reimburse himself on account of the taxes which
    26  he has previously prepaid. Should such vendor collect a greater
    27  amount of tax in any reporting period than he had previously
    28  prepaid upon purchase of the goods with respect to which he
    29  prepaid the tax, he must file a return and remit the balance to
    30  the Commonwealth at the time at which a return would otherwise
    19710H0190B0445                 - 48 -

     1  be due with respect to such sales.
     2     Section 240.  Bulk and Auction Sales.--Every person who shall
     3  sell or cause to be sold at auction, or who shall sell or
     4  transfer in bulk, fifty-one per centum or more of any stock of
     5  goods, wares or merchandise of any kind, fixtures, machinery,
     6  equipment, buildings or real estate, involved in a business for
     7  which such person is licensed or required to be licensed under
     8  the provisions of this article, or is liable for filing use tax
     9  returns in accordance with the provisions of this article, shall
    10  give the department ten days' written notice of the sale or
    11  transfer prior to the completion of the transfer of such
    12  property. Whenever the seller or transferor shall fail to give
    13  such notice to the department, or whenever the department shall
    14  upon written notice inform the purchaser or transferee that a
    15  possible claim for tax imposed by this act exists, any sums of
    16  money, property or choses in action or other consideration,
    17  which the purchaser or transferee is thereafter required to
    18  transfer over to the seller or transferor, shall be subject to a
    19  first priority right and lien for any such taxes theretofore or
    20  thereafter determined to be due from the seller or transferor,
    21  and the purchaser or transferee is forbidden to transfer to the
    22  seller or transferor any such sums of money, property or choses
    23  in action to the extent of the amount of the Commonwealth's
    24  claim. For failure to comply with the provisions of this
    25  section, the purchaser or transferee shall be liable for the
    26  payment to the Commonwealth of any such taxes theretofore or
    27  thereafter determined to be due from the seller or transferor,
    28  and such liability may be assessed and enforced in the same
    29  manner as the liability for tax under this article: Provided,
    30  That nothing contained in this provision shall apply to sales or
    19710H0190B0445                 - 49 -

     1  transfers made under any order of court: And provided further,
     2  That the written notice required to be filed with the department
     3  by this provision shall be deemed to satisfy the requirements of
     4  section 1403 of "The Fiscal Code" as to taxes imposed by this
     5  article.
     6     Section 241.  Collection of Tax on Liquor.--The tax due on     <--
     7  the sale of liquor shall be collected on the purchase price or
     8  constructive purchase price, as defined in this article, as the
     9  case may be, of each bottle sold and a receipt shall be issued
    10  to the purchasers stating that the tax imposed by this article
    11  is included in the purchase price or constructive purchase
    12  price. The sale of each bottle of liquor shall be construed to
    13  be a separate sale.
    14     Section 242. 241.  Collection upon Failure to Request          <--
    15  Reassessment, Review or Appeal.--The department may collect any
    16  tax:
    17     (1)  If an assessment of tax is not paid within ten days or
    18  thirty days as the case may be after notice thereof to the
    19  taxpayer, and no petition for reassessment has been filed;
    20     (2)  Within sixty days from the date of reassessment, if no
    21  petition for review has been filed;
    22     (3)  Within sixty THIRTY days from the date of the decision    <--
    23  of the Board of Finance and Revenue upon a petition for review,
    24  or of the expiration of the board's time for acting upon such
    25  petition, if no appeal has been made; and
    26     (4)  In all cases of judicial sales, receiverships,
    27  assignments or bankruptcies.
    28     In any such case in a proceeding for the collection of such
    29  taxes, the person against whom they were assessed shall not be
    30  permitted to set up any ground of defense that might have been
    19710H0190B0445                 - 50 -

     1  determined by the department, the Board of Finance and Revenue
     2  or the courts: Provided, That the defense of failure of the
     3  department to mail notice of assessment or reassessment to the
     4  taxpayer and the defense of payment of assessment or
     5  reassessment may be raised in proceedings for collection by a
     6  motion to stay the proceedings.
     7     Section 243. 242.  Lien for Taxes.--(a) Lien Imposed. If any   <--
     8  person liable to pay any tax neglects or refuses to pay the same
     9  after demand, the amount (including any interest, addition or
    10  penalty, together with any costs that may accrue in addition
    11  thereto) shall be a lien in favor of the Commonwealth upon the
    12  property, both real and personal, of such person but only after
    13  same has been entered and docketed of record by the prothonotary
    14  of the county where such property is situated. The department
    15  may, at any time, transmit, to the prothonotaries of the
    16  respective counties, certified copies of all liens for taxes
    17  imposed by this act and penalties and interest. It shall be the
    18  duty of each prothonotary receiving the lien to enter and docket
    19  the same of record in his office, which lien shall be indexed as
    20  judgments are now indexed. No prothonotary shall require, as a
    21  condition precedent to the entry of such liens, the payment of
    22  the costs incident thereto.
    23     (b)  Priority of Lien and Effect on Judicial Sale; No
    24  Discharge by Sale on Junior Lien. The lien imposed hereunder
    25  shall have priority from the date of its recording as aforesaid,
    26  and shall be fully paid and satisfied out of the proceeds of any
    27  judicial sale of property subject thereto before any other
    28  obligation, judgment, claim, lien or estate to which said
    29  property may subsequently become subject, except costs of the
    30  sale and of the writ upon which the sale was made, and real
    19710H0190B0445                 - 51 -

     1  estate taxes and municipal claims against such property, but
     2  shall be subordinate to mortgages and other liens existing and
     3  duly recorded or entered of record prior to the recording of the
     4  tax lien. In the case of a judicial sale of property, subject to
     5  a lien imposed hereunder, upon a lien or claim over which the
     6  lien imposed hereunder has priority as aforesaid, such sale
     7  shall discharge the lien imposed hereunder to the extent only
     8  that the proceeds are applied to its payment, and such lien
     9  shall continue in full force and effect as to the balance
    10  remaining unpaid. There shall be no inquisition or condemnation
    11  upon any judicial sale of real estate made by the Commonwealth
    12  pursuant to the provisions hereof. The lien of the taxes,
    13  interest and penalties, shall continue for five years from the
    14  date of entry, and may be revived and continued in the manner
    15  now or hereafter provided for renewal of judgments, or as may be
    16  provided in "The Fiscal Code," and a writ of execution may
    17  directly issue upon such lien without the issuance and
    18  prosecution to judgment of a writ of scire facias: Provided,
    19  That not less than ten days before issuance of any execution on
    20  the lien, notice of the filing and the effect of the lien shall
    21  be sent by registered mail to the taxpayer at his last known
    22  post office address: And provided further, That the said lien
    23  shall have no effect upon any stock of goods, wares or
    24  merchandise regularly sold or leased in the ordinary course of
    25  business by the person against whom said lien has been entered,
    26  unless and until a writ of execution has been issued and a levy
    27  made upon said stock of goods, wares and merchandise.
    28     (c)  Duty of Prothonotary. Any wilful failure of any
    29  prothonotary to carry out any duty imposed upon him by this
    30  section shall be a misdemeanor, and, upon conviction, he shall
    19710H0190B0445                 - 52 -

     1  be sentenced to pay a fine not exceeding one thousand dollars
     2  ($1,000) and costs of prosecution, or to undergo imprisonment
     3  not exceeding one year, or both.
     4     (d)  Priority of Tax. Except as hereinbefore provided in the
     5  distribution, voluntary or compulsory, in receivership,
     6  bankruptcy or otherwise, of the property or estate of any
     7  person, all taxes imposed by this article which are due and
     8  unpaid and are not collectible under the provisions of section
     9  225 hereof, shall be paid from the first money available for
    10  distribution in priority to all other claims and liens, except
    11  in so far as the laws of the United States may give a prior
    12  claim to the Federal government. Any person charged with the
    13  administration or distribution of any such property or estate,
    14  who shall violate the provisions of this section, shall be
    15  personally liable for any taxes imposed by this article, which
    16  are accrued and unpaid and are chargeable against the person
    17  whose property or estate is being administered or distributed.
    18     (e)  Other Remedies. Subject to the limitations contained in
    19  this article as to the assessment of taxes, nothing contained in
    20  this section shall be construed to restrict, prohibit or limit
    21  the use by the department in collecting taxes finally due and
    22  payable of any other remedy or procedure available at law or
    23  equity for the collection of debts.
    24     Section 244. 243.  Suit for Taxes.--(a) Commencement. At any   <--
    25  time within three years after any tax or any amount of tax shall
    26  be finally due and payable, the department may commence an
    27  action in the courts of this Commonwealth, of any state or of
    28  the United States, in the name of the Commonwealth of
    29  Pennsylvania, to collect the amount of tax due together with
    30  additions, interest, penalties and costs in the manner provided
    19710H0190B0445                 - 53 -

     1  at law or in equity for the collection of ordinary debts.
     2     (b)  Procedure. The Attorney General shall prosecute the
     3  action and, except as provided herein, the provisions of the
     4  Rules of Civil Procedure and the provisions of the laws of this
     5  Commonwealth relating to civil procedures and remedies shall, to
     6  the extent that they are applicable, be available in such
     7  proceedings.
     8     (c)  Other Remedies. The provisions of this section are in
     9  addition to any process, remedy or procedure for the collection
    10  of taxes provided by this article or by the laws of this
    11  Commonwealth, and this section is neither limited by nor
    12  intended to limit any such process, remedy or procedure.
    13     Section 245. 244.  Tax Suit Comity.--The courts of this        <--
    14  Commonwealth shall recognize and enforce liabilities for sales
    15  and use taxes, lawfully imposed by any other state: Provided,
    16  That such other state extends a like comity to this
    17  Commonwealth.
    18     Section 246. 245.  Service.--Any person maintaining a place    <--
    19  of business within this Commonwealth is deemed to have appointed
    20  the Secretary of the Commonwealth his agent for the acceptance
    21  of service of process or notice in any proceedings for the
    22  enforcement of the civil provisions of this article, and any
    23  service made upon the Secretary of the Commonwealth as such
    24  agent shall be of the same legal force and validity as if such
    25  service had been personally made upon such person. Where service
    26  cannot be made upon such person in the manner provided by other
    27  laws of this Commonwealth relating to service of process,
    28  service may be made upon the Secretary of the Commonwealth and,
    29  in such case, a copy of the process or notice shall also be
    30  personally served upon any agent or representative of such
    19710H0190B0445                 - 54 -

     1  person who may be found within this Commonwealth, or where no
     2  such agent or representative may be found a copy of the process
     3  or notice shall forthwith be sent by registered mail to such
     4  person at the last known address of his principal place of
     5  business, home office or residence.
     6     Section 247. 246.  Collection of Tax on Credit Sales.--If any  <--
     7  sale subject to tax hereunder is wholly or partly on credit, the
     8  taxpayer shall require the purchaser to pay in cash at the time
     9  the sale is made, or within thirty days thereafter, the full tax
    10  due on the basis of the entire purchase price.
    11     Section 248. 247.  Prepayment of Tax.--Whenever a vendor is    <--
    12  forbidden by law or governmental regulation to charge and
    13  collect the purchase price in advance of or at the time of
    14  delivery, the vendor shall prepay the tax as required by section
    15  222 of this article, but in such case if the purchaser shall
    16  fail to pay to the vendor the total amount of the purchase price
    17  and the tax, and such amount is written off as uncollectible by
    18  the vendor, the vendor shall not be liable for such tax and
    19  shall be entitled to a credit or refund of such tax paid. If the
    20  purchase price is thereafter collected, in whole or in part, the
    21  amount collected shall be first applied to the payment of the
    22  entire tax portion of the bill, and shall be remitted to the
    23  department by the vendor with the first return filed after such
    24  collection. For any tax prepaid prior to the effective date of
    25  this article, credit may be claimed on any returns filed for the
    26  periods prior to the effective date of this article. Tax prepaid
    27  after the effective date of this article shall be subject to
    28  refund upon petition to the department under the provisions of
    29  section 252 of this article, filed within one hundred five days
    30  of the close of the fiscal year in which such accounts are
    19710H0190B0445                 - 55 -

     1  written off.
     2                             CHAPTER V
     3                        REFUNDS AND CREDITS
     4     Section 250.  Refund or Credit for Overpayment.--With respect
     5  to all taxes paid to a vendor or to the Commonwealth prior to
     6  April 5, 1957, in the case of any overpayment, the department,
     7  within the applicable period of limitations, may credit the
     8  amount of such overpayment against any liability in respect of
     9  the tax imposed by this act on the part of the person who made
    10  the overpayment, and shall refund any balance to such person.
    11     Section 251.  Restriction on Refunds.--No refund shall be
    12  made under section 250 without the approval of the Board of
    13  Finance and Revenue.
    14     Section 252.  Refunds.--The department shall, pursuant to the
    15  provisions of sections 253 and 254, refund all taxes, interest
    16  and penalties paid to the Commonwealth under the provisions of
    17  this article and to which the Commonwealth is not rightfully
    18  entitled. Such refunds shall be made to the person, his heirs,
    19  successors, assigns or other personal representatives, who
    20  actually paid the tax: Provided, That no refund shall be made
    21  under this section with respect to any payment made by reason of
    22  an assessment with respect to which a taxpayer has filed a
    23  petition for reassessment pursuant to section 232 of this
    24  article to the extent that said petition has been determined
    25  adversely to the taxpayer by a decision which is no longer
    26  subject to further review or appeal: Provided further, That
    27  nothing contained herein shall be deemed to prohibit a taxpayer
    28  who has filed a timely petition for reassessment from amending
    29  it to a petition for refund where the petitioner has paid the
    30  tax assessed.
    19710H0190B0445                 - 56 -

     1     Section 253.  Refund Petition.--(a) Except as provided for in
     2  section 251 256 and in subsection (b) and (d) of this section,    <--
     3  the refund or credit of tax, interest or penalty provided for by
     4  section 252 shall be made only where the person who has actually
     5  paid the tax files a petition for refund with the department
     6  within three years of the actual payment of the tax to the
     7  Commonwealth. Such petition for refund must set forth in
     8  reasonable detail the grounds upon which the taxpayer claims
     9  that the Commonwealth is not rightfully entitled to such tax,
    10  interest or penalty, in whole or in part, and shall be
    11  accompanied by an affidavit affirming that the facts contained
    12  therein are true and correct. The department may hold such
    13  hearings as may be necessary for the purpose at such times and
    14  places as it may determine, and each person who has duly filed a
    15  refund petition shall be notified by the department of the time
    16  when, and the place where, such hearing in his case will be
    17  held.
    18     (b)  A refund or credit of tax, interest or penalty, paid as
    19  a result of an assessment made by the department under section
    20  232, shall be made only where the person who has actually paid
    21  the tax files with the department a petition for a refund with
    22  the department within six months after the date the notice of
    23  assessment was mailed. The filing of a petition for refund,
    24  under the provisions of this subsection, shall not affect the
    25  abatement of interest, additions or penalties to which the
    26  person may be entitled by reason of his payment of the
    27  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
    19710H0190B0445                 - 57 -

     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 within five years of the date of the payment of
    12  which a refund is requested. The department shall have
    13  jurisdiction to hear and determine any such petition filed prior
    14  to such final judgment only if, at the time of filing of the
    15  petition, proceedings are pending in a court of competent
    16  jurisdiction wherein the claim of unconstitutionality or of
    17  erroneous interpretation, made in the petition for refund may be
    18  established, and in such case, the department shall not take
    19  final action upon the petition for refund until the judgment
    20  determining the question involved in such petition has become
    21  final.
    22     Section 254.  Review by Board of Finance and Revenue.--Within
    23  sixty days after the date of mailing of notice by the department
    24  of the decision upon a petition for refund filed with it,
    25  pursuant to section 253, the petitioner may further petition the
    26  Board of Finance and Revenue to review the decision of the
    27  department. The failure of the department to notify the
    28  petitioner of its decision within the time provided for by
    29  section 253 shall act as a denial of such petition, and a
    30  petition for review may be filed with the Board of Finance and
    19710H0190B0445                 - 58 -

     1  Revenue within one hundred twenty days of the date prior to
     2  which the department should have mailed to the petitioner its
     3  notice of decision. Every petition for review filed with the
     4  Board of Finance and Revenue under the provisions of this
     5  section shall incorporate by reference the petition for refund.
     6  The petitioner may, in his petition for review, elect to
     7  withdraw one or more grounds as set out in the original refund
     8  petition. The Board of Finance and Revenue shall act finally in
     9  disposing of such petitions filed with it within six months
    10  after they have been received. In the event of the failure of
    11  the board to dispose of any petition within six months, the
    12  action taken by the department upon the petition for refund
    13  shall be sustained. The Board of Finance and Revenue may sustain
    14  the action taken by the department on a petition for refund, or
    15  it may redetermine whether a lessor or greater amount of refund
    16  is proper. Under no circumstances may the Board of Finance and
    17  Revenue authorize a refund greater than that originally applied
    18  for by the petitioner. The board shall give notice of its action
    19  to the department and to the petitioner.
    20     Section 255.  Appeal to the Commonwealth Court.--Any person
    21  aggrieved by the decision of the Board of Finance and Revenue
    22  under section 254, or by the board's failure to act upon a
    23  petition for review within six months may, within sixty THIRTY    <--
    24  days, appeal to the Commonwealth Court from the decision of the
    25  board or of the department, as the case may be, in the manner
    26  now or hereafter provided for by law for appeals in the case of
    27  tax settlements.
    28     Section 256.  Extended Time for Filing Special Petition for
    29  Refund.--Any party to a transaction who has paid tax by reason
    30  of a transaction with respect to which the department is
    19710H0190B0445                 - 59 -

     1  assessing tax against another person may, within six months
     2  after the filing by the department of the assessment against
     3  such other person, file a special petition for refund,
     4  notwithstanding his failure to file a regular petition within
     5  eighteen months THREE YEARS of the payment. The provisions of     <--
     6  sections 253, 254 and 255 shall be applicable to such special
     7  petition for refund, except that the department need not act on
     8  such petition until there is a final determination as to the
     9  propriety of the assessment filed against the other party to the
    10  transaction. Where a petition is filed under this provision in
    11  order to take advantage of the extended period of limitations,
    12  overpayments by the petitioner shall be refunded but only to the
    13  extent of the actual tax (without consideration of interest and
    14  penalties) paid by the other party to the transaction. The
    15  purpose of this section is to avoid duplicate payment of tax
    16  where a determination is made by the department that one party
    17  to a transaction is subject to tax, and another party to the
    18  transaction has previously paid tax with respect to such
    19  transaction and, as such, this section shall be construed as
    20  extending right beyond that provided for by section 253, and not
    21  to limit such other section.
    22                             CHAPTER VI
    23                            LIMITATIONS
    24     Section 258.  Limitation on Assessment and Collection.--The
    25  amount of the tax imposed by this act shall be assessed within
    26  three years after the date when the return provided for by
    27  subsection (a) or (c) or under subsection (e) of section 217 is
    28  filed or the end of the year in which the tax liability arises
    29  whichever shall last occur. Any such assessment may be made at
    30  any time during such period notwithstanding that the department
    19710H0190B0445                 - 60 -

     1  may have made one or more previous assessments against the
     2  taxpayer for the year in question, or for any part of such year.
     3  In any such case, no credit shall be given for any penalty
     4  previously assessed or paid.
     5     Section 259.  Failure to File Return.--Where no return is
     6  filed, the amount of the tax due may be assessed and collected
     7  at any time as to taxable transactions not reported.
     8     Section 260.  False or Fraudulent Return.--Where the taxpayer
     9  wilfully files a false or fraudulent return with intent to evade
    10  the tax imposed by this article, the amount of tax due may be
    11  assessed and collected at any time.
    12     Section 261.  Extension of Limitation Period.--
    13  Notwithstanding any of the foregoing provisions of this part,
    14  where, before the expiration of the period prescribed therein
    15  for the assessment of a tax, a taxpayer has consented, in
    16  writing, that such period be extended, the amount of tax due may
    17  be assessed at any time within such extended period. The period
    18  so extended may be extended further by subsequent consents, in
    19  writing, made before the expiration of the extended period.
    20                            CHAPTER VII
    21             INTEREST, ADDITIONS, PENALTIES AND CRIMES
    22     Section 265.  Interest.--If any amount of tax imposed by this
    23  article is not paid to the department on or before the last date
    24  prescribed for payment, interest on such amount at the rate of
    25  one-half of one per cent per month for each month, or fraction
    26  thereof, from such date, shall be paid for the period from such
    27  last date to the date paid. The last date prescribed for payment
    28  shall be determined under subsection (a) or (c) of section 222
    29  without regard to any extension of time for payment. In the case
    30  of any amount assessed as a deficiency or as an estimated
    19710H0190B0445                 - 61 -

     1  assessment, the date prescribed for payment shall be thirty days
     2  after notice of such assessment.
     3     Section 266.  Additions to Tax.--(a) Failure to File Return.
     4  In the case of failure to file any return required by section
     5  215 on the date prescribed therefor (determined with regard to
     6  any extension of time for filing), and in the case in which a
     7  return filed understates the true amount due by more than fifty
     8  per cent, there shall be added to the amount of tax actually due
     9  five per cent of the amount of such tax if the failure to file a
    10  proper return is for not more than one month, with an additional
    11  five per cent for each additional month, or fraction thereof,
    12  during which such failure continues, not exceeding twenty-five
    13  per cent in the aggregate. In every such case at least two
    14  dollars ($2) shall be added.
    15     (b)  Addition for Understatement. There shall be added to
    16  every assessment under subsection (b) of section 231 an addition
    17  equal to five per cent of the amount of the understatement and
    18  no addition to the tax shall be paid under subsection (a) of
    19  section 231.
    20     (c)  Interest. If the department assesses a tax according to
    21  subsection (a) or (c) of section 231, there shall be added to
    22  the amount of the deficiency interest at the rate of one-half of
    23  one per cent per month for each month, or fraction thereof, from
    24  the date prescribed by subsection (a) or (c) of section 222 of
    25  this article for the payment of the tax to the date of notice of
    26  the assessment.
    27     (d)  Uncollectible Checks. Whenever any check issued in
    28  payment of any tax or for any other purpose shall be returned to
    29  the department as uncollectible, the secretary shall charge a
    30  fee of ten per cent of the face amount thereof plus all protest
    19710H0190B0445                 - 62 -

     1  fees, to the person presenting such check to him to cover the
     2  cost of its collection in addition to the interest and penalties
     3  otherwise provided for by this article: Provided, however, That
     4  the additions imposed hereby shall not exceed two hundred
     5  dollars ($200) nor be less than ten dollars ($10).
     6     Section 267.  Penalties.--(a) Penalty Assessed as Tax. The
     7  penalties, additions, interest and liabilities provided by this
     8  article shall be paid upon notice and demand by the department,
     9  and shall be assessed and collected in the same manner as taxes.
    10  Except as otherwise provided, any reference in this article to
    11  "tax" imposed by this article shall be deemed also to refer to
    12  the penalties, additions, interest and liabilities provided by
    13  this part.
    14     (b)  Attempt to Evade or Defeat Tax.  Any person who wilfully
    15  attempts, in any manner, to evade or defeat the tax imposed by
    16  this article, or the payment thereof, or to assist any other
    17  person to evade or defeat the tax imposed by this article, or
    18  the payment thereof, or to receive a refund improperly, shall,
    19  in addition to other penalties provided by law, be liable for a
    20  penalty equal to one-half of the total amount of the tax evaded.
    21     In any direct proceeding arising out of a petition for
    22  reassessment or refund as provided in this article, in which an
    23  issue of fact is raised with respect to whether a return is
    24  fraudulent or with respect to the propriety of the imposition by
    25  the department of the penalty prescribed in this subsection (b),
    26  the burden of proof with respect to such issue shall be upon the
    27  department.
    28     Section 268.  Crimes.--(a) Fraudulent Return. Any person who
    29  with intent to defraud the Commonwealth shall wilfully make, or
    30  cause to be made, any return required by this article, which is
    19710H0190B0445                 - 63 -

     1  false, shall be guilty of a misdemeanor, and, upon conviction
     2  thereof, shall be sentenced to pay a fine not exceeding two
     3  thousand dollars ($2000), or undergo imprisonment not exceeding
     4  three years, or both.
     5     (b)  Other Crimes. Except as otherwise provided by subsection
     6  (a) of this section, any person maintaining a place of business
     7  in this Commonwealth, who advertises or holds out or states to
     8  the public or to any purchaser or user, directly or indirectly,
     9  that the tax or any part thereof imposed by this article will be
    10  absorbed by such person, or that it will not be added to the
    11  purchase price of the tangible personal property or services
    12  described in subclauses (2), (3) and (4) of clause (k) of
    13  section 201 of this article sold or, if added, that the tax or
    14  any part thereof will be refunded, other than when such person
    15  refunds the purchase price because of such property being
    16  returned to the vendor, and any person maintaining a place of
    17  business in this Commonwealth and selling or leasing tangible
    18  personal property or said services the sale or use of which by
    19  the purchaser is subject to tax hereunder, who shall wilfully
    20  fail or refuse to collect the tax from the purchaser and remit
    21  the same to the department, and any person who shall wilfully
    22  fail, neglect or refuse to file any return or report required by
    23  this article or any taxpayer who shall refuse to pay any tax,
    24  penalty or interest imposed or provided for by this article, or
    25  who shall wilfully fail to preserve his books, papers and
    26  records as directed by the department, or any person who shall
    27  refuse to permit the department or any of its authorized agents
    28  to examine his books, records or papers, or who shall knowingly
    29  make any incomplete, false or fraudulent return or report, or
    30  who shall do, or attempt to do, anything whatever to prevent the
    19710H0190B0445                 - 64 -

     1  full disclosure of the amount or character of taxable sales
     2  purchases or use made by himself or any other person, or shall
     3  provide any person with a false statement as to the payment of
     4  tax with respect to particular tangible personal property or
     5  said services, or shall make, utter or issue a false or
     6  fraudulent exemption certificate, shall be guilty of a
     7  misdemeanor, and, upon conviction thereof, shall be sentenced to
     8  pay a fine not exceeding one thousand dollars ($1000) and costs
     9  of prosecution, or undergo imprisonment not exceeding one year,
    10  or both: Provided, however, That any person maintaining a place
    11  of business outside this Commonwealth may absorb the tax with
    12  respect to taxable sales made in the normal course of business
    13  to customers present at such place of business without being
    14  subject to the above penalty and fines. The penalties imposed by
    15  this section shall be in addition to any other penalties imposed
    16  by any provision of this article.
    17     Section 269.  Abatement of Additions or Penalties.--Upon the
    18  filing of a petition for reassessment or a petition for refund
    19  as provided under this article by a taxpayer, additions or
    20  penalties imposed upon such taxpayer by this act may be waived
    21  or abated, in whole or in part, where the petitioner has
    22  established that he has acted in good faith, without negligence
    23  and with no intent to defraud.
    24                            CHAPTER VIII
    25                    ENFORCEMENT AND EXAMINATIONS
    26     Section 270.  Rules and Regulations.--(a) General Provision.
    27  The department is hereby charged with the enforcement of the
    28  provisions of this article, and is hereby authorized and
    29  empowered to prescribe, adopt, promulgate and enforce, rules and
    30  regulations not inconsistent with the provisions of this
    19710H0190B0445                 - 65 -

     1  article, relating to any matter or thing pertaining to the
     2  administration and enforcement of the provisions of this
     3  article, and the collection of taxes, penalties and interest
     4  imposed by this article. The department may prescribe the
     5  extent, if any, to which any of such rules and regulations shall
     6  be applied without retroactive effect.
     7     (b)  Sales between Affiliated Interests. In determining the
     8  purchase price of taxable sales where, because of affiliation of
     9  interests between the vendor and the purchaser or irrespective
    10  of any such affiliation, if for any other reason, the purchase
    11  price of such sale is in the opinion of the department not
    12  indicative of the true value of the article or the fair price
    13  thereof, the department shall, pursuant to uniform and equitable
    14  rules, determine the amount of constructive purchase price upon
    15  the basis of which the tax shall be computed and levied. Such
    16  rules shall provide for a constructive amount of a purchase
    17  price for each such sale, which price shall equal a price for
    18  such article which would naturally and fairly be charged in an
    19  arm's-length transaction in which the element of common
    20  interests between vendor and purchaser, or, if no common
    21  interest exists, any other element causing a distortion of the
    22  price or value is absent. For the purpose of this article where
    23  a taxable sale occurs between a parent corporation and a
    24  subsidiary affiliate or controlled corporation of such parent,
    25  there shall be a rebuttable presumption that because of such
    26  common interest such transaction was not at arm's-length.
    27     Section 271.  Keeping of Records.--(a) General Provision.
    28  Every person liable for any tax imposed by this article, or for
    29  the collection thereof, shall keep the records, render such
    30  statements, make the returns and comply with such rules and
    19710H0190B0445                 - 66 -

     1  regulations as the department may, from time to time, prescribe
     2  regarding matters pertinent to his business. Whenever in the
     3  judgment of the department it is necessary, it may require any
     4  person, by notice served upon such person, or by regulations, to
     5  make such returns, render such statements or keep such records
     6  as the department deems sufficient to show whether or not such
     7  person is liable to pay or collect tax under this article.
     8     (b)  Persons Collecting Tax from Others. Any person liable to
     9  collect tax from another person under the provisions of this
    10  article shall file reports, keep records, make payments and be
    11  subject to interest and penalties as provided for under this
    12  article, in the same manner as if he were directly subject to
    13  the tax.
    14     (c)  Records of Non-Residents. A non-resident who does
    15  business in this Commonwealth as a retail dealer shall keep
    16  adequate records of such business or businesses and of the tax
    17  due with respect thereto, which records shall at all times be
    18  retained within this Commonwealth unless retention outside the
    19  Commonwealth is authorized by the department. No taxes collected
    20  from purchasers shall be sent outside the Commonwealth without
    21  the written consent of, and in accordance with conditions
    22  prescribed by the department. The department may require a
    23  taxpayer who desires to retain records or tax collections
    24  outside the Commonwealth to assume reasonable out-of-state audit
    25  expenses.
    26     (d)  Keeping of Separate Records. Any person doing business
    27  as a retail dealer who at the same time is engaged in another
    28  business or businesses which do not involve the making of sales
    29  taxable under this article, shall keep separate books and
    30  records of his businesses so as to show the sales taxable under
    19710H0190B0445                 - 67 -

     1  this article separately from his sales not taxable hereunder. If
     2  any such person fails to keep such separate books and records,
     3  he shall be liable for tax at the rate designated in section 202
     4  of this article upon the entire purchase price of sales from
     5  both or all of his businesses.
     6     (e)  Other Methods. In those instances where a vendor gives
     7  no sales memoranda or uses registers showing only total sales,
     8  the vendor must adopt some method of segregating tax from sales
     9  receipts and keep records showing such segregation, all in
    10  accordance with proper accounting and business practices.
    11     A vendor may apply to the department for permission to use a
    12  collection and recording procedure which will show such
    13  information as the law requires with reasonable accuracy and
    14  simplicity. Such application must contain a detailed description
    15  of the procedure to be adopted. Permission to use the proposed
    16  procedure is not to be construed as relieving the vendor from
    17  remitting the full amount of tax collected. The department may
    18  revoke such permission upon thirty days' notice to the vendor.
    19  Refusal of the department to grant permission in advance to use
    20  such procedure shall not be construed to invalidate a procedure
    21  which upon examination shows such information as the law
    22  requires.
    23     Section 272.  Examinations.--The department or any of its
    24  authorized agents is hereby authorized to examine the books,
    25  papers and records of any taxpayer in order to verify the
    26  accuracy and completeness of any return made or, if no return
    27  was made, to ascertain and assess the tax imposed by this
    28  article. The department may require the preservation of all such
    29  books, papers and records for any period deemed proper by it but
    30  not to exceed three years from the end of the calendar year to
    19710H0190B0445                 - 68 -

     1  which the records relate. Every such taxpayer is hereby required
     2  to give to the department, or its agent, the means, facilities
     3  and opportunity for such examinations and investigation. The
     4  department is further authorized to examine any person, under
     5  oath, concerning taxable sales or use by any taxpayer or
     6  concerning any other matter relating to the enforcement or
     7  administration of this article, and to this end may compel the
     8  production of books, papers and records and the attendance of
     9  all persons whether as parties or witnesses whom it believes to
    10  have knowledge of such matters. The procedure for such hearings
    11  or examinations shall be the same as that provided by The Fiscal
    12  Code relating to inquisitorial powers of fiscal officers.
    13     Section 273.  Records and Examinations of Delivery Agents.--
    14  Every agent for the purpose of delivery of goods shipped into
    15  the Commonwealth by a nonresident including, but not limited to,
    16  common carriers shall maintain adequate records of such
    17  deliveries pursuant to rules and regulations adopted by the
    18  department and shall make such records available to the
    19  department upon request after due notice.
    20     Section 274.  Unauthorized Disclosure.--Any information
    21  gained by the department as a result of any return, examination,
    22  investigation, hearing or verification, required or authorized
    23  by this article, shall be confidential, except for official
    24  purposes and except in accordance with proper judicial order or
    25  as otherwise provided by law, and any person unlawfully
    26  divulging such information shall be guilty of a misdemeanor,
    27  and, upon conviction thereof, shall be sentenced to pay a fine
    28  not in excess of one thousand dollars ($1000) and costs of
    29  prosecution, or to undergo imprisonment for not more than one
    30  year, or both.
    19710H0190B0445                 - 69 -

     1     Section 275.  Cooperation with Other Governments.--
     2  Notwithstanding the provisions of section 274, the department
     3  may permit the Commissioner of Internal Revenue of the United
     4  States, or the proper officer of any state, or the authorized
     5  representative of either such officer, to inspect the tax
     6  returns of any taxpayer, or may furnish to such officer or to
     7  his authorized representative an abstract of the return of any
     8  taxpayer, or supply him with information concerning any item
     9  contained in any return or disclosed by the report of any
    10  examination or investigation of the return of any taxpayer. This
    11  permission shall be granted only if the statutes of the United
    12  States or of such other state, as the case may be, grant
    13  substantially similar privileges to the proper officer of the
    14  Commonwealth charged with the administration of this article.
    15     Section 276.  Interstate Compacts.--The Governor, or his
    16  authorized representative, is hereby vested with authority to
    17  confer with the Governor and the authorized representatives of
    18  other states with respect to reciprocal use tax collection
    19  between Pennsylvania and such other states.
    20     The Governor, or his representative, is authorized to join
    21  with such authorities of other states to conduct joint
    22  investigations, to exchange information, hold joint hearings and
    23  enter into compacts or interstate agreements with such other
    24  states to accomplish uniform reciprocal use tax collections
    25  between those states who are parties to any compact or
    26  interstate agreement and the Commonwealth of Pennsylvania.
    27     Section 277.  Bonds.--(a) Taxpayer to File Bond.  Whenever
    28  the department in its discretion, deems it necessary to protect
    29  the revenues to be obtained under the provisions of this
    30  article, it may require any nonresident natural person or any
    19710H0190B0445                 - 70 -

     1  foreign corporation, association, fiduciary, partnership or
     2  other entity, not authorized to do business within this
     3  Commonwealth or not having an established place of business
     4  therein and subject to the tax imposed by section 202 of this
     5  article, to file a bond issued by a surety company authorized to
     6  do business in this Commonwealth and approved by the Insurance
     7  Commissioner as to solvency and responsibility, in such amounts
     8  as it may fix, to secure the payment of any tax or penalties
     9  due, or which may become due, from such natural person or
    10  corporation. In order to protect the revenues to be obtained
    11  under the provisions of this article, the department shall
    12  require any nonresident natural person or any foreign
    13  corporation, association, fiduciary, partnership or entity, who
    14  or which is a building contractor, or who or which is a supplier
    15  delivering building materials for work in this Commonwealth and
    16  is not authorized to do business within this Commonwealth or
    17  does not have an established place of business therein and is
    18  subject to the tax imposed by section 202 of this article, to
    19  file a bond issued by a surety company authorized to do business
    20  in this Commonwealth and approved by the Insurance Commissioner
    21  as to solvency and responsibility, in such amounts as it may
    22  fix, to secure the payments of any tax or penalties due, or
    23  which may become due, from such natural person, corporation or
    24  other entity. The department may also require such a bond of any
    25  person petitioning the department for reassessment, in the case
    26  of any assessment over five hundred dollars ($500) or where it
    27  is of the opinion that the ultimate collection is in jeopardy.
    28  The department may, for a period of three years, require such a
    29  bond of any person who has on three or more occasions within a
    30  twelve month period either filed a return or made payment to the
    19710H0190B0445                 - 71 -

     1  department more than thirty days late. In the event that the
     2  department determines that a taxpayer is to file such a bond, it
     3  shall give notice to such taxpayer to that effect, specifying
     4  the amount of the bond required. The taxpayer shall file such
     5  bond within five days after the giving of such notice by the
     6  department unless, within such five days, the taxpayer shall
     7  request, in writing, a hearing before the Secretary of Revenue
     8  or his representative at which hearing the necessity, propriety
     9  and amount of the bond shall be determined by the secretary or
    10  such representative. Such determination shall be final and shall
    11  be complied with within fifteen days after notice thereof is
    12  mailed to the taxpayer.
    13     (b)  Securities in Lieu of Bond.  In lieu of the bond
    14  required by this section, securities approved by the department,
    15  or cash in such amount as it may prescribe, may be deposited.
    16  Such securities or cash shall be kept in the custody of the
    17  department, who may, at any time, without notice to the
    18  depositor, apply them to any tax and/or interest or penalties
    19  due, and for that purpose the securities may be sold by the
    20  department, at public or private sale, upon five days written
    21  notice to the depositor.
    22     (c)  Failure to File Bond.  The department may file a lien
    23  pursuant to section 243 242 against any taxpayer who fails to     <--
    24  file a bond when required to do so under this section. All funds
    25  received upon execution of the judgment on such lien shall be
    26  refunded to the taxpayer with three per cent interest should a
    27  final determination be made that he does not owe any payment to
    28  the department.
    29                              PART VII
    30              REPEALER; APPROPRIATION; EFFECTIVE DATE
    19710H0190B0445                 - 72 -

     1     Section 280.  Repeal.--The act of March 6, 1956 (P.L.1228),
     2  known as the "Tax Act of 1963 for Education," is repealed
     3  concurrently with the effective date of the various provisions
     4  of this article.
     5     SECTION 281.  APPROPRIATION FOR REFUNDS, ETC.--SO MUCH OF THE  <--
     6  PROCEEDS OF THE TAX IMPOSED BY THIS ARTICLE AS SHALL BE
     7  NECESSARY FOR THE PAYMENT OF REFUNDS, ENFORCEMENT, OR
     8  ADMINISTRATION, UNDER THIS ARTICLE, IS HEREBY APPROPRIATED FOR
     9  SUCH PURPOSES.
    10     Section 281. 282.  Effective Date.--The provisions of this     <--
    11  article shall take effect March 1, 1971, or upon the date this
    12  article is enacted into law whichever is the last to occur,
    13  except that clauses (k) (4), (m) and (o) (4) of section 201,
    14  clause (c) of section 202, clause (17) of section 204 and clause
    15  (30) (iii) of section 204 in so far as it relates to the fifty
    16  cent (50¢) exclusion from purchase price on restaurant meals,
    17  shall take effect July 1, 1971.
    18                            ARTICLE III
    19                        PERSONAL INCOME TAX
    20                               PART I
    21                DECLARATION OF POLICY:  DEFINITIONS
    22     Section 301.  Declaration of Intent and Policy.--The
    23  Legislature, in imposing a flat rate tax on income defined in
    24  this article, hereby declares its legislative intent and policy
    25  to provide a fair and practical method of taxation and to
    26  effectuate an income tax which shall constitutionally conform to
    27  the uniformity provisions of section 1, of Article VIII, of the
    28  Constitution, by utilizing and uniformly applying in this
    29  article those terms, definitions, classifications and other
    30  provisions of the Federal Internal Revenue Code of 1954, as
    19710H0190B0445                 - 73 -

     1  amended, as they relate to the Federal Income Tax on
     2  individuals, being the same code which the General Assembly has
     3  heretofore employed in the Pennsylvania "Corporate Net Income
     4  Tax" and "Corporation Income Tax" acts relating to the
     5  imposition of income taxes on corporations.
     6     Section 302.  Definitions.--Any term used in this article
     7  shall have the same meaning as when used in comparable context
     8  in the laws of the United States relating to Federal income
     9  taxes unless a different meaning is clearly required. Any
    10  reference in this article to the Internal Revenue Code shall
    11  include the Internal Revenue Code of 1954 and other provisions
    12  of the laws of the United States relating to Federal income
    13  taxes, all as amended and effective on the date such reference
    14  is required by this article:
    15     (a)  "Compensation" means any form of remuneration as defined
    16  in section 3401 (a) of the Internal Revenue Code.
    17     (b)  "Department" means the Department of Revenue of the
    18  Commonwealth of Pennsylvania.
    19     (c)  "Employe" means any employe as defined in section 3401
    20  (c) of the Internal Revenue Code. Any person from whose
    21  compensation an employer is required to withhold Federal income
    22  tax shall prima facie be deemed an employe.
    23     (d)  "Employer" means an employer as defined in section 3401
    24  (d) of the Internal Revenue Code. Any person required to
    25  withhold Federal income tax from compensation paid shall prima
    26  facie be deemed an employer.
    27     (e)  "Fiduciary" means a guardian, trustee, executor,
    28  administrator, receiver, conservator or any person acting in any
    29  fiduciary capacity, whether domiciliary or ancillary.
    30     (f)  "Individual" means a natural person.
    19710H0190B0445                 - 74 -

     1     (g)  "Nonresident individual" means any individual who is not
     2  a resident of the Commonwealth.
     3     (h)  "Nonresident estate or trust" means any estate or trust
     4  which is not a resident estate or trust.
     5     (i)  "Person" means any individual, employer, association,
     6  fiduciary, partnership, corporation or other entity, estate or
     7  trust, resident or nonresident, and the plural as well as the
     8  singular number.
     9     (j)  "Resident individual" means an individual who is
    10  domiciled in this Commonwealth unless he maintains no permanent
    11  place of abode in this Commonwealth and does maintain a
    12  permanent place of abode elsewhere and spends in the aggregate
    13  not more than thirty days of the taxable year in this
    14  Commonwealth; or who is not domiciled in this Commonwealth but
    15  maintains a permanent place of abode in this Commonwealth and
    16  spends in the aggregate more than one hundred eighty-three days
    17  of the taxable year in this Commonwealth.
    18     (k)  "Resident estate" means the estate of a decedent who at
    19  his death was a resident individual.
    20     (l)  "Resident trust" means a trust created by the will of a
    21  decedent who at his death was a resident individual and any
    22  trust created by, or consisting of property transferred to such
    23  trust by a person who was a resident individual.
    24     (m)  "State" means any state or commonwealth of the United
    25  States, the District of Columbia, the Commonwealth of Puerto
    26  Rico, any territory or possession of the United States, any
    27  foreign country, or any political subdivision of any of the
    28  foregoing.
    29     (n)  "Tax" includes interest, penalties and additions to tax,
    30  and further includes the tax required to be withheld by an
    19710H0190B0445                 - 75 -

     1  employer on compensation paid, unless a more limited meaning is
     2  disclosed by the context.
     3     (o)  "Taxable year" means the taxable period on the basis of
     4  which a taxpayer is required to file his Federal income tax
     5  return pursuant to the Internal Revenue Code.
     6     (p)  "Taxpayer" means any person subject to the tax imposed
     7  by this article or any employer required to withhold tax on
     8  compensation paid.
     9     (q)  "Taxable income."  Except as otherwise provided herein,
    10  "taxable income" means the same as "taxable income" as defined
    11  in the Internal Revenue Code and which is required to be
    12  returned to and ascertained by the Federal Government pursuant
    13  to said code, subject to the following adjustments:
    14     (1)  Subtraction of interest income derived from obligations
    15  of the United States Government to the extent included in
    16  adjusted gross income.
    17     (2)  Addition of interest income derived from obligations of
    18  states, political subdivisions, instrumentalities and public
    19  authorities thereof other than Pennsylvania or its political
    20  subdivisions, instrumentalities or public authorities to the
    21  extent not included in adjusted gross income.
    22     (3)  In the case of a nonresident individual, estate or trust
    23  estate or trust "taxable income" and the adjustments required by
    24  subsections (a) and (b) above shall include only income derived
    25  from sources within this Commonwealth.
    26     (4)  The respective shares of an estate or trust and its
    27  beneficiaries in the additions and subtractions to taxable
    28  income shall be in proportion to their respective shares of
    29  distributable net income of the estate or trust as defined in
    30  the Internal Revenue Code. If the estate or trust has no
    19710H0190B0445                 - 76 -

     1  distributable net income for the taxable year, the share of each
     2  beneficiary in the additions and subtractions shall be in
     3  proportion to his share of the estate or trust income for such
     4  year, under local law or the terms of the instrument, which is
     5  required to be distributed currently and any other amounts of
     6  such income distributed in such year. Any balance of the
     7  additions and subtractions shall be allocated to the estate or
     8  trust.
     9     (5)  In the case of a nonresident estate or trust, the
    10  respective shares of the estate or trust and of its
    11  beneficiaries shall be determined in the manner set forth by
    12  this subsection (q); however, in determining the taxable income
    13  of a nonresident estate or trust or of any nonresident
    14  beneficiary thereof, there shall be taken into account only the
    15  income of the estate or trust, or the beneficiary's share
    16  thereof, derived from sources within this Commonwealth.
    17     (r)  (1)  "Income from sources within this Commonwealth"
    18  means all taxable income to the extent that it is earned,
    19  received or acquired from sources within this Commonwealth:
    20     (i)  by reason of ownership or disposition of any interest in
    21  real or tangible personal property in this Commonwealth; or
    22     (ii)  in connection with a trade, profession, occupation
    23  carried on in this Commonwealth or for the rendition or personal
    24  services performed in this Commonwealth; or
    25     (iii)  as a distributive share of the income of an
    26  unincorporated business, profession, enterprise, undertaking or
    27  other activity as the result of work done, services rendered or
    28  other business activities conducted in this Commonwealth, except
    29  as allocated to another state pursuant to regulations
    30  promulgated by the department under this article.
    19710H0190B0445                 - 77 -

     1     (2)  Income from tangible personal property shall constitute
     2  income from sources within this Commonwealth only to the extent
     3  that such income is from property employed in a trade,
     4  profession, occupation or business carried on in this
     5  Commonwealth.
     6                              PART II
     7                         IMPOSITION OF TAX
     8     Section 305.  Incidence and Rate.--For the privilege of
     9  receiving, earning or otherwise acquiring income from any source
    10  whatsoever, in the case of a resident individual, estate or
    11  trust of this Commonwealth, or from sources within this
    12  Commonwealth, in the case of a nonresident individual, estate or
    13  trust of this Commonwealth, there is levied and imposed an
    14  annual tax of five per cent of the taxable income of the
    15  taxpayer.
    16     Section 306.  Beneficiary of Grantor Trust.--The taxable
    17  income of a person who is required to include income from a
    18  trust in his Federal income tax return under the provisions of
    19  subpart E of subchapter J of the Internal Revenue Code shall be
    20  computed with reference to the income of the trust as if such
    21  income were the income of the taxpayer rather than the trust.
    22                              PART III
    23                      NONRESIDENT INDIVIDUALS
    24     Section 308.  Nonresident Individuals; Taxable Income.--The
    25  taxable income of a nonresident individual shall be that part of
    26  his Federal taxable income derived from sources within this
    27  Commonwealth as defined in subsection (r) of section 302 of this
    28  article.
    29     Section 309.  Husband and Wife.--(a) Separate Federal Return.
    30  If the Federal taxable income of husband or wife who are both
    19710H0190B0445                 - 78 -

     1  nonresidents of this Commonwealth is determined on a separate
     2  Federal return, their taxable incomes from sources within this
     3  Commonwealth shall be separately determined.
     4     (b)  Joint Federal Return.  If the Federal taxable income of
     5  husband and wife who are both nonresidents is determined on a
     6  joint Federal return, their tax shall be determined in this
     7  State on their joint taxable income.
     8     (c)  One Spouse a Nonresident.  If either husband or wife is
     9  a nonresident and the other a resident, separate taxes shall be
    10  determined on their separate taxable incomes from sources within
    11  this Commonwealth on such forms as the department shall
    12  prescribe, unless both elect to determine their joint taxable
    13  income in this Commonwealth as if both were residents. If a
    14  husband and wife file a joint Federal income tax return, but
    15  determine their taxable income from sources within this
    16  Commonwealth separately, they shall compute their taxable
    17  incomes from sources within this Commonwealth as if their
    18  Federal taxable incomes had been determined separately.
    19     Section 310.  Allocation of Income of Nonresident.--Where a
    20  nonresident taxpayer engages in a business, trade, profession or
    21  occupation partly within and partly without this Commonwealth,
    22  and, as a result thereof or for other reasons that portion of
    23  the income derived from or connected with sources within this
    24  Commonwealth cannot readily or accurately be ascertained, the
    25  department shall by regulation prescribe uniform rules for
    26  apportionment or allocation of so much of such taxpayer's income
    27  as fairly and equitably represents income derived from sources
    28  within this Commonwealth.
    29                              PART IV
    30                        CREDITS AGAINST TAX
    19710H0190B0445                 - 79 -

     1     Section 315.  Tax Withheld.--(a) The amount withheld under
     2  section 322 shall be allowed to the recipient of the
     3  compensation as a credit against the tax imposed on him by this
     4  article.
     5     Section 316.  Income Taxes Imposed by Other States.--(a) A
     6  resident taxpayer shall be allowed a credit against the tax
     7  otherwise due under this act for the amount of any income tax,
     8  wage tax or tax on or measured by gross or net earned or
     9  unearned income imposed on him by another state with respect to
    10  income which is also subject to tax under this article.
    11     (b)  The credit provided under this section shall not exceed
    12  the proportion of the tax otherwise due under this article that
    13  the amount of the taxpayer's taxable income subject to tax by
    14  the other jurisdiction bears to his entire taxable income.
    15     Section 317.  Personal Taxes Imposed by Political              <--
    16  Subdivisions of This Commonwealth.--(a) Every resident or
    17  nonresident individual, ESTATE OR TRUST subject to tax under      <--
    18  this article shall be allowed a credit against the tax otherwise
    19  due under this article equal to thirty per cent of the amount of
    20  any local taxes imposed on and paid by such individual, ESTATE    <--
    21  OR TRUST to any political subdivision of this Commonwealth
    22  during the calendar year 1971, except that such credit shall not
    23  apply to local taxes imposed on real estate, realty transfers or
    24  amusements.
    25     (b)  For local taxes DESCRIBED IN SUBSECTION (A) imposed and   <--
    26  paid in the taxable years beginning after December 31, 1971, the
    27  amount of credit BASE provided in this section shall not exceed   <--
    28  thirty per cent of the total amount of the local taxes which
    29  were imposed upon and paid by such individual, ESTATE OR TRUST    <--
    30  during the calendar year 1971 to political subdivisions of this
    19710H0190B0445                 - 80 -

     1  Commonwealth, EXCEPT THAT IN THE CASE WHERE NO SUCH LOCAL TAXES   <--
     2  WERE IMPOSED UPON AND PAID BY SUCH INDIVIDUAL, ESTATE OR TRUST
     3  DURING THE CALENDAR YEAR 1971, THEN THE PERCENTAGE RATE SHALL BE
     4  APPLIED TO THE TOTAL AMOUNT OF SUCH LOCAL TAXES WHICH WERE
     5  IMPOSED UPON AND PAID BY SUCH INDIVIDUAL, ESTATE OR TRUST DURING
     6  THE CALENDAR YEAR IN WHICH SUCH TAXES WERE FIRST IMPOSED AND
     7  PAID AND THE AMOUNT SO DETERMINED SHALL EACH YEAR THEREAFTER
     8  CONSTITUTE THE BASE ON WHICH THE TAX CREDIT RATE SHALL BE
     9  APPLIED.
    10     Section 318.  Tax Paid by Trust on Accumulated Income.--A
    11  beneficiary of a trust whose taxable income includes all or part
    12  of an accumulation distribution or a capital gain distribution
    13  by a trust, as defined in section 665 of the Internal Revenue
    14  Code, shall be allowed a credit against the tax otherwise due
    15  under this article equal to all or a proportionate part of any
    16  tax paid by the trust under this article for any preceding
    17  taxable year which would not have been payable if the trust had
    18  in fact made distribution to its beneficiaries at the times and
    19  in the amounts specified in sections 666 and 669 of the Internal
    20  Revenue Code. The credit shall not reduce the tax otherwise due
    21  from the beneficiary to an amount less than would have been due
    22  if the accumulation distribution or capital gain distribution
    23  were excluded from taxable income.
    24     Section 319.  Tax Credit for Taxpayer Class.--(a) Declaration
    25  of Legislative Purpose.  The General Assembly, in recognition of
    26  section 2 (b) (ii) of Article VIII of the Constitution of
    27  Pennsylvania which provides for the establishing as a class or
    28  classes of subjects of taxation, the property or privileges of
    29  persons who, because of age, disability, infirmity or poverty
    30  are determined to be in need of tax exemption or of special tax
    19710H0190B0445                 - 81 -

     1  provisions, hereby declares as its legislative intent and
     2  purpose to execute its power under such constitutional provision
     3  by establishing a special tax credit provision, as hereinafter
     4  provided in subsections (b) and (c) of this section.
     5     (b)  Establishing of Class; Tax Credit.--Pursuant to the
     6  provisions of said section of the Constitution of Pennsylvania
     7  there is hereby legislatively determined and established in the
     8  schedule provided in subsection (c) of this section, a class of
     9  taxpayers who by reason of poverty, age, disability or infirmity
    10  are in need of special tax relief and the members of such class,
    11  on and after the effective date of this article, shall be
    12  entitled to claim a credit against the amount of tax which would
    13  otherwise be due under this article. The class of taxpayers and
    14  the members thereof who qualify for such tax credit and the
    15  amount thereof shall be determined solely by reference to the
    16  taxable income and exemption schedule set forth in subsection
    17  (c) of this section.
    18     (c)  Tax credit schedule for taxpayer class.
    19                              SCHEDULE
    20                        VANISHING TAX CREDIT
    21    Net     Tax               Number of FEDERAL Exemptions          <--
    22  Taxable    at
    23   Income    5%     1       2       3        4        5        6
    24
    25    $ 100   $ 5  $ 5.00  $ 5.00  $ 5.00   $ 5.00   $ 5.00   $ 5.00
    26      200    10   10.00   10.00   10.00    10.00    10.00    10.00
    27      300    15   15.00   15.00   15.00    15.00    15.00    15.00
    28      400    20   20.00   20.00   20.00    20.00    20.00    20.00
    29      500    25   25.00   25.00   25.00    25.00    25.00    25.00
    30      600    30   30.00   30.00   30.00    30.00    30.00    30.00
    19710H0190B0445                 - 82 -

     1      700    35   31.25   35.00   35.00    35.00    35.00    35.00
     2      800    40   30.00   40.00   40.00    40.00    40.00    40.00
     3      900    45   28.75   45.00   45.00    45.00    45.00    45.00
     4     1000    50   27.50   50.00   50.00    50.00    50.00    50.00
     5     1100    55   26.25   55.00   55.00    55.00    55.00    55.00
     6     1200    60   25.00   60.00   60.00    60.00    60.00    60.00
     7     1300    65   23.75   62.50   65.00    65.00    65.00    65.00
     8     1400    70   22.50   60.00   70.00    70.00    70.00    70.00
     9     1500    75   21.25   57.50   75.00    75.00    75.00    75.00
    10     1600    80   20.00   55.00   80.00    80.00    80.00    80.00
    11     1700    85   18.75   52.50   85.00    85.00    85.00    85.00
    12     1800    90   17.50   50.00   90.00    90.00    90.00    90.00
    13     1900    95   16.25   47.50   93.75    95.00    95.00    95.00
    14     2000   100   15.00   45.00   90.00   100.00   100.00   100.00
    15     2100   105   13.75   42.50   86.25   105.00   105.00   105.00
    16     2200   110   12.50   40.00   82.50   110.00   110.00   110.00
    17     2300   115   11.25   37.50   78.75   115.00   115.00   115.00
    18     2400   120   10.00   35.00   75.00   120.00   120.00   120.00
    19     2500   125    8.75   32.50   71.25   125.00   125.00   125.00
    20     2600   130    7.50   30.00   67.50   120.00   130.00   130.00
    21     2700   135    6.25   27.50   63.75   115.00   135.00   135.00
    22     2800   140    5.00   25.00   60.00   110.00   140.00   140.00
    23     2900   145    3.75   22.50   56.25   105.00   145.00   145.00
    24     3000   150    2.50   20.00   52.50   100.00   150.00   150.00
    25     3100   155    1.25   17.50   48.75    95.00   124.00   155.00  <--
    26                                                   155.00
    27     3200   160     .00   15.00   45.00    90.00   156.25   160.00
    28     3300   165     .00   12.50   41.25    85.00   150.00   165.00
    29     3400   170     .00   10.00   37.50    80.00   143.75   170.00
    30     3500   175     .00    7.50   33.75    75.00   137.50   175.00
    19710H0190B0445                 - 83 -

     1     3600   180     .00    5.00   30.00    70.00   131.25   180.00
     2     3700   185     .00    2.50   26.25    65.00   125.00   185.00
     3     3800   190     .00     .00   22.50    60.00   118.75   187.50
     4     3900   195     .00     .00   18.75    55.00   112.50   180.00
     5     4000   200     .00     .00   15.00    50.00   106.25   172.50
     6     4100   205     .00     .00   11.25    45.00   100.00   165.00
     7     4200   210     .00     .00    7.50    40.00    93.75   157.50
     8     4300   215     .00     .00    3.75    35.00    87.50   150.00
     9     4400   220     .00     .00     .00    30.00    81.25   142.50
    10     4500   225     .00     .00     .00    25.00    75.00   135.00
    11     4600   230     .00     .00     .00    20.00    68.75   127.50
    12     4700   235     .00     .00     .00    15.00    62.50   120.00
    13     4800   240     .00     .00     .00    10.00    56.25   112.50
    14     4900   245     .00     .00     .00     5.00    50.00   105.00
    15     5000   250     .00     .00     .00      .00    43.75    97.50
    16     5100   255     .00     .00     .00      .00    37.50    90.00
    17     5200   260     .00     .00     .00      .00    31.25    82.50
    18     5300   265     .00     .00     .00      .00    25.00    75.00
    19     5400   270     .00     .00     .00      .00    18.75    67.50
    20     5500   275     .00     .00     .00      .00    12.50    60.00
    21     5600   280     .00     .00     .00      .00     6.25    52.50
    22     5700   285     .00     .00     .00      .00      .00    45.00
    23     5800   290     .00     .00     .00      .00      .00    37.50
    24     5900   295     .00     .00     .00      .00      .00    30.00
    25     6000   300     .00     .00     .00      .00      .00    22.50
    26     6100   305     .00     .00     .00      .00      .00    15.00
    27     6200   310     .00     .00     .00      .00      .00     7.50
    28     6300   315     .00     .00     .00      .00      .00      .00
    29     6400   320     .00     .00     .00      .00      .00      .00
    30     6500   325     .00     .00     .00      .00      .00      .00
    19710H0190B0445                 - 84 -

     1     6600   330     .00     .00     .00      .00      .00      .00
     2     6700   335     .00     .00     .00      .00      .00      .00
     3     6800   340     .00     .00     .00      .00      .00      .00
     4     6900   345     .00     .00     .00      .00      .00      .00
     5     7000   350     .00     .00     .00      .00      .00      .00
     6     7100   355     .00     .00     .00      .00      .00      .00
     7     7200   360     .00     .00     .00      .00      .00      .00
     8     7300   365     .00     .00     .00      .00      .00      .00
     9     7400   370     .00     .00     .00      .00      .00      .00
    10     7500   375     .00     .00     .00      .00      .00      .00
    11     7600   380     .00     .00     .00      .00      .00      .00
    12     7700   385     .00     .00     .00      .00      .00      .00
    13     7800   390     .00     .00     .00      .00      .00      .00
    14     7900   395     .00     .00     .00      .00      .00      .00
    15     8000   400     .00     .00     .00      .00      .00      .00
    16     8100   405     .00     .00     .00      .00      .00      .00
    17     8200   410     .00     .00     .00      .00      .00      .00
    18     8300   415     .00     .00     .00      .00      .00      .00
    19     8400   420     .00     .00     .00      .00      .00      .00
    20     8500   425     .00     .00     .00      .00      .00      .00
    21     8600   430     .00     .00     .00      .00      .00      .00
    22     8700   435     .00     .00     .00      .00      .00      .00
    23     8800   440     .00     .00     .00      .00      .00      .00
    24     8900   445     .00     .00     .00      .00      .00      .00
    25     9000   450     .00     .00     .00      .00      .00      .00
    26     9100   455     .00     .00     .00      .00      .00      .00
    27     9200   460     .00     .00     .00      .00      .00      .00
    28     9300   465     .00     .00     .00      .00      .00      .00
    29     9400   470     .00     .00     .00      .00      .00      .00
    30     9500   475     .00     .00     .00      .00      .00      .00
    19710H0190B0445                 - 85 -

     1     9600   480     .00     .00     .00      .00      .00      .00
     2     9700   485     .00     .00     .00      .00      .00      .00
     3     9800   490     .00     .00     .00      .00      .00      .00
     4     9900   495     .00     .00     .00      .00      .00      .00
     5   10,000   500     .00     .00     .00      .00      .00      .00
     6    Net     Tax               Number of FEDERAL Exemptions          <--
     7  Taxable    at
     8   Income    5%     7       8       9       10       11       12
     9
    10    $ 100   $ 5  $ 5.00  $ 5.00  $ 5.00   $ 5.00   $ 5.00   $ 5.00
    11      200    10   10.00   10.00   10.00    10.00    10.00    10.00
    12      300    15   15.00   15.00   15.00    15.00    15.00    15.00
    13      400    20   20.00   20.00   20.00    20.00    20.00    20.00
    14      500    25   25.00   25.00   25.00    25.00    25.00    25.00
    15      600    30   30.00   30.00   30.00    30.00    30.00    30.00
    16      700    35   35.00   35.00   35.00    35.00    35.00    35.00
    17      800    40   40.00   40.00   40.00    40.00    40.00    40.00
    18      900    45   45.00   45.00   45.00    45.00    45.00    45.00
    19     1000    50   50.00   50.00   50.00    50.00    50.00    50.00
    20     1100    55   55.00   55.00   55.00    55.00    55.00    55.00
    21     1200    60   60.00   60.00   60.00    60.00    60.00    60.00
    22     1300    65   65.00   65.00   65.00    65.00    65.00    65.00
    23     1400    70   70.00   70.00   70.00    70.00    70.00    70.00
    24     1500    75   75.00   75.00   75.00    75.00    75.00    75.00
    25     1600    80   80.00   80.00   80.00    80.00    80.00    80.00
    26     1700    85   85.00   85.00   85.00    85.00    85.00    85.00
    27     1800    90   90.00   90.00   90.00    90.00    90.00    90.00
    28     1900    95   95.00   95.00   95.00    95.00    95.00    95.00
    29     2000   100  100.00  100.00  100.00   100.00   100.00   100.00
    30     2100   105  105.00  105.00  105.00   105.00   105.00   105.00
    19710H0190B0445                 - 86 -

     1     2200   110  110.00  110.00  110.00   110.00   110.00   110.00
     2     2300   115  115.00  115.00  115.00   115.00   115.00   115.00
     3     2400   120  120.00  120.00  120.00   120.00   120.00   120.00
     4     2500   125  125.00  125.00  125.00   125.00   125.00   125.00
     5     2600   130  130.00  130.00  130.00   130.00   130.00   130.00
     6     2700   135  135.00  135.00  135.00   135.00   135.00   135.00
     7     2800   140  140.00  140.00  140.00   140.00   140.00   140.00
     8     2900   145  145.00  145.00  145.00   145.00   145.00   145.00
     9     3000   150  150.00  150.00  150.00   150.00   150.00   150.00
    10     3100   155  155.00  155.00  155.00   155.00   155.00   155.00
    11     3200   160  160.00  160.00  160.00   160.00   160.00   160.00
    12     3300   165  165.00  165.00  165.00   165.00   165.00   165.00
    13     3400   170  170.00  170.00  170.00   170.00   170.00   170.00
    14     3500   175  175.00  175.00  175.00   175.00   175.00   175.00
    15     3600   180  180.00  180.00  180.00   180.00   180.00   180.00
    16     3700   185  185.00  185.00  185.00   185.00   185.00   185.00
    17     3800   190  190.00  190.00  190.00   190.00   190.00   190.00
    18     3900   195  195.00  195.00  195.00   195.00   195.00   195.00
    19     4000   200  200.00  200.00  200.00   200.00   200.00   200.00
    20     4100   205  205.00  205.00  205.00   205.00   205.00   205.00
    21     4200   210  210.00  210.00  210.00   210.00   210.00   210.00
    22     4300   215  215.00  215.00  215.00   215.00   215.00   215.00
    23     4400   220  218.75  220.00  220.00   220.00   220.00   220.00
    24     4500   225  210.00  225.00  225.00   225.00   225.00   225.00
    25     4600   230  201.25  230.00  230.00   230.00   230.00   230.00
    26     4700   235  192.50  235.00  235.00   235.00   235.00   235.00
    27     4800   240  183.75  240.00  240.00   240.00   240.00   240.00
    28     4900   245  175.00  245.00  245.00   245.00   245.00   245.00
    29     5000   250  166.25  250.00  250.00   250.00   250.00   250.00
    30     5100   255  157.50  246.00  255.00   255.00   255.00   255.00  <--
    19710H0190B0445                 - 87 -

     1                         240.00
     2     5200   260  148.75  230.00  260.00   260.00   260.00   260.00
     3     5300   265  140.00  220.00  265.00   265.00   265.00   265.00
     4     5400   270  131.25  210.00  270.00   270.00   270.00   270.00
     5     5500   275  122.50  200.00  275.00   275.00   275.00   275.00
     6     5600   280  113.75  190.00  280.00   280.00   280.00   280.00
     7     5700   285  105.00  180.00  281.25   285.00   285.00   285.00
     8     5800   290   96.25  170.00  270.00   290.00   290.00   290.00
     9     5900   295   87.50  160.00  258.75   295.00   295.00   295.00
    10     6000   300   78.75  150.00  247.50   300.00   300.00   300.00
    11     6100   305   70.00  140.00  236.25   305.00   305.00   305.00
    12     6200   310   61.25  130.00  225.00   310.00   310.00   310.00
    13     6300   315   52.50  120.00  213.75   312.50   315.00   315.00
    14     6400   320   43.75  110.00  202.50   300.00   300.00  300.00   <--
    15                                                   320.00   320.00
    16     6500   325   35.00  100.00  191.25   287.50   325.00   325.00
    17     6600   330   26.25   90.00  180.00   275.00   330.00   330.00
    18     6700   335   17.50   80.00  168.75   262.50   335.00   335.00
    19     6800   340    8.75   70.00  157.50   250.00   340.00   340.00
    20     6900   345     .00   60.00  146.25   237.50   343.75   345.00
    21     7000   350     .00   50.00  135.00   225.00   330.00   350.00
    22     7100   355     .00   40.00  123.75   212.50   316.25   355.00
    23     7200   360     .00   30.00  112.50   206.00   302.50   360.00  <--
    24                                          200.00
    25     7300   365     .00   20.00  101.25   187.50   288.75   365.00
    26     7400   370     .00   10.00   90.00   175.00   275.00   370.00
    27     7500   375     .00     .00   78.75   162.50   261.25   375.00
    28     7600   380     .00     .00   67.50   150.00   247.50   360.00
    29     7700   385     .00     .00   56.25   137.50   233.75   345.00
    30     7800   390     .00     .00   45.00   125.00   220.00   330.00
    19710H0190B0445                 - 88 -

     1     7900   395     .00     .00   33.75   112.50   206.25   315.00
     2     8000   400     .00     .00   22.50   100.00   192.50   300.00
     3     8100   405     .00     .00   11.25    87.50   178.75   285.00
     4     8200   410     .00     .00     .00    75.00   165.00   270.00
     5     8300   415     .00     .00     .00    62.50   151.25   255.00
     6     8400   420     .00     .00     .00    50.00   137.50   240.00
     7     8500   425     .00     .00     .00    37.50   123.75   225.00
     8     8600   430     .00     .00     .00    25.00   110.00   210.00
     9     8700   435     .00     .00     .00    12.50    96.25   195.00
    10     8800   440     .00     .00     .00      .00    82.50   180.00
    11     8900   445     .00     .00     .00      .00    68.75   165.00
    12     9000   450     .00     .00     .00      .00    55.00   150.00
    13     9100   455     .00     .00     .00      .00    41.25   135.00
    14     9200   460     .00     .00     .00      .00    27.50   120.00
    15     9300   465     .00     .00     .00      .00    13.75   105.00
    16     9400   470     .00     .00     .00      .00      .00    90.00
    17     9500   475     .00     .00     .00      .00      .00    75.00
    18     9600   480     .00     .00     .00      .00      .00    60.00
    19     9700   485     .00     .00     .00      .00      .00    45.00
    20     9800   490     .00     .00     .00      .00      .00    30.00
    21     9900   495     .00     .00     .00      .00      .00    15.00
    22   10,000   500     .00     .00     .00      .00      .00      .00
    23  Line indicates point at which there is no tax liability.
    24                               PART V
    25                         WITHHOLDING OF TAX
    26     Section 322.  Requirement of Withholding Tax.--Every employer
    27  maintaining an office or transacting business within this
    28  Commonwealth and making payment of taxable compensation (i) to a
    29  resident individual, or (ii) to a nonresident individual
    30  taxpayer performing services on behalf of such employer within
    19710H0190B0445                 - 89 -

     1  this Commonwealth, shall deduct and withhold from such
     2  compensation for each payroll period a tax computed in such
     3  manner as to result, so far as practicable, in withholding from
     4  the employe's compensation during each calendar year an amount
     5  substantially equivalent to the tax reasonably estimated to be
     6  due for such year with respect to such compensation. The method
     7  of determining the amount to be withheld shall be prescribed by
     8  regulations of the department, with due regard to any credits
     9  allowable against his tax under this article.
    10     Section 323.  Information Statement.--Every employer required
    11  to deduct and withhold tax under this article shall furnish to
    12  each such employe to whom the employer has paid compensation
    13  during the calendar year, on or before February 15 JANUARY 31 of  <--
    14  the succeeding year, or, if his employment is terminated before
    15  the close of such calendar year, within thirty days from the
    16  date on which the last payment of compensation is made, a
    17  written statement in such manner and in such form as may be
    18  prescribed by the department showing the amount of compensation
    19  paid by the employer to the employe, the amount deducted and
    20  withheld as tax, and such other information as the department
    21  shall prescribe.
    22     Section 324.  Time for Filing Employers' Returns.--Every
    23  employer required to deduct and withhold tax under this article
    24  shall file a quarterly withholding return on or before the last
    25  day of April, July, October and December JANUARY for the three    <--
    26  months ending the last day of March, June, September and
    27  December. Such quarterly returns shall be filed with the
    28  department at its main office or at any branch office which it
    29  may designate for filing returns.
    30     Section 324.1.  Monthly, Semi-monthly and Quarterly Payment
    19710H0190B0445                 - 90 -

     1  of Taxes Withheld.--Every employer withholding tax under this
     2  article shall pay over to the department or to a depository
     3  designated by it the tax required to be deducted and withheld
     4  under this article.
     5     (1)  Where the aggregate amount required to be deducted and
     6  withheld by any employer for each quarterly period can
     7  reasonably be expected to be less than three hundred dollars
     8  ($300), such employer shall file a return and pay the tax on or
     9  before the last day for filing a quarterly return under section
    10  324, except that commencing with the year 1971, and each year
    11  thereafter every employer required to file a quarterly return
    12  for the second calendar quarter shall with respect to the tax
    13  deducted and withheld for the months of April and May pay such
    14  tax over to the department on or before June 15 next following.
    15  The payment of the April and May tax withholdings shall not
    16  relieve the employer of the duty to file a quarterly return on
    17  or before the last day of July next following and remit
    18  therewith the tax deducted and withheld for the month of June.
    19     (2)  Where the aggregate amount required to be deducted and
    20  withheld by any employer for each quarterly period can
    21  reasonably be expected to be three hundred dollars ($300) or
    22  more but less than one thousand dollars ($1,000), such employer
    23  shall pay the tax monthly, on or before the fifteenth day of the
    24  month succeeding the months of January to November, inclusive,
    25  and on or before the last day of January following the month of
    26  December.
    27     (3)  Where the aggregate amount required to be deducted and
    28  withheld by any employer for each quarterly period can
    29  reasonably be expected to be one thousand dollars ($1,000) or
    30  more, such employer shall pay the tax semi-monthly, within three
    19710H0190B0445                 - 91 -

     1  banking days after the close of the semi-monthly period.
     2     Notwithstanding anything in this section to the contrary,
     3  whenever any employer fails to deduct or truthfully account for
     4  or pay over the tax withheld or file returns as prescribed by
     5  this article, the department may serve a notice on such employer
     6  requiring him to withhold taxes which are required to be
     7  deducted under this article and deposit such taxes in a bank
     8  approved by the department in a separate account in trust for
     9  and payable to the department, and to keep the amount of such
    10  tax in such account until payment over to the department. Such
    11  notice shall remain in effect until a notice of cancellation is
    12  served on the employer by the department.
    13     Section 325.  Employer's Liability for Withheld Taxes.--Every
    14  employer required to deduct and withhold tax under this article
    15  is hereby made liable for such tax. For purposes of assessment
    16  and collection, any amount required to be withheld and paid over
    17  to the department and any additions to tax penalties and
    18  interest with respect thereto, shall be considered the tax of
    19  the employer. All taxes deducted and withheld from employes
    20  pursuant to this article or under color of this article shall
    21  constitute a trust fund for the Commonwealth and shall be
    22  enforceable against such employer, his representative or any
    23  other person receiving any part of such fund.
    24     Section 326.  Employer's Failure to Withhold.--If an employer
    25  fails to deduct and withhold tax as prescribed herein and
    26  thereafter the tax against which such tax may be credited is
    27  paid, the tax which was required to be deducted and withheld
    28  shall not be collected from the employer, but the employer shall
    29  not be relieved of the liability for any penalty, interest, or
    30  additions to the tax imposed with respect to such failure to
    19710H0190B0445                 - 92 -

     1  deduct and withhold.
     2     Section 327.  Designation of Third Parties to Perform Acts
     3  Required of Employers.--In case a fiduciary, agent or other
     4  person has the control, receipt, custody or disposal of, or pays
     5  the compensation of an employe or a group of employes, employed
     6  by one or more employers, the department is authorized to
     7  designate such fiduciary, agent, or other person to perform such
     8  acts as are required of employers under this article as the
     9  department may by regulation prescribe. Except as may be
    10  otherwise prescribed by the department, all provisions of this
    11  article which are applicable to an employer shall be applicable
    12  to a fiduciary, agent or other person so designated.
    13                              PART VI
    14                           ESTIMATED TAX
    15     Section 330.  Declarations of Estimated Tax.--(a) Every
    16  resident and nonresident individual shall at the time
    17  hereinafter prescribed make a declaration of his estimated tax
    18  for the taxable year, containing such information as the
    19  department may prescribe by regulations, if his taxable income,
    20  other than from compensation on which tax is withheld under this
    21  article, can reasonably be expected to exceed one thousand
    22  dollars ($1,000).
    23         (b)  For the purposes of this article, the term
    24  "estimated tax" means the amount which an individual estimates
    25  to be his tax due under this article for the taxable year, less
    26  the amount which he estimates to be the sum of any credits
    27  allowable against the tax under this article.
    28     (c)  A husband and wife entitled to make a joint declaration
    29  of Federal estimated tax may make a joint declaration of
    30  estimated tax hereunder as if they were one taxpayer, in which
    19710H0190B0445                 - 93 -

     1  case the liability with respect to the estimated tax shall be
     2  joint and several. If a joint declaration is made but husband
     3  and wife elect to determine their taxes separately, the
     4  estimated tax for such year may be treated as the estimated tax
     5  of either husband or wife, or may be divided between them, as
     6  they may elect.
     7     (d)  Except as hereinafter provided, the date for filing a
     8  declaration of estimated tax shall depend upon when the resident
     9  or nonresident individual determines that his taxable income on
    10  which no tax has been withheld under this article can reasonably
    11  be expected to exceed one thousand dollars ($1,000) in the
    12  taxable year, as follows:
    13     (1)  If the determination is made on or before April 1 of the
    14  taxable year, a declaration of estimated tax shall be filed no
    15  later than April 15 of the taxable year.
    16     (2)  If the determination is made after April 1 but before
    17  June 2 of the taxable year, the declaration shall be filed no
    18  later than June 15 of such year.
    19     (3)  If the determination is made after June 1 but before
    20  September 2 of the taxable year, the declaration shall be filed
    21  no later than September 15 of such year.
    22     (4)  If the determination is made after September 1 of the
    23  taxable year, the declaration shall be filed no later than
    24  January 15 of the year succeeding the taxable year.
    25     (e)  Notwithstanding subsection (d), of this section, a
    26  declaration of estimated tax of an individual having an
    27  estimated taxable income from farming for the taxable year which
    28  is at least two-thirds of his total estimated taxable income for
    29  the taxable year may be filed at any time on or before January
    30  15 of the succeeding year.
    19710H0190B0445                 - 94 -

     1     (f)  A declaration of estimated tax of an individual having a
     2  total estimated tax for the taxable year of fifty dollars ($50)
     3  or less may be filed at any time on or before January 15 of the
     4  succeeding year under regulations of the department.
     5     (g)  An individual may amend a declaration under regulations
     6  of the department.
     7     (h)  If on or before January 31 of the year succeeding a
     8  taxable year, an individual files his return for the entire
     9  taxable year for which a declaration was required to be filed
    10  within the time prescribed by subsection (d) (4) of this section
    11  and pays therewith the full amount of the tax shown to be due on
    12  the return:
    13     (1)  Such return shall be considered as his declaration which
    14  was required to be filed no later than January 15.
    15     (2)  Such return shall be considered as the amendment
    16  permitted by subsection (g) to be filed on or before January 15
    17  provided the amount of the tax shown on the return is greater
    18  than the amount of the estimated tax shown in a declaration
    19  previously made.
    20     (i)  This article shall apply to a taxable year other than a
    21  calendar year by the substitution of the months of such fiscal
    22  year for the corresponding months specified in this section.
    23     (j)  This article shall apply to an individual having a
    24  taxable year of less than twelve months in accordance with
    25  procedures prescribed in regulations of the department.
    26     Section 331.  Payments of Estimated Tax.--(a) The estimated
    27  tax with respect to which a declaration is required shall be
    28  paid as follows:
    29     (1)  If the declaration is filed on or before April 15 of the
    30  taxable year, the estimated tax shall be paid in four equal
    19710H0190B0445                 - 95 -

     1  installments. The first installment shall be paid at the time of
     2  the filing of the declaration, and the second, third and fourth
     3  installments shall be paid on or before the succeeding June 15,
     4  September 15, and January 15, respectively.
     5     (2)  If the declaration is not required to be filed on or
     6  before April 15 of the taxable year and is filed after April 15,
     7  but before June 16 of the taxable year, the estimated tax shall
     8  be paid in three equal installments. The first installment shall
     9  be paid at the time of the filing of the declaration, and the
    10  second and third installments shall be paid on the succeeding
    11  September 15 and January 15, respectively.
    12     (3)  If the declaration is not required to be filed on or
    13  before June 15 of the taxable year and is filed after June 15
    14  but before September 16 of the taxable year, the estimated tax
    15  shall be paid in two equal installments. The first installment
    16  shall be paid at the time of the filing of the declaration, and
    17  the second shall be paid on the succeeding January 15.
    18     (4)  If the declaration is not required to be filed on or
    19  before September 15 of the taxable year and is filed after
    20  September 15 of the taxable year, the estimated tax shall be
    21  paid in full at the time of the filing of the declaration.
    22     (5)  If the declaration is not filed within the time
    23  prescribed therefor, or after the expiration of any extension of
    24  time therefor, clauses (2), (3) and (4) of this subsection shall
    25  not apply, and there shall be paid at the time of such filing
    26  the amount of all installments of estimated tax which were due
    27  and payable on or before the date the declaration was filed, and
    28  the remaining installments shall be paid at such times and in
    29  such amounts as they would have been payable if the declaration
    30  had been filed when due.
    19710H0190B0445                 - 96 -

     1     (b)  If an individual described in subsection (e) of section
     2     (relating to farmers) makes a declaration of estimated tax
     3  after September 15 of the taxable year, but before the following
     4  January 15, the estimated tax shall be paid in full at the time
     5  of the filing of the declaration.
     6     (c)  If any amendment of a declaration is filed, the
     7  remaining unpaid installments, if any, shall be ratably
     8  increased or decreased, as the case may be, to reflect any
     9  increase or decrease in the estimated tax by reason of such
    10  amendment, and if any amendment is made after September 15 of
    11  the taxable year, any increase in the estimated tax by reason
    12  thereof shall be paid at the time of making such amendment.
    13                              PART VII
    14                     RETURNS AND PAYMENT OF TAX
    15     Section 335.  Returns and Liability.--On or before the date
    16  when the taxpayer's Federal income tax return is due or would be
    17  due if the taxpayer were required to file a Federal income tax
    18  return, a tax return under this article shall be made and filed
    19  by or for every taxpayer having taxable income for the taxable
    20  year.
    21     Section 336.  Returns of Married Individuals, Deceased or
    22  Disabled Individuals and Fiduciaries.--(a) If the Federal income
    23  tax liability of husband or wife is determined on a separate
    24  Federal return, their income tax liabilities and returns under
    25  this article shall be separate.
    26     (b)  If the Federal income tax liabilities of husband and
    27  wife (other than a husband and wife described in subsection (c))
    28  are determined on a joint Federal return, or if neither files a
    29  Federal return:
    30     (1)  they shall file a joint tax return under this article
    19710H0190B0445                 - 97 -

     1  and their tax liabilities shall be joint and several; or
     2     (2)  they may elect to file separate returns under this
     3  article on a single form if they comply with the requirements of
     4  the department in setting forth information, in which event
     5  their tax liabilities shall be separate, except as provided in
     6  subsection (d).
     7     (c)  If either husband or wife is a resident and the other is
     8  a nonresident, they shall file separate tax returns under this
     9  article on such single or separate forms as may be required by
    10  the department, in which event their tax liabilities shall be
    11  separate except as provided in subsection (d) unless both elect
    12  to determine their joint taxable income as if both were
    13  residents, in which event their tax liabilities shall be joint
    14  and several.
    15     (d)  If husband and wife file separate tax returns under this
    16  article on a single form pursuant to subsections (b) or (c) and:
    17     (1)  If the sum of the payments by either spouse, including
    18  withheld and estimated taxes, exceeds the amount of the tax for
    19  which such spouse is separately liable, the excess may be
    20  applied by the department to the credit of the other spouse if
    21  the sum of the payments by such other spouse, including withheld
    22  and estimated taxes, is less than the amount of the tax for
    23  which such other spouse is separately liable.
    24     (2)  If the sum of the payments made by both spouses with
    25  respect to the taxes for which they are separately liable,
    26  including withheld and estimated taxes, exceeds the total of the
    27  taxes due, refund of the excess may be made payable to both
    28  spouses, or if either is deceased, to the survivor.
    29     Provided, however, That the provisions of this subsection (d)
    30  shall not apply if the return of either spouse includes a demand
    19710H0190B0445                 - 98 -

     1  that any overpayment made by him or her shall be applied only on
     2  account of his or her separate liability.
     3     (e)  The return for any deceased individual shall be made and
     4  filed by his executor, administrator, or other person charged
     5  with his property.
     6     (f)  The return for an individual who is unable to make a
     7  return by reason of minority or other disability shall be made
     8  and filed by his guardian, committee, fiduciary or other person
     9  charged with the care of his person or property, or by his duly
    10  authorized agent.
    11     (g)  The return for an estate or trust shall be made and
    12  filed by the fiduciary. If two or more fiduciaries are acting
    13  jointly, the return may be made by any one of them.
    14     Section 337.  Time and Place for Filing Returns and Paying
    15  Tax.--A person required to make and file a return under this
    16  article shall, without assessment, notice or demand, pay any tax
    17  due thereon to the department on or before the date fixed for
    18  filing such return (determined without regard to any extension
    19  of time for filing the return). The department shall prescribe
    20  by regulation the place for filing any return, declaration,
    21  statement, or other document required pursuant to this article
    22  and for payment of any tax.
    23     Section 338.  Signing of Returns and Other Documents.--(a)
    24  Any return, declaration, statement or other document required to
    25  be made pursuant to this article shall be signed in accordance
    26  with regulations or instructions prescribed by the department.
    27     (b)  Any return, statement, or other document required of a
    28  partnership shall be signed by one or more partners. The fact
    29  that a partner's name is signed to a return, statement, or other
    30  document, shall be prima facie evidence for all purposes that
    19710H0190B0445                 - 99 -

     1  such partner is authorized to sign on behalf of the partnership.
     2     (c)  The making or filing of any return, declaration,
     3  statement or other document or copy thereof required to be made
     4  or filed pursuant to this article shall constitute a
     5  certification by the person making or filing such return,
     6  declaration, statement or other document or copy thereof that
     7  the statements contained therein are true and that any copy
     8  filed is a true copy.
     9     Section 339.  Extensions of Time.--(a) A taxpayer who is
    10  granted a Federal extension of time by the Commissioner of
    11  Internal Revenue for filing any return, declaration, statement
    12  or other document shall be automatically entitled to a similar
    13  extension of the time for filing any corresponding return,
    14  declaration, statement or other document required pursuant to
    15  this article. No application for such extension need be made,
    16  provided that evidence of the granting of the Federal extension
    17  accompany the return, declaration, statement or other document
    18  filed pursuant to this article.
    19     (b)  In all other cases the department may, upon application,
    20  grant a reasonable extension of time for filing any return,
    21  declaration, statement, or other document required pursuant to
    22  this article, on such terms and conditions as it may require.
    23  Except for a taxpayer who is outside the United States, no such
    24  extension for filing any return, declaration, statement or other
    25  document, shall exceed six months.
    26     Section 340.  Requirements Concerning Returns, Notices,
    27  Records and Statements.--(a) The department may prescribe by
    28  regulation for the keeping of records, the content and form of
    29  returns, declarations, statements and other documents and the
    30  filing of copies of Federal income tax returns and
    19710H0190B0445                 - 100 -

     1  determinations. The department may require any person, by
     2  regulation or notice served upon such person, to make such
     3  returns, render such statements, or keep such records, as the
     4  department may deem sufficient to show whether or not such
     5  person is liable for tax under this article.
     6     (b)  (1)  When required by regulations prescribed by the
     7  department:
     8     (i)  Any person required under the authority of this article
     9  to make a return, declaration, statement, or other document
    10  shall include in such return, declaration, statement or other
    11  document such identifying number as may be prescribed for
    12  securing proper identification of such person.
    13     (ii)  Any person with respect to whom a return, declaration,
    14  statement, or other document is required under the authority of
    15  this article to make a return, declaration, statement, or other
    16  document with respect to another person, shall request from such
    17  other person, and shall include in any such return, declaration,
    18  statement, or other document, such identifying number as may be
    19  prescribed for securing proper identification of such other
    20  person.
    21     (2)  For purposes of this section, the department is
    22  authorized to require such information as may be necessary to
    23  assign an identifying number to any person.
    24     (c)  Every partnership having a resident partner or having
    25  any income derived from sources within this Commonwealth shall
    26  make a return for the taxable year setting forth all items of
    27  income, gain, loss and deduction, and such other pertinent
    28  information as the department may by regulations prescribe. Such
    29  return shall be filed on or before the fifteenth day of the
    30  fourth month following the close of each taxable year. For
    19710H0190B0445                 - 101 -

     1  purposes of this subsection, "taxable year" means year or period
     2  which would be a taxable year of the partnership if it were
     3  subject to tax under this article.
     4     (d)  The department may prescribe regulations requiring
     5  returns of information to be made and filed on or before
     6  February 28 of each year as to the payment or crediting in any
     7  calendar year of amounts of one thousand dollars ($1,000) or
     8  more to any taxpayer. Such returns may be required of any
     9  person, including lessees or mortgagors of real or personal
    10  property, fiduciaries, employers and all officers and employes
    11  of this Commonwealth, or of any municipal corporation or
    12  political subdivision of this Commonwealth having the control,
    13  receipt, custody, disposal or payment of interest, rents,
    14  salaries, wages, premiums, annuities, compensations,
    15  remunerations, emoluments or other fixed or determinable gains,
    16  profits or income, except interest coupons payable to bearer. A
    17  duplicate of the statement as to tax withheld on compensation
    18  required to be furnished by an employer to an employe, shall
    19  constitute the return of information required to be made under
    20  this section with respect to such compensation.
    21     Section 341.  Report of Change in Federal Taxable Income.--If
    22  the amount of a taxpayer's Federal taxable income reported on
    23  his Federal income tax return for any taxable year is changed or
    24  corrected by the United States Internal Revenue Service or other
    25  competent authority of the United States, the taxpayer shall
    26  report to the department such change or correction in Federal
    27  taxable income within ninety days after the final determination
    28  of such change or correction, or as otherwise required by the
    29  department, and shall either concede the accuracy of such
    30  determination or state wherein he claims it is erroneous. Any
    19710H0190B0445                 - 102 -

     1  taxpayer filing an amended Federal income tax return shall also
     2  file within ninety days thereafter an amended return under this
     3  article, and shall give such information as the department may
     4  require. The department may by regulation prescribe such
     5  exceptions to the requirements of this section as it deems
     6  appropriate.
     7                             PART VIII
     8                    PROCEDURE AND ADMINISTRATION
     9     Section 345.  Payment on Notice and Demand.--Upon receipt of
    10  notice and demand from the department, there shall be paid the
    11  amount of any tax due under the provisions of this article
    12  stated in such notice and demand.
    13     Section 346.  Assessment.--(a) The department is authorized
    14  and required to make the inquiries, determinations and
    15  assessments of all taxes imposed by this article.
    16     (b)  If the mode or time for the assessment of any tax is not
    17  otherwise provided for, the department may establish the same by
    18  regulations.
    19     Section 347.  Procedure for Reassessment.--Promptly after the
    20  date of an assessment by the department, the department shall
    21  send by mail a copy thereof to the person against whom it was
    22  made. Within ninety days after the date upon which the copy of
    23  any such assessment was mailed, such person may file with the
    24  department a petition for reassessment of such tax. Every
    25  petition for reassessment shall state specifically the reasons
    26  which the petitioner believes entitled him to such reassessment,
    27  and it shall be supported by affidavit that it is not made for
    28  the purpose of delay and that the facts set forth therein are
    29  true. It shall be the duty of the department, within six months
    30  after receiving a petition for reassessment, to dispose of such
    19710H0190B0445                 - 103 -

     1  petition for reassessment. Notice of the action taken upon any
     2  petition for reassessment shall be given to the petitioner
     3  promptly thereafter.
     4     Section 348.  Review by Board of Finance and Revenue.--Within
     5  ninety days after the date of mailing of notice by the
     6  department of the action taken on any petition for reassessment
     7  filed with it, the person against whom the assessment was made
     8  may by petition request the Board of Finance and Revenue to
     9  review such action. Every petition for review filed hereunder
    10  shall state specifically the reasons upon which the petitioner
    11  relies, or shall incorporate by reference the petition for
    12  reassessment in which such reasons shall have been stated. The
    13  petition shall be supported by affidavit that it is not made for
    14  the purpose of delay and that the facts therein set forth are
    15  true. The Board of Finance and Revenue shall act in disposition
    16  of such petitions filed with it within six months after they
    17  have been received, and in the event of failure of said board to
    18  dispose of any such petition within six months, the action taken
    19  by the department upon the petition for reassessment shall be
    20  deemed sustained. The Board of Finance and Revenue may sustain
    21  the action taken on the petition for reassessment, or it may
    22  reassess the tax due upon such basis as it shall deem according
    23  to law. Notice of the action of the Board of Finance and Revenue
    24  shall be given by mail to the department and to the petitioner.
    25     Section 349.  Appeal to the Commonwealth Court.--Any person,
    26  or the Commonwealth, aggrieved by the decision of the Board of
    27  Finance and Revenue may, within sixty days, appeal to the
    28  Commonwealth Court from the decision of the Board of Finance and
    29  Revenue in the manner now or hereafter provided by law for
    30  appeals from decisions of said board in tax cases.
    19710H0190B0445                 - 104 -

     1     Section 350.  Collection of Tax.--The department shall
     2  collect the taxes imposed by this article in the manner provided
     3  by law for the collection of taxes imposed by the laws of this
     4  Commonwealth.
     5     Section 351.  Collection upon Failure to Request
     6  Reassessment, Review or Appeal.--(a) The department may collect
     7  any tax:
     8     (1)  After ninety days from the date of mailing of a copy of
     9  the notice of assessment, if no petition for reassessment has
    10  been filed;
    11     (2)  After ninety days from the date of mailing of notice of
    12  the department's action thereon, if no petition for review has
    13  been filed;
    14     (3)  Within sixty days from the date of mailing of notice of
    15  the decision of the Board of Finance and Revenue upon a petition
    16  for review or from the expiration of the board's time for acting
    17  upon such petition, if no decision has been made; or
    18     (4)  Immediately, in all cases of judicial sales,
    19  receiverships, assignments or bankruptcies.
    20     In any such proceeding for the collection of the tax imposed
    21  by this article, the person against whom the assessment was made
    22  shall not be permitted to set up any ground of defense that
    23  might have been presented to the department, the Board of
    24  Finance and Revenue or the Commonwealth Court if such person had
    25  properly pursued his administrative remedies under this article.
    26     Section 352.  Lien for Tax.--(a) If any person liable to pay
    27  any tax neglects or refuses to pay the same on the date the tax
    28  becomes collectible, the amount of such tax, together with any
    29  costs that may accrue in addition thereto, shall be a lien in
    30  favor of the Commonwealth against all real estate within the
    19710H0190B0445                 - 105 -

     1  Commonwealth of such person from and after such date.
     2     (b)  The department may, at any time, transmit to the
     3  prothonotaries of the respective counties certified copies of
     4  all liens for taxes imposed by this article. It shall be the
     5  duty of each prothonotary receiving such lien to enter and
     6  docket the same of record in his office, which lien shall be
     7  indexed as judgments are now indexed. All such liens shall have
     8  priority to, and be fully before, any other obligation,
     9  judgment, claim, lien or estate paid and satisfied out of the
    10  judicial sale of said real estate with which said real estate
    11  may subsequently become charged, or for which it may
    12  subsequently become liable, subject, however, to mortgage or
    13  other liens existing and duly recorded at the time such tax lien
    14  is recorded, save and except the cost of sale and of the writ
    15  upon which it is made and real estate taxes imposed or assessed
    16  upon said property. The lien of said taxes shall continue for
    17  five years from the date of entry and may be revived and
    18  continued, in the manner now or hereafter provided for renewal
    19  of judgments, and it shall be lawful for a writ of scire facias
    20  to issue and be prosecuted to judgment in the manner in which
    21  such writs are ordinarily employed.
    22     (c)  Any wilful failure of any prothonotary to carry out any
    23  duty imposed upon him by this section shall be a misdemeanor
    24  and, upon conviction, he shall be sentenced to pay a fine not
    25  exceeding one thousand dollars ($1,000) and cost of prosecution,
    26  or to undergo imprisonment not exceeding one year, or both.
    27     Section 353.  Refund or Credit of Overpayment.--(a) In the
    28  case of any overpayment, the department may credit the amount of
    29  such overpayment against any liability in respect of the tax
    30  imposed by this article on the part of the person who made the
    19710H0190B0445                 - 106 -

     1  overpayment and shall refund any balance to such person.
     2     (b)  The department is authorized to prescribe regulations
     3  providing for the crediting against the estimated tax for any
     4  taxable year of the amount determined to be an overpayment of
     5  the tax for a preceding taxable year.
     6     (c)  If the taxpayer has paid as an installment of estimated
     7  tax more than the correct amount of such installment, the
     8  overpayment shall be credited against the unpaid installments,
     9  if any. If the amount paid, whether or not on the basis of
    10  installments, exceeds the amount determined to be the correct
    11  amount of the tax, the overpayment shall be credited or refunded
    12  as provided in subsection (a) or (b).
    13     Section 354.  Restrictions on Refunds.--No credit or refund
    14  shall be made under section 353 without the approval of the
    15  Board of Finance and Revenue, except such credits or refunds as
    16  arise:
    17     (1)  By reason of the overpayment of an installment of
    18  estimated tax;
    19     (2)  Upon the filing of a final return showing less tax due
    20  after the application of the allowable credits than the amount
    21  of tax withheld from the taxpayer's compensation or the amount
    22  of tax paid by him as estimated tax; or
    23     (3)  Upon the filing of an amended return or a report of
    24  change in Federal taxable income disclosing less tax due than
    25  the taxpayer has theretofore paid.
    26     Section 355.  Limitations on Assessment and Collection.--(a)
    27  The amount of any tax imposed by this article shall be assessed
    28  within three years after the return or any report of change in
    29  Federal taxable income, whichever is later, is filed. For the
    30  purposes of this subsection and subsection (b), a return filed
    19710H0190B0445                 - 107 -

     1  before the last day prescribed for the filing thereof, or before
     2  the last day of any extension of time for the filing thereof,
     3  shall be considered as filed on such last day.
     4     (b)  If the taxpayer omits from taxable income an amount
     5  properly includable therein which is in excess of twenty-five
     6  per cent of the amount of taxable income stated in the return,
     7  the tax may be assessed at any time within six years after the
     8  return was filed.
     9     (c)  Where no return is filed, or if a taxpayer shall fail to
    10  report a change in Federal taxable income or, when required, to
    11  file an amended return, the amount of the tax due may be
    12  assessed at any time.
    13     (d)  Where the taxpayer files a false or fraudulent return
    14  with intent to evade the tax imposed by this article, the amount
    15  of tax due may be assessed at any time.
    16     Section 356.  Extension of Limitation Period.--
    17  Notwithstanding section 355, where, before the expiration of the
    18  period prescribed therein a taxpayer has consented in writing
    19  that such period be extended, the amount of tax due may be
    20  assessed at any time within such extended period. The period so
    21  extended may be further extended by subsequent consents in
    22  writing made before the expiration of the extended period.
    23     Section 357.  Limitations on Refund or Credit.--Any
    24  application for refund must be filed with the Board of Finance
    25  and Review within three years from the time the return, amended
    26  return, or report of change in Federal taxable income is
    27  required to be filed, determined without regard to any extension
    28  of time or within two years from the time the tax was paid,
    29  whichever is later.
    30     Section 358.  Interest.--If any amount of tax imposed by this
    19710H0190B0445                 - 108 -

     1  article is not paid on or before the last date prescribed for
     2  payment, interest on such amount at the rate of one-half of one
     3  per cent per month, for each month or fraction thereof from such
     4  date, shall be paid for the period from such last date to the
     5  date paid. The last date prescribed for payment shall be
     6  determined without regard to any extension of time for filing
     7  the return. This section shall not apply to any failure to pay
     8  estimated tax.
     9     Section 359.  Additions.--(a) In case of failure to file any
    10  return required under section 335 on the date prescribed
    11  therefor, determined with regard to any extension of time for
    12  filing, unless it is shown that such failure is due to
    13  reasonable cause and not due to wilful neglect, there shall be
    14  added to the amount required to be shown as tax on such return
    15  five per cent of the amount of such tax if the failure is for
    16  not more than one month, with an additional five per cent for
    17  each additional month or fraction thereof during which such
    18  failure continues, not exceeding twenty-five per cent, in the
    19  aggregate, but in no case shall the amount added be less than
    20  five dollars ($5).
    21     (b)  If any part of any underpayment of any tax imposed by
    22  this article is due to negligence or intentional disregard of
    23  rules and regulations, but without intent to defraud, there
    24  shall be added to the tax an amount equal to five per cent of
    25  the underpayment.
    26     (c)  If any part of any underpayment of tax required to be
    27  shown on a return is due to fraud, there shall be added to the
    28  tax an amount equal to fifty per cent of the underpayment. This
    29  amount shall be in lieu of any amount determined under
    30  subsection (b).
    19710H0190B0445                 - 109 -

     1     (d)  (1)  If any taxpayer fails to file a declaration of
     2  estimated tax or fails to pay all of any part of an installment
     3  of estimated tax, he shall be deemed to have made an
     4  underpayment of estimated tax. There shall be added to the tax
     5  for the taxable year an amount at the rate of six per cent per
     6  annum upon the amount of the underpayment for the period of the
     7  underpayment but not beyond the fifteenth day of the fourth
     8  month following the close of the taxable year. The amount of the
     9  underpayment shall be the excess of the amount of the
    10  installment which would be required to be paid if the estimated
    11  tax were equal to eighty per cent of the tax (two-thirds in the
    12  case of an individual described in subsection (e) of section
    13  330) shown on the return for the taxable year (or if no return
    14  was filed, of the tax for such year) over the amount, if any, of
    15  the installments paid on or before the last day prescribed for
    16  such payment. No underpayment shall be deemed to exist with
    17  respect to a declaration or installment otherwise due on or
    18  after the taxpayer's death.
    19     (2)  No addition to tax shall be imposed if the total amount
    20  of all payments of estimated tax made on or before the last date
    21  prescribed for the payment of such installment equals or exceeds
    22  the lesser of:
    23     (A)  The amount which would have been required to be paid on
    24  or before such date if the estimated tax were:
    25     (i)  the tax shown on the return of the individual for the
    26  preceding taxable year, if a return showing a liability for tax
    27  was filed by the individual for the preceding taxable year and
    28  such preceding year was a taxable year of twelve months, or
    29     (ii)  an amount equal to the tax computed, at the rates
    30  applicable to the taxable year, on the basis of the taxpayer's
    19710H0190B0445                 - 110 -

     1  status with respect to personal exemptions for the taxable year,
     2  but otherwise on the basis of the facts shown on his return for,
     3  and the law applicable to, the preceding taxable year; or
     4     (B)  An amount equal to ninety per cent of the tax computed,
     5  at the rates applicable to the taxable year, on the basis of the
     6  actual taxable income for the months in the taxable year ending
     7  before the month in which the installment is required to be
     8  paid.
     9     (e)  Any person required to collect, account for and pay over
    10  any tax imposed by this article who wilfully fails to collect
    11  such tax or truthfully account for and pay over such tax, or
    12  wilfully attempts in any manner to evade or defeat any such tax
    13  or the payment thereof, shall, in addition to other penalties
    14  provided by law, be liable to a penalty equal to the total
    15  amount of the tax evaded or not collected or not accounted for
    16  and paid over. No penalty shall be imposed under subsection (b)
    17  or (c) of section 359 for any offense to which this section is
    18  applicable.
    19     (f)  Any person required under the provisions of section 323
    20  to furnish a statement to an employe who wilfully furnishes a
    21  false or fraudulent statement, or who wilfully fails to furnish
    22  a statement in the manner, at the time, and showing the
    23  information required under section 323 and the regulations
    24  prescribed thereunder, shall, for each such failure, be subject
    25  to a penalty of fifty dollars ($50) for each employe.
    26     (G)  WHENEVER ANY CHECK ISSUED IN PAYMENT OF ANY TAX, OR FOR   <--
    27  ANY OTHER PURPOSE REQUIRED BY THIS ARTICLE, SHALL BE RETURNED TO
    28  THE DEPARTMENT AS UNCOLLECTIBLE, THE DEPARTMENT SHALL CHARGE A
    29  FEE OF TEN PER CENT OF THE FACE AMOUNT THEREOF, PLUS ALL PROTEST
    30  FEES, TO THE PERSON PRESENTING SUCH CHECK TO THE DEPARTMENT, TO
    19710H0190B0445                 - 111 -

     1  COVER THE COST OF ITS COLLECTION IN ADDITION TO THE INTEREST AND
     2  PENALTIES OTHERWISE PROVIDED FOR IN THIS ARTICLE:  PROVIDED,
     3  THAT THE ADDITIONS IMPOSED HEREBY SHALL NOT EXCEED TWO HUNDRED
     4  DOLLARS ($200) NOR BE LESS THAN TEN DOLLARS ($10).
     5     Section 360.  Crimes.--(a) Any person who wilfully attempts
     6  in any manner to evade or defeat any tax imposed by this article
     7  or the payment thereof shall, in addition to other penalties
     8  provided by law, be guilty of a misdemeanor and shall, upon
     9  conviction, be sentenced to pay a fine not exceeding twenty-five
    10  thousand dollars ($25,000) or to undergo imprisonment not
    11  exceeding two years, or both.
    12     (b)  Any person required under this article to collect,
    13  account for and pay over any tax imposed by this article who
    14  wilfully fails to collect or truthfully account for and pay over
    15  such tax, shall, in addition to other penalties provided by law,
    16  be guilty of a misdemeanor, and shall, upon conviction, be
    17  sentenced to pay a fine not exceeding twenty-five thousand
    18  dollars ($25,000) or to undergo imprisonment not exceeding two
    19  years, or both.
    20     (c)  Any person required under this article to pay any tax or
    21  to make a return, keep any records or supply any information,
    22  who wilfully fails to pay such tax or make such return, keep
    23  such records or supply such information at the time or times
    24  required by law or regulations, shall, in addition to other
    25  penalties provided by law, be guilty of a misdemeanor and shall,
    26  upon conviction, be sentenced to pay a fine not exceeding five
    27  thousand dollars ($5,000) or to undergo imprisonment not
    28  exceeding two years, or both.
    29     (d)  Any person who wilfully makes and subscribes any return,
    30  statement or other document which contains or is verified by a
    19710H0190B0445                 - 112 -

     1  written declaration that it is made under the penalties of
     2  perjury and which he does not believe to be true and correct as
     3  to every material matter, or wilfully aids or assists in, or
     4  procures, counsels or advises the preparation or presentation,
     5  in connection with any matter arising under this article, of a
     6  return, affidavit, claim or other document which is fraudulent
     7  or is false as to any material matter, whether or not such
     8  falsity or fraud is with the knowledge or consent of the person
     9  authorized or required to present such return, affidavit, claim
    10  or document, shall be guilty of a misdemeanor and shall, upon
    11  conviction, be sentenced to pay a fine not exceeding five
    12  thousand dollars ($5,000) or to undergo imprisonment not
    13  exceeding two years, or both.
    14     (e)  Any person who wilfully delivers or discloses to the
    15  department any list, return, account, statement or other
    16  document known by him to be fraudulent or to be false as to any
    17  material matter shall be guilty of a misdemeanor and shall, upon
    18  conviction, be sentenced to pay a fine not exceeding five
    19  thousand dollars ($5,000) or to undergo imprisonment not
    20  exceeding two years, or both.
    21     (f)  It shall be unlawful for any officer or employe of the
    22  Commonwealth to divulge or to make known in any manner whatever,
    23  not provided by law, except for official purposes, to any
    24  person, the amount or source of income, profits, losses,
    25  expenditures or any particular thereof set forth or disclosed in
    26  any return, or to permit any return or copy thereof or any book
    27  containing any abstract or particulars thereof, to be seen or
    28  examined by any person except as provided by law, and it shall
    29  be unlawful for any person to print or publish in any manner
    30  whatsoever not provided by law, any return or any part thereof
    19710H0190B0445                 - 113 -

     1  or source of income, profits, losses or expenditures appearing
     2  in any return, and any person committing an offense against the
     3  foregoing provisions shall be guilty of a misdemeanor and, upon
     4  conviction thereof, shall be fined not more than one thousand
     5  dollars ($1,000), or imprisoned for not more than one year, or
     6  both, together with the costs of prosecution; and, if the
     7  offender be an officer or employe of the Commonwealth, he shall
     8  be dismissed from office or discharged from employment.
     9     (g)  Notwithstanding subsection (f), it shall be lawful for
    10  any officer or employe of the Commonwealth having custody of
    11  returns to produce them or evidence of anything contained in
    12  them in any action or proceeding in any court on behalf of the
    13  department under the provisions of this article to which it is a
    14  party, or on behalf of any party to any action or proceeding
    15  under the provisions of this article, when the returns or facts
    16  shown thereby are directly involved in such action or
    17  proceeding, in either of which events the court may require the
    18  production of and may admit in evidence so much of said returns
    19  or the facts shown thereby as are pertinent to the action or
    20  proceeding and no more. Nothing herein shall be construed to
    21  prohibit the delivery to a taxpayer or his duly authorized
    22  representative of a certified copy of any return filed in
    23  connection with his tax, nor to prohibit the publication of
    24  statistics so classified as to prevent the identification of
    25  particular returns and the items thereof or the inspection by
    26  the Attorney General or other legal representatives of the
    27  Commonwealth of the return of any taxpayer who shall bring
    28  action to review the tax based thereon or against whom an action
    29  or proceeding has been instituted for the collection or recovery
    30  of the tax imposed by this article.
    19710H0190B0445                 - 114 -

     1     Section 361.  Rules and Regulations.--The department is
     2  hereby charged with the enforcement of the provisions of this
     3  article, and is hereby authorized and empowered to prescribe,
     4  adopt, promulgate and enforce rules and regulations relating to
     5  any matter or thing pertaining to the administration and
     6  enforcement of the provisions of this article and the collection
     7  of taxes imposed by this article.
     8     Section 362.  Examination.--The department, or any agent
     9  authorized in writing by it, is hereby authorized to examine the
    10  books, papers and records of any taxpayer or supposed taxpayer,
    11  and to require the production of a copy of his return as made to
    12  and filed with the Federal Government, if one was so made and
    13  filed, in order to verify the accuracy of any return made, or if
    14  no return was made, to ascertain and assess the tax imposed by
    15  this article. Every such taxpayer or supposed taxpayer is hereby
    16  directed and required to give to the department or its duly
    17  authorized agent the means, facilities and opportunity for such
    18  examinations and investigations as are hereby provided and
    19  authorized. The department is hereby authorized to examine any
    20  person under oath concerning any taxable income which was or
    21  should have been returned for taxation, and to this end may
    22  compel the production of books, papers and records and the
    23  attendance of all persons, whether as parties or witnesses, whom
    24  it believes have knowledge of such taxable income. The procedure
    25  for such hearing or examination shall be the same as that
    26  provided by "The Fiscal Code" relating to inquisitorial powers
    27  of fiscal officers.
    28     Section 363.  Cooperation with Other Governmental Agencies.--
    29  Notwithstanding the provisions of subsection (f) of section 359,
    30  the department may permit the Commissioner of Internal Revenue
    19710H0190B0445                 - 115 -

     1  of the United States, or the proper officer of any political
     2  subdivision of this Commonwealth or of any other state imposing
     3  tax based upon the incomes of individuals, or the authorized
     4  representative of such officer, to inspect the tax returns of
     5  any taxpayer, or may furnish to such officer or his authorized
     6  representative an abstract of the return of income of any
     7  taxpayer, or supply him with information concerning any item of
     8  income contained in any return of any taxpayer. Such permission
     9  shall be granted or such information furnished to such officer
    10  or his representative only if the statutes of the United States
    11  or of such other state, as the case may be, grant substantially
    12  similar privileges to the proper officer of this Commonwealth
    13  charged with the administration of the personal income tax law
    14  thereof.
    15     SECTION 364.  APPROPRIATION FOR REFUNDS.--SO MUCH OF THE       <--
    16  PROCEEDS OF THE TAX IMPOSED BY THIS ARTICLE AS SHALL BE
    17  NECESSARY FOR THE PAYMENT OF REFUNDS, ENFORCEMENT, OR
    18  ADMINISTRATION, UNDER THIS ARTICLE, IS HEREBY APPROPRIATED FOR
    19  SUCH PURPOSES.
    20                              PART IX
    21                      MISCELLANEOUS PROVISIONS
    22     Section 370.  Effective Date.-- Except as hereinafter
    23  provided this article shall take effect on March 1, 1971, and
    24  the tax imposed hereby shall apply to taxable years ending after
    25  December 31, 1970:  Provided, however, That a taxpayer who filed
    26  returns on the basis of a fiscal year or who is the beneficiary
    27  of an estate or trust or member of a partnership which files its
    28  returns under this article or with the Federal Government on the
    29  basis of a fiscal year, shall be subject to tax for his first
    30  taxable period on an apportioned basis reflecting the portion of
    19710H0190B0445                 - 116 -

     1  his fiscal year or of the fiscal year of the estate, trust or
     2  partnership which postdates December 31, 1970, as prescribed by
     3  the department by regulations. Section 359 which provides for
     4  additions or penalties to the tax shall not take effect until
     5  thirty days after the date on which the department has
     6  promulgated and issued regulations relating to the duties and
     7  liabilities imposed on taxpayers under this article.
     8                             ARTICLE IV
     9                      CORPORATE NET INCOME TAX
    10                               PART I
    11                            DEFINITIONS
    12     Section 401.  Definitions.--The following words, terms, and
    13  phrases, when used in this article, shall have the meaning
    14  ascribed to them in this section, except where the context
    15  clearly indicates a different meaning:
    16     (1)  "Corporation."  A corporation having capital stock,
    17  joint-stock association, or limited partnership either organized
    18  under the laws of this Commonwealth, the United States, or any
    19  other state, territory, or foreign country, or dependency, and
    20  doing business in this Commonwealth, or having capital or
    21  property employed or used in this Commonwealth by or in the name
    22  of itself, or any person, partnership, association, limited
    23  partnership, joint-stock association or corporation. The word
    24  "corporation" shall not include building and loan associations,
    25  banks, bank and trust companies, national banks, savings
    26  institutions, trust companies, insurance and surety companies.
    27     (2)  "Department."  The Department of Revenue of this
    28  Commonwealth.
    29     (3)  "Net income."  1.  In case the entire business of the
    30  corporation is transacted within this Commonwealth, for any
    19710H0190B0445                 - 117 -

     1  taxable year which begins on or after January 1, 1971, net
     2  income for the calendar year or fiscal year as returned to and
     3  ascertained by the Federal Government, or in the case of a
     4  corporation participating in the filing of consolidated returns
     5  to the Federal Government, the net income which would have been
     6  returned to and ascertained by the Federal Government if
     7  separate returns had been made to the Federal Government for the
     8  current and prior taxable years, subject, however, to any
     9  correction thereof, for fraud, evasion, or error as finally
    10  ascertained by the Federal Government: Except as hereinafter      <--
    11  otherwise provided PROVIDED, THAT additional deductions shall be  <--
    12  allowed from net income on account of any dividends received
    13  from any other corporation which eighty per cent or more of the   <--
    14  voting stock is owned by the taxpayer and on account of eighty-
    15  five per cent of dividends received from all other corporations.
    16  BUT ONLY TO THE EXTENT THAT SUCH DIVIDENDS ARE INCLUDED IN        <--
    17  TAXABLE INCOME AS RETURNED TO AND ASCERTAINED BY THE FEDERAL
    18  GOVERNMENT. No deduction shall be allowed for net operating
    19  losses sustained by the corporation during any other fiscal or
    20  calendar year. In the case of regulated investment companies as
    21  defined by the Internal Revenue Code of 1954, as amended, "net
    22  income" shall be investment company taxable income as defined in
    23  the aforesaid Internal Revenue Code of 1954, as amended. In
    24  arriving at "net income" for Federal tax purposes for any
    25  taxable year beginning on or after January 1, 1971, any
    26  corporate net income tax paid to the Commonwealth pursuant to
    27  the provisions of this article shall not be allowed as a
    28  deduction HOWEVER, THE AMOUNT OF CORPORATE NET INCOME TAX SO      <--
    29  PAID AND EXCLUDED FROM NET INCOME SHALL NOT BE APPORTIONED BUT
    30  SHALL BE SUBJECT TO TAX AT THE RATE IMPOSED UNDER THIS ARTICLE.
    19710H0190B0445                 - 118 -

     1     2.  In case the entire business of any corporation, other
     2  than a corporation engaged in doing business as a regulated
     3  investment company as defined by the Internal Revenue Code of
     4  1954, as amended, is not transacted within this Commonwealth,
     5  the tax imposed by this article shall be based upon such portion
     6  of the net income of such corporation for the fiscal or calendar
     7  year, as defined in subclause 1 hereof, and may be determined as
     8  follows:
     9     (a)  Division of Income.
    10     (1)  As used in this definition, unless the context otherwise
    11  requires:
    12     (A)  "Business income" means income arising from transactions
    13  and activity in the regular course of the taxpayer's trade or
    14  business and includes income from tangible and intangible
    15  property if the acquisition, management, and disposition of the
    16  property constitute integral parts of the taxpayer's regular
    17  trade or business operations.
    18     (B)  "Commercial domicile"  means the principal place from
    19  which the trade or business of the taxpayer is directed or
    20  managed.
    21     (C)  "Compensation" means wages, salaries, commissions and
    22  any other form of remuneration paid to employes for personal
    23  services.
    24     (D)  "Financial organization" means any safe deposit company,
    25  credit union, small loan company, sales finance company, or
    26  investment company.
    27     (E)  "Nonbusiness income" means all income other than
    28  business income.
    29     (F)  "Public utility" means any business entity which owns or
    30  operates any plant, equipment, property, franchise, or license
    19710H0190B0445                 - 119 -

     1  for the transmission of communications, transportation of goods
     2  or persons, except by pipeline, or the production, transmission,
     3  sale, delivery, or furnishing of electricity, water or steam;
     4  and whose rates of charges for goods or services have been
     5  established or approved by a Federal, State or local government
     6  or governmental agency.
     7     (G)  "Sales" means all gross receipts of the taxpayer not
     8  allocated under this definition.
     9     (H)  "State" means any state of the United States, the
    10  District of Columbia, the Commonwealth of Puerto Rico, any
    11  territory or possession of the United States, and any foreign
    12  country or political subdivision thereof.
    13     (I)  "This state" means the state in which the relevant tax
    14  return is filed or, in the case of application of this
    15  definition to the apportionment and allocation of income for
    16  local tax purposes, the subdivision or local taxing district in
    17  which the relevant tax return is filed.
    18     (2)  Any taxpayer having income from business activity which
    19  is taxable both within and without this State, other than
    20  activity as a financial organization or public utility or the
    21  rendering of purely personal services by an individual, shall
    22  allocate and apportion his net income as provided in this
    23  definition.
    24     (3)  For purposes of allocation and apportionment of income
    25  under this definition, a taxpayer is taxable in another state if
    26  in that state he is subject to a net income tax, a franchise tax
    27  measured by net income, a franchise tax for the privilege of
    28  doing business, or a corporate stock tax, or that state has
    29  jurisdiction to subject the taxpayer to a net income tax
    30  regardless of whether, in fact, the state does or does not.
    19710H0190B0445                 - 120 -

     1     (4)  Rents and royalties from real or tangible personal
     2  property, capital gains, interest, dividends or patent or
     3  copyright royalties, to the extent that they constitute
     4  nonbusiness income, shall be allocated as provided in paragraphs
     5  (5) through (8).
     6     (5)  (A)  Net rents and royalties from real property located
     7  in this State are allocable to this State.
     8     (B)  Net rents and royalties from tangible personal property
     9  are allocable to this State if and to the extent that the
    10  property is utilized in this State, or in their entirety if the
    11  taxpayer's commercial domicile is in this State and the taxpayer
    12  is not organized under the laws of or taxable in the state in
    13  which the property is utilized.
    14     (C)  The extent of utilization of tangible personal property
    15  in a state is determined by multiplying the rents and royalties
    16  by a fraction, the numerator of which is the number of days of
    17  physical location of the property in the state during the rental
    18  or royalty period in the taxable year and the denominator of
    19  which is the number of days of physical location of the property
    20  everywhere during all rental or royalty periods in the taxable
    21  year. If the physical location of the property during the rental
    22  or royalty period is unknown or unascertainable by the taxpayer,
    23  tangible personal property is utilized in the state in which the
    24  property was located at the time the rental or royalty payer
    25  obtained possession.
    26     (6)  (A)  Capital gains and losses from sales of real
    27  property located in this State are allocable to this State.
    28     (B)  Capital gains and losses from sales of tangible personal
    29  property are allocable to this State if the property had a situs
    30  in this State at the time of the sale, or the taxpayer's
    19710H0190B0445                 - 121 -

     1  commercial domicile is in this State and the taxpayer is not
     2  taxable in the state in which the property had a situs.
     3     (C)  Capital gains and losses from sales of intangible
     4  personal property are allocable to this State if the taxpayer's
     5  commercial domicile is in this State.
     6     (7)  Interest and dividends are allocable to this State if
     7  the taxpayer's commercial domicile is in this State.
     8     (8)  (A)  Patent and copyright royalties are allocable to
     9  this State if and to the extent that the patent or copyright is
    10  utilized by the payer in this State, or if and to the extent
    11  that the patent copyright is utilized by the payer in a state in
    12  which the taxpayer is not taxable and the taxpayer's commercial
    13  domicile is in this State.
    14     (B)  A patent is utilized in a state to the extent that it is
    15  employed in production, fabrication, manufacturing, or other
    16  processing in the state or to the extent that a patented product
    17  is produced in the state. If the basis of receipts from patent
    18  royalties does not permit allocation to states or if the
    19  accounting procedures do not reflect states of utilization, the
    20  patent is utilized in the state in which the taxpayer's
    21  commercial domicile is located.
    22     (C)  A copyright is utilized in a state to the extent that
    23  printing or other publication originates in the state. If the
    24  basis of receipts from copyright royalties does not permit
    25  allocation to states or if the accounting procedures do not
    26  reflect states of utilization, the copyright is utilized in the
    27  state in which the taxpayer's commercial domicile is located.
    28     (9)  All business income shall be apportioned to this State
    29  by multiplying the income by a fraction, the numerator of which
    30  is the property factor plus the payroll factor plus the sales
    19710H0190B0445                 - 122 -

     1  factor, and the denominator of which is three.
     2     (10)  The property factor is a fraction, the numerator of
     3  which is the average value of the taxpayer's real and tangible
     4  personal property owned or rented and used in this State during
     5  the tax period and the denominator of which is the average value
     6  of all the taxpayer's real and tangible personal property owned
     7  or rented and used during the tax period.
     8     (11)  Property owned by the taxpayer is valued at its
     9  original cost. Property rented by the taxpayer is valued at
    10  eight times the net annual rental rate. Net annual rental rate
    11  is the annual rental rate paid by the taxpayer less any annual
    12  rental rate received by the taxpayer from subrentals.
    13     (12)  The average value of property shall be determined by
    14  averaging the values at the beginning and ending of the tax
    15  period but the tax administrator may require the averaging of
    16  monthly values during the tax period if reasonably required to
    17  reflect properly the average value of the taxpayer's property.
    18     (13)  The payroll factor is a fraction, the numerator of
    19  which is the total amount paid in this State during the tax
    20  period by the taxpayer for compensation and the denominator of
    21  which is the total compensation paid everywhere during the tax
    22  period.
    23     (14)  Compensation is paid in this State if:
    24     (A)  The individual's service is performed entirely within
    25  the State;
    26     (B)  The individual's service is performed both within and
    27  without the State, but the service performed without the State
    28  is incidental to the individual's service within the State; or
    29     (C)  Some of the service is performed in the State and the
    30  base of operations or if there is no base of operations, the
    19710H0190B0445                 - 123 -

     1  place from which the service is directed or controlled is in the
     2  State, or the base of operations or the place from which the
     3  service is directed or controlled is not in any state in which
     4  some part of the service is performed, but the individual's
     5  residence is in this State.
     6     (15)  The sales factor is a fraction, the numerator of which
     7  is the total sales of the taxpayer in this State during the tax
     8  period, and the denominator of which is the total sales of the
     9  taxpayer everywhere during the tax period.
    10     (16)  Sales of tangible personal property are in this State
    11  if:                                                               <--
    12     (A)  The property is delivered or shipped to a purchaser,
    13  other than the United States Government, within this State
    14  regardless of the f.o.b. point or other conditions of the sale;
    15  or
    16     (B)  The property is shipped from an office, store,
    17  warehouse, factory, or other place of storage in this State. IF   <--
    18  THE PROPERTY IS DELIVERED OR SHIPPED TO A PURCHASER, OTHER THAN
    19  THE UNITED STATES GOVERNMENT, WITHIN THIS STATE REGARDLESS OF
    20  THE F.O.B. POINT OR OTHER CONDITIONS OF THE SALE.
    21     (17)  Sales, other than sales of tangible personal property,
    22  are in this State if:
    23     (A)  The income-producing activity is performed in this
    24  State; or
    25     (B)  The income-producing activity is performed both in and
    26  outside this State and a greater proportion of the income-
    27  producing activity is performed in this State than in any other
    28  state, based on costs of performance.
    29     (18)  If the allocation and apportionment provisions of this
    30  definition do not fairly represent the extent of the taxpayer's
    19710H0190B0445                 - 124 -

     1  business activity in this State, the taxpayer may petition the
     2  Secretary of Revenue or THE SECRETARY OF REVENUE may require, in  <--
     3  respect to all or any part of the taxpayer's business activity:
     4     (A)  Separate accounting;
     5     (B)  The exclusion of any one or more of the factors;
     6     (C)  The inclusion of one or more additional factors which
     7  will fairly represent the taxpayer's business activity in this
     8  State; or
     9     (D)  The employment of any other method to effectuate an
    10  equitable allocation and apportionment of the taxpayer's income.
    11     (b)  Railroad, Truck, Bus or Airline Companies.
    12     (1)  All business income of railroad, truck, bus or airline
    13  companies shall be apportioned to this Commonwealth by
    14  multiplying the income by a fraction, the numerator of which is
    15  the taxpayer's total revenue miles within this Commonwealth
    16  during the tax period and the denominator of which is the total
    17  revenue miles of the taxpayer everywhere during the tax period.
    18  For purposes of this subsection revenue mile shall mean the
    19  average receipts derived from the transportation by the taxpayer
    20  of persons or property one mile. Where revenue miles are derived
    21  from the transportation of both persons and property, the
    22  revenue mile fractions attributable to each such class of
    23  transportation shall be computed separately, and the average of
    24  the two fractions, weighted in accordance with the ratio of
    25  total receipts from each such class of transportation everywhere
    26  to total receipts from both such classes of transportation
    27  everywhere, shall be used in apportioning income to this
    28  Commonwealth.
    29     (2)  Nonbusiness income of railroad, truck, bus or airline
    30  companies shall be allocated as provided in paragraphs (5)
    19710H0190B0445                 - 125 -

     1  through (8) of clause (a) of subclause 2 of the definition of
     2  net income.
     3     (c)  Pipeline or Natural Gas Companies.
     4     (1)  All business income of pipeline companies shall be
     5  apportioned to this Commonwealth by multiplying the income by a
     6  fraction, the numerator of which is the revenue ton miles,
     7  revenue barrel miles or revenue cubic feet miles within this
     8  Commonwealth during the tax period and the denominator of which
     9  is the total revenue ton miles, revenue barrel miles or the
    10  revenue cubic feet miles of the taxpayer everywhere during the
    11  tax period. For purposes of this subsection a revenue ton mile,
    12  revenue barrel mile or a revenue cubic foot mile shall mean
    13  respectively the receipts derived from the transportation by the
    14  taxpayer of one ton of solid property, one barrel of liquid
    15  property or one cubic foot of gaseous property transported one
    16  mile.
    17     (2)  All business income of natural gas companies subject to
    18  regulation by the Federal Power Commission or by the
    19  Pennsylvania Public Utility Commission shall be apportioned to
    20  this Commonwealth by multiplying the income by a fraction, the
    21  numerator of which shall be the cubic foot capacity of the
    22  taxpayer's pipelines in this Commonwealth, and the denominator
    23  of which shall be the cubic foot capacity of the taxpayer's
    24  pipelines everywhere, at the end of the tax period. For the
    25  purpose of this subsection, the cubic foot capacity of a
    26  pipeline shall be determined by multiplying the square of its
    27  radius (in feet) by its length (in feet).
    28     (3)  Nonbusiness income of pipeline companies or natural gas
    29  companies subject to regulation by the Federal Power Commission
    30  or by the Pennsylvania Public Utility Commission shall be
    19710H0190B0445                 - 126 -

     1  allocated as provided in paragraphs (5) through (8) of clause
     2  (a) of subclause 2 of the definition of net income.
     3     (d)  Water Transportation Companies.
     4     (1)  Water Transportation Companies Operating on High Seas.
     5  All business income of water transportation companies operating
     6  on high seas shall be apportioned to this Commonwealth by
     7  multiplying the business income by a fraction, the numerator of
     8  which is the number of port days spent inside the Commonwealth
     9  and the denominator of which is the total number of port days
    10  spent inside and outside of the Commonwealth. The term "port
    11  days" does not include periods when the ships are not in use
    12  because of strikes or withheld from service for repair or
    13  because of seasonal reduction of services. Days in port are
    14  computed by dividing the aggregate number of hours in all ports
    15  by twenty-four.
    16     (2)  Water Transportation Companies Operating in Inland
    17  Waters.  All business income of water transportation companies
    18  operating on inland waters shall be apportioned to this
    19  Commonwealth by multiplying the business income by a fraction,
    20  the numerator of which is the taxpayer's total revenue miles
    21  within this Commonwealth during the tax period and the
    22  denominator of which is the total revenue miles of the taxpayer
    23  everywhere during the tax period. In the determination of
    24  revenue miles, one-half of the mileage of all navigable
    25  waterways bordering between the Commonwealth and another state
    26  shall be considered Commonwealth miles. For purposes of this
    27  subclause, revenue miles shall mean the revenue receipts derived
    28  from the transportation by the taxpayer of persons or property
    29  one mile.
    30     (3)  Nonbusiness income of water transportation companies
    19710H0190B0445                 - 127 -

     1  shall be allocated as provided in paragraphs (5) through (8) of
     2  clause (a) of subclause 2 of the definition of net income.
     3     3.  In case the entire business of a corporation which has
     4  filed a timely election and has qualified to be taxed as a
     5  regulated investment company under the provisions of the
     6  Internal Revenue Code of 1954, as amended, is not transacted
     7  within this Commonwealth, the tax imposed by this article shall
     8  be based upon such portion of the net income of such corporation
     9  for the fiscal or calendar year as defined in subclause 1
    10  hereof, as shall be attributable to business transacted within
    11  this Commonwealth by multiplying such net income by a fraction,
    12  the numerator of which is the sum of the corporation's gross
    13  receipts from (i) sales of its own shares to Pennsylvania
    14  investors and (ii) sales of its portfolio securities, where the
    15  orders for such sales are placed with or credited to
    16  Pennsylvania offices of registered securities dealers and the
    17  denominator of which fraction is the corporation's total gross
    18  receipts from (i) sales of its own shares and (ii) sales of its
    19  portfolio securities. Pennsylvania investors shall mean
    20  individuals residing in Pennsylvania at the time of the sale or
    21  corporations or other entities having their principal place of
    22  business located in Pennsylvania at such time.
    23     (4)  "Person."  Every natural person, association or
    24  corporation. Whenever used in any clause prescribing and
    25  imposing a fine or imprisonment, or both, the term "person," as
    26  applied to associations, shall mean the partners or members
    27  thereof, and as applied to corporations the officers thereof.
    28                              PART II
    29                         IMPOSITION OF TAX
    30     Section 402.  Imposition of Tax.--Every corporation shall be
    19710H0190B0445                 - 128 -

     1  subject to, and shall pay for the privilege of doing business in
     2  this Commonwealth, or having capital or property employed or
     3  used in this Commonwealth, by or in the name of itself, or any
     4  person, partnership, association, limited partnership, joint-
     5  stock association, or corporation, a State excise tax at the
     6  rate of twelve per cent per annum upon each dollar of net income
     7  of such corporation received by, and accruing to, such
     8  corporation during the calendar year 1971, except where a
     9  corporation reports to the Federal Government on the basis of a
    10  fiscal year, and has certified such fact to the department as
    11  required by section 403 of this article, in which case, such
    12  tax, at the rate of twelve per cent, shall be levied, collected,
    13  and paid upon all net income received by, and accruing to, such
    14  corporation during the fiscal year commencing in the calendar
    15  year 1971 and ending in the calendar year 1972, a similar tax at
    16  the rate of nine and one-half TEN per cent per annum upon each    <--
    17  dollar of the net income of such corporation received by, and
    18  accruing to, such corporation during the calendar year 1972, and
    19  each year thereafter, except where a corporation reports to the
    20  Federal Government on the basis of a fiscal year, and has
    21  certified such fact to the department as required by section 403
    22  of this article, in which case, such tax, at the rate of nine     <--
    23  and one-half TEN per cent, shall be levied, collected and paid    <--
    24  upon all net income received by, and accruing to, such
    25  corporation during the fiscal year commencing in the calendar
    26  year 1972 and ending in the calendar year 1973 and each year
    27  thereafter.
    28                              PART III
    29                     REPORTS AND PAYMENT OF TAX
    30     Section 403.  Reports and Payment of Tax.--(a) For the
    19710H0190B0445                 - 129 -

     1  purpose of ascertaining the amount of tax payable under this
     2  article, it shall be the duty of every corporation, liable to
     3  pay tax under this article, on or before April 15, 1972, and
     4  each year thereafter, to transmit to the department, upon a form
     5  prescribed, prepared and furnished by the department, an annual
     6  report under oath or affirmation of its president, vice-
     7  president or other principal officer, and of its treasurer or
     8  assistant treasurer of net income taxable under the provisions
     9  of this article. Such report shall set forth:
    10     (1)  A true copy of its return to the Federal Government of
    11  the annual net income arising or accruing in the calendar or
    12  fiscal year next preceding, or such part or portions of said
    13  return, as the department may designate;
    14     (2)  If no return was filed with the Federal Government the
    15  report made to the department shall show such information as
    16  would have been contained in a return to the Federal Government
    17  had one been made; and
    18     (3)  Such other information as the department may require.
    19     (b)  For the purpose of ascertaining the amount of tax
    20  payable under this article for the taxable year 1971, and each
    21  taxable year thereafter, it shall be the duty of every
    22  corporation liable to pay tax under this article, on or before
    23  April 30, 1971, and on or before the end of the fourth month
    24  after the close of its previous fiscal year for fiscal year
    25  taxpayers, and each year thereafter, to transmit in like form
    26  and manner an additional tentative report and make payment
    27  pursuant to the provisions of the act of March 16, 1970 (Act No.
    28  69).
    29     (c)  The amount of all taxes, imposed under the provisions of
    30  this article, not paid on or before the times as above provided,
    19710H0190B0445                 - 130 -

     1  shall bear interest at the rate of six per cent per annum from
     2  the date they are due and payable until paid, except that if the
     3  taxable income has been, or is increased by the Commissioner of
     4  Internal Revenue, or by any other agency or court of the United
     5  States, interest shall be computed on the additional tax due
     6  from thirty days after the corporation receives notice of the
     7  change of income until paid: Provided, however, That any
     8  corporation may pay the full amount of such tax, or any part
     9  thereof, together with interest due to the date of payment,
    10  without prejudice to its right to present and prosecute a
    11  petition for resettlement, a petition for review, or an appeal
    12  to court. If it be thereafter determined that such taxes were
    13  overpaid, the department shall enter a credit to the account of
    14  such corporation, which may be used by it in the manner
    15  prescribed by law.
    16     (d)  If the officers of any corporation shall neglect, or
    17  refuse to make any report as herein required, or shall knowingly
    18  make any false report, the following percentages of the amount
    19  of the tax shall be added by the department to the tax
    20  determined to be due on the first one thousand dollars ($1,000)
    21  of tax ten per cent, on the next four thousand dollars ($4,000)
    22  five per cent, and on everything in excess of five thousand
    23  dollars ($5,000) one per cent, no such amounts added to the tax
    24  shall bear any interest whatsoever.
    25     (e)  If any corporation closes its fiscal year not upon
    26  December 31, but upon some other date, and reports to the
    27  Federal Government as of such other date, or would so report
    28  were it to make a return to the Federal Government, such
    29  corporation shall certify such fact to the department, and shall
    30  make the annual report, herein required, within thirty days
    19710H0190B0445                 - 131 -

     1  after the return to the Federal Government is due, or would be
     2  due were it to be required of such corporation, subject in all
     3  other respects to the provisions of this article. The tentative
     4  report required of such corporation shall be due not later than
     5  four months after the end of the next preceding fiscal year.
     6     (f)  If the corporation shall claim in its report that the
     7  return made to the Federal Government was inaccurate, the amount
     8  claimed by it to be the net income, taxable under this article,
     9  and the basis of such claim of inaccuracy, shall be fully
    10  specified.
    11     Section 404.  Consolidated Reports.--The department shall not
    12  permit any corporation owning or controlling, directly or
    13  indirectly, any of the voting capital stock of another
    14  corporation or of other corporations, subject to the provisions
    15  of this article, to make a consolidated report, showing the
    16  combined net income.
    17     Section 405.  Extension of Time to File Reports.--The
    18  department may, upon application made to it, in such form as it
    19  shall prescribe, on or prior to the last day for filing any
    20  annual report, and upon proper cause shown, grant to the
    21  corporation, required to file such report, an extension of not
    22  more than sixty days within which such report may be filed, and
    23  in case the Federal income tax authorities at any time grant a
    24  longer extension of time for filing such reports with the
    25  Federal Government, the department may grant an additional
    26  extension of time for filing the annual report under this
    27  article of not more than thirty days after the termination of
    28  the Federal extension, but the amount of tax due shall, in such
    29  cases, nevertheless, be subject to interest from the due dates
    30  and at the rates fixed by this article.
    19710H0190B0445                 - 132 -

     1     Section 406.  Changes Made by Federal Government.--(a) If the
     2  amount of the net income, as returned by any corporation to the
     3  Federal Government, is finally changed or corrected by the
     4  Commission of Internal Revenue or by any other agency or court
     5  of the United States, such corporation, within thirty days after
     6  the receipt of such final change or correction, shall make a
     7  corrected report, under oath or affirmation, to the department
     8  showing such finally changed or corrected net income, upon which
     9  the tax is required to be paid to the United States. In case a
    10  corporation fails to file a report of such correction, which
    11  results in an increase in net income within the time prescribed,
    12  there shall be added to the tax, a penalty of five dollars ($5)
    13  for every day during which such corporation is in default, but
    14  the department may abate any such penalty in whole or in part.
    15     (b)  If, as a result of such final change or correction,
    16  there should be any change made in the amount of the net income
    17  of any corporation upon which tax is imposed by this article,
    18  the department shall have the power, and its duty shall be to
    19  resettle such taxes. Whenever a resettlement shall have been
    20  made hereunder, the department shall resettle the account
    21  according to law, and shall credit or charge, as the case may
    22  be, the amount resulting from such resettlement upon the current
    23  accounts of the corporation with which it is made. The
    24  resettlement shall be subject to audit and approval by the
    25  Department of the Auditor General, as in the case of original
    26  settlements, and in case of the failure of the two departments
    27  to agree, the resettlement shall be submitted to the Board of
    28  Finance and Revenue, as in the case of original settlements.
    29     (c)  Where a report of change, correction, or redetermination
    30  of Federal income, or Federal tax, has been filed after a
    19710H0190B0445                 - 133 -

     1  petition for review, or an appeal has been taken, such report
     2  shall be deemed a part of the original annual report upon
     3  petition of the taxpayer at any subsequent proceeding as though
     4  it had been filed with such original report, and no separate
     5  petition for review or appeal from the resettlement resulting
     6  from such report of change, correction, or redetermination shall
     7  be necessary.
     8     (d)  The provisions of this section shall not be construed so
     9  as to permit a resettlement based upon the allowance of any
    10  deduction on account of net operating losses, sustained in other
    11  fiscal or calendar years, that are not allowed as deductions
    12  under the definition of "net income" as contained in this
    13  article.
    14     (e)  The provisions of this section shall apply to every
    15  corporation which was doing business in Pennsylvania in the year
    16  for which the Federal income has been changed, irrespective of
    17  whether or not such corporation has thereafter merged,
    18  consolidated, withdrawn or dissolved. Any clearance certificate
    19  issued by the department shall be conditioned upon the
    20  requirement that in the event of a change in Federal income for
    21  any year for which taxes have been paid to the Commonwealth, the
    22  corporation or its successor or its officers or its directors
    23  shall file with the department a report of change and pay any
    24  additional State tax resulting therefrom.
    25                              PART IV
    26                    SETTLEMENT AND RESETTLEMENT
    27     Section 407.  Settlement and Resettlement.--(a) All taxes due
    28  under this article shall be settled by the department, and such
    29  settlement shall be subject to audit and approval by the
    30  Department of the Auditor General, and shall, so far as
    19710H0190B0445                 - 134 -

     1  possible, be made so that notice thereof may reach the taxpayer
     2  before the end of two years after the tax report was required to
     3  be made.
     4     (b)  Promptly after the date of any such settlement, the
     5  department shall send, by mail or otherwise, a copy thereof to
     6  such corporation. The tax imposed by this article shall be
     7  settled, resettled, and otherwise imposed and adjusted in the
     8  same manner, within the same periods of time, and right of
     9  resettlement, review, appeal, and refund, as provided by law in
    10  the case of capital stock and franchise taxes imposed upon
    11  corporations.
    12     (c)  If, within a period of one year after the date of any
    13  settlement, the department is not satisfied with such
    14  settlement, or if at any time the net income as returned by any
    15  corporation to the Federal Government is finally changed or
    16  corrected by the Commissioner of Internal Revenue or by any
    17  other agency or court of the United States with the result that
    18  tax, in addition to the amount paid, is due under this article,
    19  the department is hereby authorized and empowered to make a
    20  resettlement of the tax due by such corporation, based upon the
    21  facts contained in the report, or upon any information within
    22  its possession or that shall come into its possession.
    23     Whenever a resettlement shall have been made hereunder, the
    24  department shall resettle the account according to law and shall
    25  credit or charge, as the case may be, the amount resulting from
    26  such resettlement upon the current accounts of the corporation
    27  with which it is made.
    28     The resettlement shall be subject to audit and approval by
    29  the Department of the Auditor General as in the case of original
    30  settlement, and in case of the failure of the two departments to
    19710H0190B0445                 - 135 -

     1  agree, the resettlement shall be submitted to the Board of
     2  Finance and Revenue as in the case of original settlements.
     3     (d)  If any corporation shall neglect or refuse to make any
     4  report and payment of tax required by this article, the
     5  department shall estimate the tax due by such corporation and
     6  subject to audit and approval by the Department of the Auditor
     7  General, settle the amount due by it for taxes, penalties, and
     8  interest thereon as prescribed herein, from which settlement
     9  there shall be no right of review or appeal, but the department,
    10  with the approval of the Department of the Auditor General, may
    11  require a report to be filed, and thereupon make a settlement
    12  based upon such report and cancel the estimated settlement.
    13                               PART V
    14                 ENFORCEMENT: RULES AND REGULATIONS
    15               INQUISITORIAL POWERS OF THE DEPARTMENT
    16     Section 408.  Enforcement; Rules and Regulations;
    17  Inquisitorial Powers of the Department.--(a) The department is
    18  hereby charged with the enforcement of the provisions of this
    19  article, and is hereby authorized and empowered to prescribe,
    20  adopt, promulgate, and enforce rules and regulations, not
    21  inconsistent with this article, relating to any matter or thing
    22  pertaining to the administration and enforcement of the
    23  provisions of this article, and the collection of taxes,
    24  penalties, and interest imposed by this article. The department
    25  is hereby required to have such rules and regulations,
    26  promulgated and adopted, printed and shall distribute the same
    27  to any person upon request.
    28     (b)  The department, or any agent authorized in writing by
    29  it, is hereby authorized to examine the books, papers, and
    30  records, and to investigate the character of the business of any
    19710H0190B0445                 - 136 -

     1  corporation in order to verify the accuracy of any report made,
     2  or if no report was made by such corporation, to ascertain and
     3  settle the tax imposed by this article. Every such corporation
     4  is hereby directed and required to give to the department, or
     5  its duly authorized agent, the means, facilities, and
     6  opportunity for such examinations and investigations, as are
     7  hereby provided and authorized. Any information gained by the
     8  department, as a result of any returns, investigations, or
     9  verifications required to be made by this article, shall be
    10  confidential, except for official purposes, and any person
    11  divulging such information shall be guilty of a misdemeanor,
    12  and, upon conviction thereof, shall be sentenced to pay a fine
    13  of not less than one hundred dollars ($100) or more than one
    14  thousand dollars ($1,000) and costs of prosecution, or to
    15  undergo imprisonment for not more than six months, or both.
    16     (c)  Whenever any person, acting for or on behalf of the
    17  department, shall in good faith institute legal proceedings for
    18  any violations of the provisions of this article, and for any
    19  reason shall fail to recover costs of record, such costs shall
    20  be a charge upon the proper county, as shall such costs in the
    21  event defendant is imprisoned for failure to pay fine or costs,
    22  or both, and shall be audited and paid as are costs of like
    23  character in said county.
    24     (d)  The powers, conferred by this article upon the
    25  department, relating to the administration or enforcement of
    26  this article, shall be in addition to, but not exclusive of, any
    27  other powers heretofore or hereafter conferred upon the
    28  department by law.
    29                              PART VI
    30                RETENTION OF RECORDS BY CORPORATION
    19710H0190B0445                 - 137 -

     1     Section 409.  Retention of Records.--Each corporation shall
     2  maintain and keep for a period of three years after any report
     3  is filed under this article, such record or records of its
     4  business within this Commonwealth for the period covered by such
     5  report and other pertinent papers, as may be required by the
     6  department.
     7                              PART VII
     8                             PENALTIES
     9     Section 410.  Penalties.--(a) Any person violating any of the
    10  provisions of section 409 shall be guilty of a misdemeanor, and
    11  shall, upon conviction thereof, be sentenced to pay a fine not
    12  exceeding one thousand dollars ($1,000) and costs of
    13  prosecution, or to undergo imprisonment for not more than six
    14  months, or both.
    15     (b)  Any person who shall wilfully make a false and
    16  fraudulent return of net income made taxable by this article,
    17  shall be guilty of wilful and corrupt perjury, and, upon
    18  conviction thereof, shall be subject to punishment as provided
    19  by law. Such penalty shall be in addition to any other penalties
    20  imposed by this article.
    21     (c)  Any person, who wilfully fails, neglects, or refuses to
    22  make a report or to pay the tax as herein prescribed, or who
    23  shall refuse to permit the department to examine the books,
    24  papers, and records of any corporation liable to pay tax under
    25  this article, shall be guilty of a misdemeanor, and, upon
    26  conviction thereof, shall be sentenced to pay a fine not
    27  exceeding one thousand dollars ($1,000) and costs of
    28  prosecution, or to undergo imprisonment not exceeding six
    29  months, or both. Such penalty shall be in addition to any other
    30  penalties imposed by this article.
    19710H0190B0445                 - 138 -

     1                             PART VIII
     2                      REPEALER; EFFECTIVE DATE
     3     Section 411.  Repeal.--The act of May 16, 1935 (P.L.208),
     4  known as the "Corporate Net Income Tax Act," is repealed.
     5     Section 412.  Effective Date.--This article shall take effect
     6  January 1, 1971.
     7                             ARTICLE V
     8                       CORPORATION INCOME TAX
     9                               PART I
    10                            DEFINITIONS
    11     Section 501.  Definitions.--The following words, terms and
    12  phrases when used in this article shall have the meaning
    13  ascribed to them in this section, except where the context
    14  clearly indicates a different meaning:
    15     (1)  "Corporation."  A corporation having capital stock,
    16  joint-stock association or limited partnership, either organized
    17  under the laws of this Commonwealth, the United States, or any
    18  other state, territory or foreign country or dependency, and
    19  carrying on activities in this Commonwealth, or owning property
    20  in this Commonwealth by or in the name of itself or any person,
    21  partnership, association, limited partnership, joint-stock
    22  association, or corporation. The word "corporation" shall not
    23  include nonprofit corporations, building and loan associations,
    24  banks, bank and trust companies, national banks, savings
    25  institutions, trust companies, insurance and surety companies.
    26     (2)  "Department."  The Department of Revenue of this
    27  Commonwealth.
    28     (3)  "Net income."
    29     1.  Net income shall be defined as set forth in Article III.
    30     2.  In the case of corporations owning property or carrying
    19710H0190B0445                 - 139 -

     1  on activities within and without this Commonwealth, the net
     2  income of such corporations derived from sources within this
     3  Commonwealth for the fiscal or calendar year shall be determined
     4  by allocations and apportionments of net income as set forth in
     5  Article III.
     6     (4)  "Sources within this Commonwealth" includes tangible or
     7  intangible property located or having a situs in this
     8  Commonwealth and any activities carried on in this Commonwealth,
     9  regardless of whether carried on in intrastate, interstate or
    10  foreign commerce.
    11     (5)  "Carrying on activities" shall include every act, power
    12  or privilege exercised or enjoyed in this Commonwealth as an
    13  incident to, or by virtue of, the powers and privileges acquired
    14  by the nature of the corporate organization.
    15                              PART II
    16                         IMPOSITION OF TAX
    17     Section 502.  Imposition of Tax.--Every corporation carrying
    18  on activities in this Commonwealth or owning property in this
    19  Commonwealth by or in the name of itself or any person,
    20  partnership, joint-stock association or corporation shall be
    21  subject to and shall pay a State property tax on net income
    22  derived from sources within this Commonwealth at the rate of
    23  twelve per cent per annum upon each dollar of such net income
    24  received by and accruing to such corporation during the calendar
    25  year 1971, except where a corporation reports to the Federal
    26  Government on the basis of a fiscal year and has certified such
    27  fact to the department as required by section 403 of Article IV,
    28  in which case such tax at the rate of twelve per cent shall be
    29  levied, collected and paid upon each dollar of such net income
    30  received by and accruing to such corporation during the fiscal
    19710H0190B0445                 - 140 -

     1  year commencing in the calendar year 1971, and a similar tax at
     2  the rate of nine and one-half per cent per annum upon each
     3  dollar of such net income received by and accruing to such
     4  corporation during the calendar year 1972, except where a
     5  corporation reports to the Federal Government on the basis of a
     6  fiscal year and has certified such fact to the department as
     7  required by section 403 of Article IV, in which case such tax at
     8  the rate of nine and one-half per cent per annum shall be
     9  levied, collected and paid upon each dollar of such net income
    10  received by and accruing to such corporation during the fiscal
    11  years commencing in the calendar year 1972, and each year
    12  thereafter: Provided, however, That such net income shall not
    13  include income for any period for which the corporation is
    14  subject to taxation under Article IV.
    15                              PART III
    16                 PROCEDURE; ENFORCEMENT; PENALTIES
    17     Section 503.  Procedure; Enforcement; Penalties.--Parts III,
    18  IV, V, VI and VII of Article IV are incorporated by reference
    19  into this article in so far as they are applicable to the tax
    20  imposed hereunder.
    21                              PART IV
    22                      REPEALER; EFFECTIVE DATE
    23     Section 505.  Repeal.--The act of August 24, 1951 (P.L.1417),
    24  known as the "Corporation Income Tax Law," is repealed.
    25     Section 506.  Effective Date.--This article shall take effect
    26  January 1, 1971.
    27                             ARTICLE VI
    28                    CAPITAL STOCK--FRANCHISE TAX
    29                               PART I
    30                     VALUATION OF CAPITAL STOCK
    19710H0190B0445                 - 141 -

     1     Section 601.  Valuation of Capital Stock.--Hereafter, except
     2  in the case of corporations of the first class, nonprofit
     3  corporations, and cooperative agricultural associations not
     4  having capital stock and not conducted for profit, banks,
     5  savings institutions, title insurance, or trust companies,
     6  building and loan associations, and insurance companies, it
     7  shall be the duty of every corporation having capital stock,
     8  every joint-stock association, limited partnership, and every
     9  company whatsoever, now or hereafter organized or incorporated
    10  by or under any laws of this Commonwealth, and of every
    11  corporation, joint-stock association, limited partnership, and
    12  company whatsoever, now or hereafter incorporated or organized
    13  by or under the law of any other state or territory of the
    14  United States, or by the United States, or by any foreign
    15  government, and doing business in and liable to taxation within
    16  this Commonwealth or having capital or property employed or used
    17  in this Commonwealth by or in the name of any limited
    18  partnership or joint-stock association, company, or corporation
    19  whatsoever, association or associations, copartnership or
    20  copartnerships, person or persons, or in any other manner, to
    21  make annually a report in writing to the Department of Revenue
    22  on a form or forms to be prescribed and furnished by it setting
    23  forth in addition to any other information required by the
    24  Department of Revenue:
    25     First.  The amount of its capital stock at the close of the
    26  year for which report is made, together with the highest selling
    27  price per share, and the average selling price thereof during
    28  said year.
    29     Second.  Its debt account.
    30     Third.  Its income account, together with the disposition of
    19710H0190B0445                 - 142 -

     1  any net income, and its profit and loss statement.
     2     Fourth.  Its general balance sheet.
     3     Fifth.  Its real estate and tangible personal property, if
     4  any, owned and permanently located outside of the Commonwealth,
     5  and value of the same; and the value of the property, if any,
     6  exempt from taxation.
     7     Sixth.  A valuation and appraisal, in the manner hereinafter
     8  provided, of the capital stock of the said corporation, company,
     9  joint-stock association, or limited partnership, at its actual
    10  value in cash as it existed at the close of the year for which
    11  the report is made.
    12     The affidavit of two of the officers of such corporation,
    13  limited partnership, joint-stock association or company, shall
    14  be attached to said report. Such affidavit shall be in the form
    15  required by the Department of Revenue, but shall state, in
    16  addition to any other averments required by the department,
    17  that, with fidelity and according to the best of their knowledge
    18  and belief, the affiants have estimated, valued and appraised,
    19  as shown in said report, the capital stock of the said
    20  corporation at its actual value in cash as it existed at the
    21  close of the year for which report is made; taking into
    22  consideration, first, the average which said stock sold for
    23  during the year; and second, the price or value indicated or
    24  measured by net earnings or by the amount of profit made and
    25  either declared in dividends, expended in betterments, or
    26  carried into the surplus or sinking fund; and third, the actual
    27  value indicated or measured by consideration of the intrinsic
    28  value of its tangible property and assets, and of the value of
    29  its good will and franchises and privileges, as indicated by the
    30  material results of their exercise, taking also into
    19710H0190B0445                 - 143 -

     1  consideration the amount of its indebtedness.
     2     The time for filing annual reports may be extended; taxpayers
     3  may be permitted to file their annual and tentative reports on a
     4  fiscal year basis; the procedure in case the Department of
     5  Revenue is not satisfied with the appraisement made by the
     6  officers of the taxpayer, and the penalties for failing to file
     7  reports and pay taxes shall be as prescribed by law.
     8                              PART II
     9                         IMPOSITION OF TAX
    10     Section 602.  Imposition of Tax.--(a) That every domestic
    11  corporation other than corporations of the first class,
    12  nonprofit corporations, and cooperative agricultural
    13  associations not having capital stock and not conducted for
    14  profit, and every joint-stock association, limited partnership,
    15  and company whatsoever, from which a report is required under
    16  section 601 hereof, shall be subject to, and pay into the
    17  treasury of the Commonwealth annually, through the Department of
    18  Revenue, a tax at the rate of eight NINE mills, upon each dollar  <--
    19  of the actual value of its whole capital stock of all kinds,
    20  including common, special, and preferred, as ascertained in the
    21  manner prescribed in section 601, for the calendar year 1971 and
    22  the fiscal year beginning in 1971 and each year thereafter,
    23  except that any domestic corporation, limited partnership,
    24  joint-stock association or company subject to the tax prescribed
    25  herein may elect to compute and pay its tax under and in
    26  accordance with the provisions of subsection (b) of this section
    27  602: Provided, That the provisions of this section shall not
    28  apply to the taxation of the capital stock of corporations,
    29  limited partnerships and joint-stock associations organized for
    30  manufacturing, processing, research or development purposes,
    19710H0190B0445                 - 144 -

     1  which is invested in and actually and exclusively employed in
     2  carrying on manufacturing, processing, research or development
     3  within the State, but every corporation, limited partnership or
     4  joint-stock association organized for the purpose of
     5  manufacturing, processing, research or development shall pay the
     6  State tax of eight NINE mills herein provided, upon such          <--
     7  proportion of its capital stock, if any, as may be invested in
     8  any property or business not strictly incident or appurtenant to
     9  the manufacturing, processing, research or development business,
    10  in addition to the local taxes assessed upon its property in the
    11  district where located, it being the object of this proviso to
    12  relieve from State taxation only so much of the capital stock as
    13  is invested purely in the manufacturing, processing, research or
    14  development plant and business.
    15     (b)  Every foreign corporation, joint-stock association,
    16  limited partnership, and company whatsoever, from which a report
    17  is required under section 601 hereof, shall be subject to and
    18  pay into the treasury of the Commonwealth annually, through the
    19  Department of Revenue, a franchise tax at the rate of eight NINE  <--
    20  mills for the calendar year 1971 and the fiscal year beginning
    21  in 1971 and each year thereafter, upon a taxable value to be
    22  determined in the following manner. The actual value of its
    23  whole capital stock of all kinds, including common, special, and
    24  preferred, shall be ascertained in the manner prescribed in
    25  section 601 of this article. The taxable value shall then be
    26  determined by employing the relevant apportionment factors set
    27  forth in Article IV.
    28     The provisions of this subsection shall apply to the taxation  <--
    29  of corporations, limited partnerships and joint-stock
    30  associations organized for manufacturing, processing, research
    19710H0190B0445                 - 145 -

     1  or development purposes.
     2     (c)  The term processing, as used in this section, shall mean
     3  and be limited to the following activities when engaged in as a
     4  business enterprise:
     5     (1)  The cooking or freezing of fruits, vegetables,
     6  mushrooms, fish, seafood, meats or poultry, when the person
     7  engaged in such business packages such property in sealed
     8  containers for wholesale distribution.
     9     (2)  The scouring, carbonizing, cording, combing, throwing,
    10  twisting or winding of natural or synthetic fibers, or the
    11  spinning, bleaching, dyeing, printing or finishing of yarns or
    12  fabrics, when such activities are performed prior to sale to the
    13  ultimate consumer.
    14     (3)  The electroplating, galvanizing, enameling, anodizing,
    15  coloring, finishing, impregnating or heat treating of metals or
    16  plastics for sale or in the process of manufacturing.
    17     (4)  The rolling, drawing or extruding of ferrous and
    18  nonferrous metals.
    19     (5)  The fabrication for sale of ornamental or structural
    20  metal or metal stairs, staircases, gratings, fire escapes or
    21  railings, (not including fabrication work done at the
    22  construction site).
    23     (6)  The preparation of animal feed or poultry feed for sale.
    24     (7)  The production, processing and bottling of nonalcoholic
    25  beverages for wholesale distribution.
    26     (8)  The slaughtering and dressing of animals for meat to be
    27  sold or to be used in preparing meat products for sale, and the
    28  preparation of meat products, including lard, tallow, grease,
    29  cooking and inedible oils for wholesale distribution.
    30     (9)  The operation of a saw mill or planing mill for the
    19710H0190B0445                 - 146 -

     1  production of lumber or lumber products for sale.
     2     (10)  The milling for sale of flour or meal from grains.
     3     (11)  The publishing of books, newspapers, magazines or other
     4  periodicals, printing and broadcasting radio and television
     5  programs by licensed commercial or educational stations.
     6     (12)  The processing of used lubricating oils.
     7     (13)  The blending, rectification or production by
     8  distillation or otherwise of alcohol or alcoholic liquors,
     9  except the distillation of alcohol from by-products of wine-
    10  making for the sole purpose of fortifying wine.
    11     (d)  "Research and development" shall mean activities
    12  relating to the discovery of new and the refinement of known
    13  substances, products, processes, theories and ideas, but shall
    14  not include activities directed primarily to the accumulation or
    15  analysis of commercial, financial or mercantile data.
    16     (e)  It shall be the duty of the treasurer or other officers
    17  having charge of any such corporation, joint-stock association,
    18  or limited partnership, upon which a tax is imposed by this
    19  section, to transmit the amount of said tax to the Department of
    20  Revenue within the time prescribed by law: Provided, That for
    21  the purposes of this act interest in limited partnerships or
    22  joint-stock associations shall be deemed to be capital stock,
    23  and taxable accordingly: Provided, further, That corporations,
    24  limited partnerships, and joint-stock associations, liable to a
    25  tax under this section, shall not be required to pay any further
    26  tax on the mortgages, bonds, and other securities owned by them
    27  and in which the whole body of stockholders or members, as such,
    28  have the entire equitable interest in remainder; but
    29  corporations, limited partnerships, and joint-stock
    30  associations, owning or holding such securities as trustees,
    19710H0190B0445                 - 147 -

     1  executors, administrators, guardians, or in any other manner
     2  than for the whole body of stockholders or members thereof as
     3  sole equitable owners in remainder, shall return and pay the tax
     4  imposed by this act upon all securities so owned or held by
     5  them, as in the case of individuals.
     6     (f)  Any holding company subject to the capital stock tax or
     7  the franchise tax imposed by this section may elect to compute
     8  said tax by applying the rate of tax of eight NINE mills, upon    <--
     9  each dollar to ten per cent of the actual value of its whole
    10  capital stock. If exercised, this election shall be in lieu of
    11  any other apportionment or allocation to which such company
    12  would otherwise be entitled.
    13     The term "holding company" shall mean any corporation (i) at
    14  least ninety per cent of the gross income of which for the
    15  taxable year is derived from dividends, interest, gains from the
    16  sale or other disposition of stock or securities and the
    17  rendition of management and administrative services to
    18  subsidiary corporations, and (ii) at least sixty per cent of the
    19  actual value of the total assets of which consists of stock
    20  securities or indebtedness of subsidiary corporations.
    21     The term "subsidiary corporation" shall mean any corporation,
    22  a majority of the total issued and outstanding shares of voting
    23  stock of which are owned by the taxpayer corporation directly or
    24  through one or more intervening subsidiary corporations.
    25     (g)  Notwithstanding any other provisions contained in this
    26  section 602, relating to the appraisal, allocation or
    27  apportionment of the value of the capital stock of a corporation
    28  subject to tax in the Commonwealth of Pennsylvania, every
    29  domestic corporation and every foreign corporation registered to
    30  do business in Pennsylvania and (i) which maintains an office in
    19710H0190B0445                 - 148 -

     1  Pennsylvania and (ii) which has filed a timely election to be
     2  taxed as a regulated investment company with the Federal
     3  Government and (iii) which duly qualifies to be taxed as a
     4  regulated investment company under the provisions of the
     5  Internal Revenue Code of 1954 as amended, shall be taxed as a
     6  regulated investment company and shall be subject to the capital
     7  stock or franchise tax imposed by section 602, which tax shall
     8  be computed in the following manner:
     9     (1)  The value of its capital stock shall be determined by
    10  adding its net asset values as of the last day of each month
    11  during the taxable period or year and dividing the total sum by
    12  the number of months involved, for which purpose net asset value
    13  means the actual market value of all assets owned by such
    14  corporation without any exemptions or exclusions less all of its
    15  liabilities, debts and other obligations.
    16     (2)  The proportion of such value taxable in this
    17  Commonwealth at the rate of eight NINE mills, shall be            <--
    18  determined by applying to such value a fraction, the numerator
    19  of which is the sum of the corporation's gross receipts from (i)
    20  sales of its own shares to Pennsylvania investors and (ii) sales
    21  of its portfolio securities where the orders for such sales are
    22  placed with or credited to Pennsylvania offices of registered
    23  securities dealers and the denominator of which fraction is the
    24  corporation's total gross receipts from (i) sales of its own
    25  shares and (ii) sales of its portfolio securities. Pennsylvania
    26  investors shall mean individuals residing in Pennsylvania at the
    27  time of the sale or corporations or other entities having their
    28  principal place of business located in Pennsylvania at such
    29  time.
    30     (3)  Any regulated investment company shall have the right
    19710H0190B0445                 - 149 -

     1  annually, to elect to compute its capital stock or franchise tax
     2  by applying the rate of tax of eight NINE mills, upon each        <--
     3  dollar to ten per cent of the capital stock value of such
     4  corporation. If exercised this election shall be in lieu of any
     5  other apportionment or allocation to which such corporation
     6  would otherwise be entitled.
     7                              PART III
     8                 PROCEDURE; ENFORCEMENT; PENALTIES
     9     Section 603.  Procedure; Enforcement; Penalties.--Parts III,
    10  IV, V, VI, and VII of Article IV are incorporated by reference
    11  into this article in so far as they are applicable to the tax
    12  imposed hereunder, EXCEPT THAT THE TAXABLE PROPORTION IN THE      <--
    13  CAPITAL STOCK TAX SHALL NOT INCLUDE ANY PROPERTY ACTUALLY AND
    14  EXCLUSIVELY USED IN MANUFACTURING, PROCESSING, RESEARCH AND
    15  DEVELOPMENT SITUATED WITHIN THE COMMONWEALTH AND THE THREE
    16  FRACTION FORMULA IN THE CAPITAL STOCK AND FRANCHISE TAXES SHALL
    17  NOT INCLUDE ANY PROPERTY, PAYROLL OR SALES FACTORS ATTRIBUTABLE
    18  TO MANUFACTURING, PROCESSING, RESEARCH OR DEVELOPMENT ACTIVITIES
    19  IN THE COMMONWEALTH.
    20                              PART IV
    21                       REPEAL; EFFECTIVE DATE
    22     Section 605.  Repeal.--Sections 20 and 21, act of June 1,
    23  1889 (P.L.420), entitled "A further supplement to an act
    24  entitled 'An act to provide revenue by taxation,' approved the
    25  seventh day of June, Anno Domini one thousand eight hundred and
    26  seventy-nine," are repealed.
    27     Section 606.  Effective Date.--This article shall take effect
    28  January 1, 1971.
    29                            ARTICLE VII
    30                          BANK SHARES TAX
    19710H0190B0445                 - 150 -

     1                               PART I
     2                         IMPOSITION OF tax
     3     Section 701.  Imposition of Tax.--Every bank or savings
     4  institution having capital stock, incorporated by or under any
     5  law of this Commonwealth or under any law of the United States,
     6  and located within this Commonwealth, shall, on or before April
     7  15 in each and every year, make to the Department of Revenue a
     8  report in writing, verified as required by law, setting forth
     9  the full number of shares of the capital stock subscribed for or
    10  issued, as of the preceding January 1, by such bank or savings
    11  institution having capital stock, and the actual value thereof
    12  as of the preceding January 1, which actual value shall be
    13  ascertained as hereinafter provided. It shall be the duty of the
    14  Department of Revenue to assess such shares for the calendar
    15  year beginning January 1, 1971, and each year thereafter, at the
    16  rate of fifteen mills upon each dollar of actual value thereof,
    17  the actual value of each share of stock to be ascertained and
    18  fixed by adding together the amount of capital stock paid in,
    19  the surplus, and undivided profits, and dividing this amount by
    20  the number of shares. It shall be the duty of every bank or
    21  savings institution having capital stock, at the time of making
    22  every report required by this section, to compute the tax and to
    23  pay the amount of said tax to the State Treasurer, through the
    24  Department of Revenue either from its general fund, or from the
    25  amount of said tax collected from its shareholders: Provided,
    26  That for the calendar year beginning January 1, 1971, and each
    27  year thereafter, such bank or savings institution having capital
    28  stock, upon the date its report, herein required is made for
    29  such calendar year beginning January 1, 1971, and each year
    30  thereafter, shall pay to the Department of Revenue not less than
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     1  eighty per cent of the tax due to the Commonwealth by it for
     2  such calendar year, and the remaining tax due shall be paid at
     3  the time when the report herein required for the year next
     4  succeeding is made: Provided, That in case any bank or savings
     5  institution having capital stock, incorporated under the law of
     6  this State or of the United States, shall collect, annually,
     7  from the shareholders thereof said tax of fifteen mills, on the
     8  dollar upon the actual value of all the shares of stock of said
     9  bank or savings institution, according to the provisions of this
    10  article, that have been subscribed for or issued, and pay the
    11  same into the State Treasury, through the Department of Revenue,
    12  the shares, and so much of the capital and profits of such bank
    13  or savings institution having capital stock as shall not be
    14  invested in real estate, shall be exempt from local taxation
    15  under the laws of this Commonwealth; and such bank or savings
    16  institution having capital stock shall not be required to make
    17  any report to the local assessor or county commissioners of its
    18  personal property owned by it in its own right for purposes of
    19  taxation and shall not be required to pay any tax thereon.
    20                              PART II
    21                 PROCEDURE; ENFORCEMENT; PENALTIES
    22     Section 702.  Procedure; Enforcement; Penalties.--Parts III,
    23  IV, V, VI and VII of Article IV are incorporated by reference
    24  into this article in so far as they are applicable to the tax
    25  imposed hereunder.
    26                              PART III
    27                      REPEALER; EFFECTIVE DATE
    28     Section 705.  Repeal.--Clause 1 of section 1, act of July 15,
    29  1897 (P.L.292), entitled "An act to provide revenue by
    30  taxation," is repealed.
    19710H0190B0445                 - 152 -

     1     Section 706.  Effective Date.--This article shall take effect
     2  January 1, 1971.
     3                            ARTICLE VIII
     4           TITLE INSURANCE AND TRUST COMPANIES SHARES TAX
     5                               PART I
     6                         IMPOSITION OF TAX
     7     Section 801.  Imposition of Tax.--Every company incorporated
     8  under the provisions of section 29 of an act, entitled "An act
     9  to provide for the incorporation and regulation of certain
    10  corporations," approved April 29, 1874, and its supplements, or
    11  any other act of Assembly heretofore or hereafter approved, for
    12  the insurance of owners of real estate, mortgages, and others
    13  interested in real estate, from loss by reason of defective
    14  titles, liens, and encumbrances, and every company entitled to
    15  benefits of, and every company having any of the powers of,
    16  companies entitled to the benefits of an act, entitled "An act
    17  conferring upon certain fidelity, insurance, safety deposit,
    18  trust, and savings companies, the powers and privileges of
    19  companies incorporated under the provisions of section 29 of an
    20  act, entitled 'An act to provide for the incorporation and
    21  regulation of certain corporations,' approved April 29, 1874,
    22  and of the supplements thereto," approved June 27, 1895,
    23  commonly known as title insurance or trust companies, and every
    24  company organized as a bank and trust company or as a trust
    25  company under any act of Assembly heretofore or hereafter
    26  approved, except any such companies, all of the shares of
    27  capital stock of which (other than shares necessary to qualify
    28  directors) are owned by a company which is liable to pay to the
    29  Commonwealth a tax on shares, shall, on or before April 15 in
    30  each and every year, make to the Department of Revenue a report
    19710H0190B0445                 - 153 -

     1  in writing, setting forth the full number of shares of the
     2  capital stock subscribed for or issued by such company, and the
     3  actual value thereof as of January 1 preceding, which shall be
     4  ascertained as hereinafter provided. It shall be the duty of the
     5  Department of Revenue, to assess such shares for taxation at the
     6  rate of fifteen mills upon each dollar of the actual value
     7  thereof, the actual value of each share of stock to be
     8  ascertained and fixed by adding together the amount of capital
     9  stock paid in, the surplus, and undivided profits, and dividing
    10  this amount by the number of shares.
    11     It shall be the duty of every such company, at the time of
    12  making every report required by this section, to compute the tax
    13  and to pay the amount of said tax to the State Treasurer,
    14  through the Department of Revenue, either from its general fund,
    15  or from the amount of said tax collected from its shareholders:
    16  Provided, That for the calendar year beginning January 1, 1971,
    17  and each year thereafter, every such company shall, at the time
    18  of making its report for the calendar year beginning January 1,
    19  1971, and each year thereafter, compute the tax and pay to the
    20  State Treasurer, through the Department of Revenue, either from
    21  its general fund, or from the amount of said tax collected from
    22  its shareholders, not less than eighty per cent of the tax due
    23  to the Commonwealth by it for such calendar year and the
    24  remaining tax due shall be paid at the time when the report
    25  herein required for the year next succeeding is made:  Provided,
    26  That upon the payment of the tax fixed by this act into the
    27  State Treasury, through the Department of Revenue, the shares
    28  and so much of the capital stock, surplus, profits, and deposits
    29  of such company as shall not be invested in real estate, shall
    30  be exempt from all other taxation under the laws of this
    19710H0190B0445                 - 154 -

     1  Commonwealth. The procedure, in case the Department of Revenue
     2  be not satisfied with the report made by any title insurance or
     3  trust company, and the penalties for failing to make such report
     4  and pay the tax, shall be as provided by law.
     5                              PART II
     6                 PROCEDURE; ENFORCEMENT; PENALTIES
     7     Section 802.  Procedure; Enforcement; Penalties.--Parts III,
     8  IV, V, VI and VII of Article IV are incorporated by reference
     9  into this article insofar as they are applicable to the tax
    10  imposed hereunder.
    11                              PART III
    12                      REPEALER; EFFECTIVE DATE
    13     Section 805.  Repeal.--Section 1, act of June 13, 1907
    14  (P.L.640), entitled "An act to provide revenue by levying a tax
    15  upon the shares of stock of companies incorporated under the
    16  provisions of section twenty-nine of an act, entitled 'An act to
    17  provide for the incorporation and regulation of certain
    18  corporations,' approved April twenty-ninth, one thousand eight
    19  hundred and seventy-four, and the supplements thereto; for the
    20  insurance of owners of real estate, mortgages, and others
    21  interested in real estate, from loss by reason of defective
    22  titles, liens, and encumbrances; and of companies entitled to
    23  the benefits of, and of companies having any of the powers of,
    24  companies entitled to the benefits of an act, entitled 'An act
    25  conferring upon certain fidelity, insurance, safety deposit,
    26  trust, and savings companies the powers and privileges of
    27  companies incorporated under the provisions of section twenty-
    28  nine of an act, entitled "An act to provide for the
    29  incorporation and regulation of certain corporations," approved
    30  April twenty-ninth, Anno Domini one thousand eight hundred and
    19710H0190B0445                 - 155 -

     1  seventy-four, and of the supplements thereto,' approved June
     2  twenty-seventh, one thousand eight hundred and ninety-five,
     3  commonly known as title insurance or trust companies," is
     4  repealed.
     5     Section 806.  Effective Date.--This article shall take effect
     6  January 1, 1971.
     7                             ARTICLE IX
     8                       INSURANCE PREMIUMS TAX
     9                               PART I
    10                            DEFINITIONS
    11     Section 901.  Definitions.--The following terms, when used in
    12  this act, shall have the meaning ascribed to them in this
    13  section:
    14     (1)  "Insurance company" means every insurance company,
    15  association or exchange, incorporated or organized by or under
    16  the laws of this Commonwealth, the United States, territories,
    17  dependencies, other states, or foreign governments, and engaged
    18  in transacting insurance business of any kind or classification
    19  within this Commonwealth, except purely mutual beneficial
    20  associations whose funds for the benefit of members and families
    21  or heirs are made up entirely of the weekly, monthly, quarterly,
    22  semi-annual or annual contributions to their members and the
    23  accumulated interest thereon and corporations organized under
    24  the act of June 21, 1937 (P.L.1948), known as the "Nonprofit
    25  Hospital Plan Act," and the act of June 27, 1939 (P.L.1125),
    26  known as the "Nonprofit Medical, Osteopathic, Dental and
    27  Podiatry Service Corporation Act."
    28     (2)  "Gross premiums" means premiums, premium deposits or
    29  assessments received by any insurance company, whether received
    30  in money or in the form of notes, credits, or any other
    19710H0190B0445                 - 156 -

     1  substitutes for money, and whether collected in this
     2  Commonwealth or elsewhere. Gross premiums shall not include: (i)
     3  amounts returned on policies canceled or not taken; (ii)
     4  premiums received for reinsurance; (iii) in the case of mutual
     5  insurance companies, associations, exchanges, and stock
     6  companies with participating features, that portion of the
     7  advanced premiums, premium deposits or assessments returned in
     8  cash or credited to members or policyholders, whether as
     9  dividends, earnings, savings, or return deposits, upon the
    10  expiration or termination of their contracts; and (iv) notes or
    11  other obligations received by mutual insurance companies to
    12  secure contingent premium liabilities to the extent that no
    13  assessment has been made and collected against said notes or
    14  obligations.
    15                              PART II
    16                         IMPOSITION OF TAX
    17     Section 902.  Imposition of Tax.--Every insurance company, as
    18  herein defined, transacting business in the Commonwealth of
    19  Pennsylvania, shall pay to the department, a tax at the rate of
    20  two per cent of the gross premiums received from business done
    21  within this Commonwealth during each calendar year, except that
    22  any insurance company which was not subject to this tax prior to
    23  1971 shall be taxed at the rate of one per cent for the year
    24  1971 and thereafter at the rate of two per cent.
    25                              PART III
    26                           ANNUAL REPORT
    27     Section 903.  Annual Report.--Every insurance company shall
    28  make a report to the department on a form prescribed by it on or
    29  before April 15 of each year, showing the gross premiums
    30  received from business transacted in the Commonwealth during the
    19710H0190B0445                 - 157 -

     1  year ending December 31 preceding. When making such report, the
     2  insurance company shall compute and pay to the Commonwealth the
     3  tax upon the gross premiums received from business transacted
     4  within this Commonwealth during such preceding year.
     5                              PART IV
     6                 PROCEDURE; ENFORCEMENT; PENALTIES
     7     Section 904.  Procedure; Enforcement; Penalties.--Parts III,
     8  IV, V, VI and VII of Article IV are incorporated by reference
     9  into this article in so far as they are applicable to the tax
    10  imposed hereunder.
    11                               PART V
    12     Section 905.  Repeal.--The act of February 21, 1961 (P.L.33),
    13  entitled "An act imposing a State tax on gross premiums, premium
    14  deposits, and assessments received from business transacted
    15  within this Commonwealth by certain insurance companies,
    16  associations, and exchanges; requiring the filing of annual and
    17  tentative reports and the computation and payment of tax;
    18  providing for the rights, powers and duties of the Department of
    19  Revenue, the taxpayers and officers thereof; and providing
    20  penalties," is repealed.
    21     Section 906.  Effective Date.--This article shall take effect
    22  January 1, 1971.
    23                             ARTICLE X
    24             CAPITAL STOCK TAX ON FOREIGN CORPORATIONS
    25                               PART I
    26                            DEFINITIONS
    27     Section 1001.  Definitions.--The following terms when used in
    28  this article shall have the meanings ascribed to them in this
    29  section:
    30     (1)  "Foreign corporation" means any corporation, limited
    19710H0190B0445                 - 158 -

     1  partnership or joint-stock association chartered or created by
     2  or under the laws of any other state or of the United States or
     3  of any foreign country, which has been issued a certificate of
     4  authority by the Department of State to do business within this
     5  Commonwealth and which either (i) has its principal office or
     6  chief place of business located within this Commonwealth, or
     7  (ii) has any part of its capital actually employed within this
     8  Commonwealth. The term "foreign corporation" shall not include
     9  foreign insurance companies and foreign nonprofit corporations
    10  which do not have capital stock.
    11     (2)  "Increase of capital" means, (i) as to foreign
    12  corporations doing business in this Commonwealth, any increase
    13  of capital in excess of the amount actually employed in this
    14  Commonwealth at any time prior to January 1, 1971 by such
    15  corporations reporting on a calendar year basis, or at any time
    16  prior to the first day of any fiscal year, beginning in the
    17  calendar year 1971, by such corporations reporting on a fiscal
    18  year basis; (ii) as to corporations admitted to do business in
    19  this Commonwealth after the effective date of this article,
    20  capital actually employed within this Commonwealth at the time
    21  of or after receiving a certificate of authority to do business
    22  from the Department of State and any increase thereof.
    23                              PART II
    24                         IMPOSITION OF TAX
    25     Section 1002.  Imposition of Tax.--From and after the
    26  effective date of this article, every foreign corporation, in
    27  addition to complying with all the laws of the Commonwealth now
    28  or hereafter in effect, shall, for the privilege of exercising
    29  its franchises in Pennsylvania, pay to the department an excise
    30  tax of one-third of one per cent upon the amount of any increase
    19710H0190B0445                 - 159 -

     1  of capital actually employed within this Commonwealth: Provided,
     2  That credit shall be allowed for said excise tax in the
     3  following cases:
     4     (1)  Merger of domestic corporation or corporations and/or
     5  foreign corporation or corporations with a foreign corporation
     6  and the surviving foreign corporation in the merger is then
     7  authorized, or will immediately thereafter be authorized, by a
     8  certificate of authority to transact business in this
     9  Commonwealth;
    10     (2)  Consolidation of two or more foreign corporations or of
    11  domestic and foreign corporations (one or more of each), and the
    12  corporation formed by the consolidation is a foreign corporation
    13  which is then authorized, or will immediately thereafter be
    14  authorized, by a certificate of authority to transact business
    15  in this Commonwealth.
    16     In such cases, the surviving or consolidated foreign
    17  corporation shall be entitled to credit upon any excise tax due
    18  and payable hereunder equal to the excise tax computed at the
    19  rate of one-third of one per cent on the value of the assets of
    20  the merging or consolidating foreign corporation or corporations
    21  actually employed by such surviving or consolidated foreign
    22  corporation within this Commonwealth within the provisions and
    23  intent of this article, and such proportion of the total excise
    24  tax of the merging or consolidating domestic corporation or
    25  corporations paid or relieved from payment on its authorized or
    26  issued and outstanding capital stock, determined by the ratio
    27  that the value of the assets of such domestic corporation or
    28  corporations actually employed by such surviving or consolidated
    29  foreign corporation within this Commonwealth within the
    30  provisions and intent of this article bears to the value of the
    19710H0190B0445                 - 160 -

     1  total assets of such domestic corporation.
     2     (3)  IN ARRIVING AT THE AMOUNT OF TAX DUE UNDER THIS ARTICLE,  <--
     3  A TAXPAYER SHALL APPORTION THE INCREASE IN CAPITAL BY THE USE OF
     4  THE FORMULA APPLICABLE TO THE OPERATIONS OF THE CORPORATION AS
     5  SET FORTH IN SECTION 401.
     6                              PART III
     7                              REPORTS
     8     Section 1003.  Initial and Annual Report.--Every foreign
     9  corporation shall annually file a report with the department for
    10  information purposes on a form prescribed by the department
    11  stating (i) the state or country in which incorporated or
    12  created, (ii) the date of incorporation or organization, (iii)
    13  location of its chief office in this Commonwealth, (iv) the name
    14  and address of its president and treasurer, (v) the greatest
    15  amount of capital actually employed within this Commonwealth
    16  during the preceding calendar or fiscal year, (vi) the greatest
    17  amount of capital actually employed within this Commonwealth at
    18  any time prior to the preceding calendar or fiscal year, and
    19  (vii) such other information as the department shall require for
    20  the purpose of this article.
    21                              PART IV
    22                 PROCEDURE; ENFORCEMENT; PENALTIES
    23     Section 1004.  Procedure; Enforcement; Penalties.--Parts III,
    24  IV, V, VI and VII of Article IV are incorporated by reference
    25  into this article in so far as they are applicable to the tax
    26  imposed hereunder.
    27                               PART V
    28                      REPEALER; EFFECTIVE DATE
    29     Section 1005.  Repeal.--The act of July 25, 1953 (P.L.560),
    30  entitled "An act to provide revenue for State purposes by
    19710H0190B0445                 - 161 -

     1  imposing an excise tax upon any increase in capital, as defined,
     2  actually employed in Pennsylvania, by any foreign corporation,
     3  limited partnership or joint-stock association; requiring the
     4  filing of reports; providing for rights, powers and duties of
     5  the Department of Revenue, the taxpayers and officers thereof;
     6  imposing interest and penalties; and repealing a certain act
     7  relating to foreign corporations, limited partnerships and
     8  joint-stock associations," is repealed.
     9     Section 1006.  Effective Date.--This article shall take
    10  effect January 1, 1971.
    11                             ARTICLE XI
    12                         GENERAL PROVISIONS
    13     Section 1101.  Saving Clause.--(a) Notwithstanding anything
    14  contained in any law to the contrary, the validity of any
    15  ordinance or part of any ordinance or any resolution or part of
    16  any resolution, and any amendments or supplements thereto now or
    17  hereinafter enacted or adopted by any political subdivision of
    18  this Commonwealth for or relating to the imposition, levy or
    19  collection of any tax, shall not be affected or impaired by
    20  anything contained in this code.
    21     (b)  Nothing contained in this code shall be construed to
    22  relieve any person, corporation or other entity from the filing
    23  returns or from any taxes, penalties or interest imposed by the
    24  provisions of any laws which were in effect prior to being
    25  repealed by this code, or effect or terminate any petitions,
    26  investigations, prosecutions, legal or otherwise, or other
    27  proceedings pending under the provisions of any such laws or
    28  prevent the commencement or further prosecution of any
    29  proceedings by the proper authorities of the Commonwealth for
    30  violation of any such laws or for the assessment, settlement,
    19710H0190B0445                 - 162 -

     1  collection or recovery of taxes, penalties or interest due to
     2  the Commonwealth under any of the laws which were in effect
     3  prior to being repealed by this code.
     4     Section 1102.  Constitutional Construction.--If any word,
     5  phrase, clause, sentence, section or provision of this code is
     6  for any reason held to be unconstitutional, the decision of the
     7  court shall not affect or impair any of the remaining provisions
     8  of this code. It is hereby declared as the legislative intent
     9  that this code would have been adopted had such unconstitutional
    10  word, phrase, clause, sentence, section or provision thereof not
    11  been included herein.
    12     Section 1103.  Effective Date.--The provisions of this code,
    13  except as otherwise specified, shall take effect immediately.












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