PRINTER'S NO. 3551
No. 2540 Session of 1976
INTRODUCED BY MORRIS, JUNE 22, 1976
REFERRED TO COMMITTEE ON EDUCATION, JUNE 22, 1976
AN ACT
1 Amending the act of March 4, 1971 (P.L.6, No.2), entitled "An
2 act relating to tax reform and State taxation by codifying
3 and enumerating certain subjects of taxation and imposing
4 taxes thereon; providing procedures for the payment,
5 collection, administration and enforcement thereof; providing
6 for tax credits in certain cases; conferring powers and
7 imposing duties upon the Department of Revenue, certain
8 employers, fiduciaries, individuals, persons, corporations
9 and other entities; prescribing crimes, offenses and
10 penalties," increasing the personal income, corporate stock
11 and franchise, bank shares, title insurance and trust company
12 shares, and insurance premiums taxes, imposing a State gross
13 receipts tax upon unincorporated businesses, codifying
14 provisions taxing mutual thrift institutions and increasing
15 the tax to compensate for the gradual elimination of school
16 real property taxes, and authorizing the Department of
17 Revenue to collect a surtax when levied by school districts.
18 The General Assembly of the Commonwealth of Pennsylvania
19 hereby enacts as follows:
20 Section 1. Section 302, act of March 4, 1971 (P.L.6, No.2),
21 known as the "Tax Reform Code of 1971," added August 31, 1971
22 (P.L.362, No.93), amended March 13, 1974 (P.L.179, No.32), is
23 amended to read:
24 Section 302. Imposition of Tax.--(a) There is hereby imposed
25 an annual tax to be paid by resident individuals, estates or
26 trusts at the [rate of two per cent] rates provided in
1 subsection (c) hereof on the privilege of receiving each of the 2 classes of income hereinafter enumerated in section 303. 3 (b) There is hereby imposed an annual tax to be paid by 4 nonresident individuals, estates or trusts at the [rate of two 5 per cent] rates provided in subsection (c) hereof on the 6 privilege of receiving each of the classes of income enumerated 7 in section 303 from sources within this Commonwealth. 8 (c) The rates of the taxes imposed in the two preceding 9 subsections shall be, for the taxpayer's calendar year 1977, two 10 and two-tenths per cent; calendar year 1978, two and four-tenths 11 per cent; calendar year 1979, two and six-tenths per cent; 12 calendar year 1980, two and eight-tenths per cent; calendar year 13 1981 and thereafter, three per cent. 14 Section 2. Article III of the act, added August 31, 1971 15 (P.L.362, No.93), is amended by adding a part to read: 16 ARTICLE III 17 PERSONAL INCOME TAX 18 * * * 19 PART XII 20 LOCAL SCHOOL SURTAX COLLECTIONS 21 Section 370. Local School Surtax.--The chief administrator 22 of each school district of the first class A, each school 23 district of the second, third and fourth class whose board of 24 directors levy, and, in the case of districts of the first 25 class, whose city council authorizes and whose members of the 26 board of public education levy an additional tax for school 27 purposes upon the classes of personal income tax as provided in 28 this article, as authorized under section 602.2 of the act of 29 March 10, 1949 (P.L.30, No.14), known as the "Public School Code 30 of 1949," and determines that the department shall act as its 19760H2540B3551 - 2 -
1 collection agent, shall so notify the department each year by 2 submitting a certified copy of the resolution or ordinance and 3 an affidavit setting forth the amount of the tax to be collected 4 by the department for the school district. The department shall 5 include in all forms and instructions prepared for the 6 collection of the personal income tax appropriate instructions 7 and procedures to enable the residents of the school districts 8 where the local school surtax is levied, and collection by the 9 department authorized, to compute and pay over to the 10 Commonwealth said surtax. The department shall remit to each 11 school district all such taxes collected by it on their behalf 12 within sixty days after receipt of same. 13 Section 371. Procedure; Enforcement; Penalties.--Parts I, 14 III, IV, VI, VII, VIII, IX, X and XI are incorporated by 15 reference in this part in so far as they are consistent with 16 this part and applicable to the surtax to be collected 17 hereunder. 18 Section 3. The act is amended by adding articles to read: 19 ARTICLE V-A 20 UNINCORPORATED BUSINESS ASSOCIATIONS GROSS RECEIPTS TAX 21 PART I 22 DEFINITIONS 23 Section 501-A. Definitions.--The following words, terms and 24 phrases when used in this article shall have the meaning 25 ascribed to them in this section except where the context 26 clearly indicates a different meaning. 27 (a) "Person." Any individual, partnership or unincorporated 28 association; whenever used in any clause prescribing or imposing 29 a penalty the term "person" as applied to associations shall 30 mean the partners or members thereof; "person" shall not include 19760H2540B3551 - 3 -
1 domestic or foreign corporations of any class. 2 (b) "Wholesale dealer" or "wholesale vender." Any person 3 who sells to dealers in or vendors of goods, wares and 4 merchandise. 5 (c) "Retail dealer" or "retail vendor." Any person who 6 sells to dealers in or vendors of goods, wares and merchandise 7 who is not a wholesale dealer or vendor. 8 (d) "Manufacturer." Any person who sells goods, wares and 9 merchandise of his own growth or production. 10 (e) "Business." The carrying on or exercising for gain or 11 profit within the Commonwealth of Pennsylvania by any person of 12 any trade, business, profession, vocation or making sales to 13 persons within the Commonwealth or of any manufacturing, 14 commercial or financial service or business including but not 15 limited to manufacturers, brokers, wholesale dealers or 16 wholesale vendors, retail dealers or retail vendors. 17 "Business" shall not include the following: any business 18 conducted by a nonprofit unincorporated association organized 19 for religious, charitable or educational purposes; any authority 20 created and organized under and pursuant to any act of Assembly; 21 the business of any insurance company, association or exchange 22 or any fraternal benefit or beneficial society or any other 23 state under the laws of which insurance companies, associations 24 or exchanges or fraternal benefit or beneficial societies of 25 this Commonwealth doing business in such other state would be 26 subjected by reason of the tax imposed by this act to additional 27 or further taxes, fines, penalties or license fees by such other 28 state and any employment for a wage or salary. 29 (f) "Financial service" or "financial business." The 30 services and transactions of unincorporated private banks and 19760H2540B3551 - 4 -
1 bankers, building and loan associations, savings and loan 2 associations, credit unions, savings banks, banks, bank and 3 trust companies, trust companies, investment companies 4 registered as such with the Federal Securities and Exchange 5 Commission, holding companies, dealers and brokers in money 6 credits, commercial paper, bonds, notes, securities and stocks, 7 monetary metals factors and commission merchants. 8 (g) "Gross volume of business." Gross receipts and shall 9 include both cash and credit transactions as reported for 10 Federal income tax purposes; it shall exclude (i) the dollar 11 volume of annual business covering the resale of goods, wares or 12 merchandise taken by a dealer as a trade-in or as part payment 13 for other goods, wares and merchandise in the usual and ordinary 14 course of his business except to the extent that the resale 15 price exceeds the trade-in allowance; (ii) in the case of 16 financial business, the cost of securities and other similar 17 property sold, exchanged, paid at maturity or redeemed, and 18 moneys or credits received in repayment of advances, credits and 19 loans, but not to exceed the principal amount of such advances, 20 credits and loans and shall exclude deposits; and (iii) the 21 receipts or the portion thereof attributable to any item of sale 22 involving the bona fide delivery of goods, commodities, wares or 23 merchandise to a location regularly maintained by the other 24 party to the transaction outside the limits of the Commonwealth 25 and not for the purpose of evading payment of the tax or any 26 portion thereof imposed under this act. 27 (h) "Department." The Department of Revenue of this 28 Commonwealth. 29 (i) "Taxable year." The calendar year or the fiscal year 30 beginning during the calendar year. 19760H2540B3551 - 5 -
1 PART II 2 IMPOSITION AND RATE OF TAX 3 Section 502-A. Imposition and Rate of Tax.--Every person 4 engaging in any business in the Commonwealth shall pay an 5 unincorporated business associations gross receipts tax for the 6 taxable year 1977 at the rate of one mill; and for the taxable 7 year 1978, at the rate of two mills; 1979, three mills; 1980, 8 four mills; and for the taxable years 1981 and thereafter, five 9 mills, on each dollar of the gross volume of business, 10 transacted by such person in that taxable year. 11 PART III 12 RETURNS AND PAYMENT OF TAX 13 Section 503-A. Returns.--Every person subject to the tax 14 imposed by this act shall on or before the fifteenth day of May 15 following the taxable year file with the department a return 16 upon a form furnished by the department setting forth his name, 17 business, business address, and such other information as may be 18 necessary in arriving at the gross volume of business transacted 19 by him during the preceding year and the amount of the tax due. 20 Section 504-A. Payment.--At the time of filing the return 21 the person making the same shall pay to the department the 22 amount of tax shown as due thereon. 23 PART IV 24 POWERS AND DUTIES OF DEPARTMENT 25 Section 505-A. Powers and Duties of Department.--(a) It 26 shall be the duty of the department to collect and receive the 27 taxes, interest, fines and penalties imposed by this act. It 28 shall keep a record showing the amount received from each person 29 paying the tax, interest, fine and penalty and the date of such 30 receipt. 19760H2540B3551 - 6 -
1 (b) The department is hereby charged with the administration 2 and enforcement of the provisions of this act and is hereby 3 empowered to prescribe, adopt, promulgate and enforce 4 regulations relating to any matter pertaining to the 5 administration and enforcement of this act including provision 6 for the reexamination and correction of returns and payments 7 alleged or found to be incorrect or as to which an overpayment 8 is claimed or found to have occurred. 9 (c) The department is hereby authorized to examine the 10 books, papers and records of any person in order to verify the 11 accuracy of any return made or if no return has been made to 12 ascertain the tax due. Every such person is hereby directed and 13 required to give to the department the means, facilities and 14 opportunity for such examinations and investigations as are 15 hereby authorized. 16 Section 506-A. Suit on Collections; Penalty.--(a) The 17 Commonwealth may sue for the recovery of taxes, interest, fines 18 and penalties due and unpaid under this act. 19 (b) If for any reason the tax is not paid when due in each 20 year interest at the rate of six per cent per annum on the 21 amount of said tax and in addition a penalty of one per cent of 22 the amount of the unpaid tax for each month or fraction thereof 23 during which the tax remains unpaid shall be added and 24 collected. Where suit is brought for the recovery of any such 25 tax the person liable therefor shall in addition be liable for 26 the costs of collection and the interest and penalties herein 27 imposed. 28 PART V 29 FINES AND PENALTIES 30 Section 507-A. Fines and Penalties.--Whoever makes any false 19760H2540B3551 - 7 -
1 or untrue statement on his return or who refuses to permit 2 inspection of the books, records or accounts of any business in 3 his custody or control when the right to make such inspection by 4 the department is requested and whoever fails or refuses to file 5 a return required by this act shall upon summary conviction be 6 sentenced to pay a fine of not more than three hundred dollars 7 ($300). 8 PART VI 9 MISCELLANEOUS PROVISIONS 10 Section 508-A. Other Taxes.--It is hereby declared to be the 11 intention of the General Assembly that the tax imposed under 12 this act shall be in addition to any and all other taxes imposed 13 by the Commonwealth. 14 Section 509-A. Saving Clause.--Notwithstanding anything 15 contained in any law to the contrary the validity of any 16 ordinance or part of any ordinance or any resolution or part of 17 any resolution and any amendments or supplements thereto now or 18 hereafter enacted or adopted by any political subdivision 19 providing for or relating to the imposition, levy or collection 20 of any mercantile license tax shall not be affected or impaired 21 by anything contained in this act. 22 ARTICLE V-B 23 MUTUAL THRIFT INSTITUTIONS TAX 24 PART I 25 DEFINITIONS 26 Section 501-B. Definitions.--As used in this article "mutual 27 thrift institution" shall be construed to mean every savings 28 bank without capital stock incorporated by or under any law of 29 this Commonwealth, every building and loan association, every 30 savings and loan association incorporated under the laws of this 19760H2540B3551 - 8 -
1 Commonwealth and every Federal savings and loan association 2 incorporated under the laws of the United States and located 3 within this Commonwealth. 4 PART II 5 IMPOSITION OF RATE OF TAX 6 Section 502-B. Imposition; Report and Payment of Tax; 7 Exemptions.--(a) Every mutual thrift institution shall annually, 8 upon the fifteenth day of April each year beginning in the year 9 1965, make a report to the Department of Revenue, setting forth 10 the entire amount of net earnings or income received or accrued 11 by said mutual thrift institution from all sources during the 12 preceding year, and such other information as the department may 13 require, and upon such net earnings or income the said mutual 14 thrift institution shall pay into the State Treasury, through 15 the Department of Revenue, for the use of the Commonwealth, 16 within the time prescribed by this article for making such 17 annual report, a State excise tax at the rate of eleven and one- 18 half per cent annually for the years 1969 through 1976, and at 19 the rate of twelve per cent for the year 1977; twelve and one- 20 half per cent for the year 1978; thirteen per cent for the year 21 1979; thirteen and one-half per cent for the the year 1980; and 22 fourteen per cent for the year 1981 and thereafter, upon such 23 annual net earnings or income, for the privilege of doing 24 business in the Commonwealth. On or before the thirtieth day of 25 April, 1970, and each year thereafter, each such mutual thrift 26 institution shall file a tentative report and pay on account of 27 the tax due upon such earnings or income received or accrued 28 during that year not less than eighty per cent of the amount of 29 said tax, the said amount to be computed by applying the current 30 tax rate to eighty per cent of the net earnings or income of 19760H2540B3551 - 9 -
1 such institution for the immediate prior year, or of the 2 estimated net earnings or income of such corporation to be 3 received or accrued during the current year. The remaining 4 portion of the tax due shall be paid upon the date the 5 institution's annual report is required herein to be made. 6 Should it subsequently be determined that the amount of the net 7 earnings or income of the institution reported for the immediate 8 prior year or of the estimated net earnings or income stated by 9 such institution and employed in the computation of the 10 tentative tax was understated by ten per cent or more, there 11 shall be added to the tax determined to be due an additional one 12 per cent of the amount of said tax for each per cent of such 13 understatement, and said additional tax shall bear interest from 14 the date the tentative tax was due. 15 (b) If, however, any such mutual thrift institution closes 16 its fiscal year, not upon the thirty-first day of December, but 17 upon some other date the tax shall be imposed upon such annual 18 net earnings or income received or accrued during its fiscal 19 year and the tentative report for the fiscal year beginning in 20 1964 and for each fiscal year thereafter shall be made and the 21 tentative tax for such year shall be paid within one hundred 22 twenty days after the close of the preceding fiscal year, and 23 the remaining portion of the tax due upon the net earnings or 24 income received or accrued during such year shall be paid within 25 the time prescribed by this article for making the annual report 26 for such year. 27 (c) Net earnings or income shall be determined in accordance 28 with generally accepted principles of accounting, either on a 29 cash or accrual or combined cash and accrual basis, depending on 30 the method of bookkeeping employed by each mutual thrift 19760H2540B3551 - 10 -
1 institution, and in computing such net earnings or income, 2 amounts credited or paid as dividends or interest to 3 shareholders, holders of accounts or depositors shall be 4 included among the allowable deductions. 5 (d) Mutual thrift institutions subject to the provisions of 6 this act shall be exempt from all other corporate taxes imposed 7 by the Commonwealth for State purposes, and from all local 8 taxation imposed by political subdivisions of this Commonwealth 9 under the authority of the laws of this Commonwealth, except 10 taxes on real estate or transfers thereof. 11 PART III 12 PROCEDURE; ENFORCEMENT; PENALTIES 13 Section 503-B. Procedure; Enforcement; Penalties.--Parts 14 III, IV, V, VI and VII of Article IV are incorporated by 15 reference into this article in so far as they are applicable to 16 the tax imposed hereunder. 17 PART IV 18 REPEALER 19 Section 504-B. Repealer.--The act of June 22, 1964 (P.L.16, 20 No.2), known as "The Mutual Thrift Institutions Tax Act," is 21 repealed. 22 Section 4. The act is amended by adding sections to read: 23 Section 602.2. Additional Tax in Lieu of School Real 24 Property Tax.--In addition to the taxes imposed by subsections 25 (a), (b), (f) and (g) of section 602, there is hereby imposed a 26 tax for the calendar year 1977 or the fiscal year beginning in 27 1977, at the rate of three mills; for 1978, six mills; 1979, 28 nine mills; 1980, twelve mills and 1981 and thereafter, fifteen 29 mills. 30 Section 701.1. Additional Tax in Lieu of School Real 19760H2540B3551 - 11 -
1 Property Tax.--In addition to the taxes imposed by section 701, 2 there is hereby imposed a tax for the calendar year 1977, at the 3 rate of seven-tenths mills; for 1978, one and four-tenths mills; 4 1979, two and one-tenth mills; 1980, two and eight-tenths mills; 5 and for 1981 and thereafter, three and five-tenths mills. 6 Section 801.1. Additional Tax in Lieu of School Real 7 Property Tax.--In addition to the taxes imposed by section 801, 8 there is hereby imposed a tax for the calendar year 1977, at the 9 rate of seven-tenths mills; 1978, one and four-tenths mills; 10 1979, two and one-tenth mills; 1980, two and eight-tenths mills; 11 and 1981 and thereafter, three and five-tenths mills. 12 Section 902.1. Additional Tax in Lieu of School Real 13 Property Tax.--In addition to the taxes imposed by subsection 14 (a) of section 902, there is hereby imposed a tax for general 15 revenue purposes for the calendar year 1977, at the rate of 16 four-one-hundredths per cent; for 1978, eight-one-hundredths per 17 cent; 1979, twelve-one-hundredths per cent; 1980, sixteen-one- 18 hundredths per cent and 1981 and thereafter, twenty-one- 19 hundredths per cent. 20 Section 5. This act shall take effect immediately. F21L56RLC/19760H2540B3551 - 12 -