PRINTER'S NO. 1940
No. 1661 Session of 1981
INTRODUCED BY WILSON, VROON, CORNELL, POTT, LUCYK, McVERRY AND
NAHILL, JUNE 17, 1981
REFERRED TO COMMITTEE ON FINANCE, JUNE 17, 1981
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," providing for the deduction and carryover of net
11 operating loss in determining taxable income for corporate
12 income taxes.
13 The General Assembly of the Commonwealth of Pennsylvania
14 hereby enacts as follows:
15 Section 1. Subclause 1 of clause (3) of section 401, act of
16 March 4, 1971 (P.L.6, No.2), known as the "Tax Reform Code of
17 1971," amended December 8, 1980 (P.L.1117, No.195), is amended
18 to read:
19 Section 401. Definitions.--The following words, terms, and
20 phrases, when used in this article, shall have the meaning
21 ascribed to them in this section, except where the context
22 clearly indicates a different meaning:
1 * * *
2 (3) "Taxable income." 1. In case the entire business of the
3 corporation is transacted within this Commonwealth, for any
4 taxable year which begins on or after January 1, 1971, taxable
5 income for the calendar year or fiscal year as returned to and
6 ascertained by the Federal Government, or in the case of a
7 corporation participating in the filing of consolidated returns
8 to the Federal Government, the taxable income which would have
9 been returned to and ascertained by the Federal Government if
10 separate returns had been made to the Federal Government for the
11 current and prior taxable years, subject, however, to any
12 correction thereof, for fraud, evasion, or error as finally
13 ascertained by the Federal Government: Provided, That additional
14 deductions shall be allowed from taxable income on account of
15 any dividends received from any other corporation but only to
16 the extent that such dividends are included in taxable income as
17 returned to and ascertained by the Federal Government: Provided
18 further, That additional deductions shall be allowed from
19 taxable income in an amount equal to the amount of any reduction
20 in an employer's deduction for wages and salaries as required by
21 section 280C of the Internal Revenue Code as a result of the
22 employer taking a credit for "new jobs" pursuant to section 44B
23 of the Internal Revenue Code: Provided further, That taxable
24 income will include the sum of the following tax preference
25 items as defined in section 57 of the Internal Revenue Code, as
26 amended, (i) excess investment interest; (ii) accelerated
27 depreciation on real property; (iii) accelerated depreciation on
28 personal property subject to a net lease; (iv) amortization of
29 certified pollution control facilities; (v) amortization of
30 railroad rolling stock; (vi) stock options; (vii) reserves for
19810H1661B1940 - 2 -
1 losses on bad debts of financial institutions; (viii) and
2 capital gains but only to the extent that such preference items
3 are not included in "taxable income" as returned to and
4 ascertained by the Federal Government. No deduction shall be
5 allowed for net operating losses sustained by the corporation
6 during any other fiscal or calendar year: Provided, That for the
7 calendar year 1981 and fiscal years beginning in 1981 and
8 thereafter, a net operating loss[, as provided by section 172 of
9 the Internal Revenue Code,] shall be allowed as a deduction and
10 a [carryover] carryforward (but not as a carryback) pursuant to
11 the following schedule:
12 Net Operating Loss for Year Carryover
13 1981 1 year
14 1982 2 years
15 1983 and thereafter 3 years
16 A net operating loss is any negative (minus) balance arrived at
17 in any taxable year after making the adjustments required or
18 permitted by this section, exclusive of any prior year net
19 operating loss deduction. For allocation or apportionment
20 purposes, the provisions hereof relating to "income" or "gain"
21 shall be deemed likewise to apply to losses. No net operating
22 loss shall be allowed for any tax year in which the corporation
23 was not subject to Pennsylvania corporate taxation. The net
24 operating loss deduction shall be carried to the earliest of the
25 taxable years to which, under this schedule, such [loss]
26 deduction may first be carried. In the case of regulated
27 investment companies as defined by the Internal Revenue Code of
28 1954, as amended, "taxable income" shall be investment company
29 taxable income as defined in the aforesaid Internal Revenue Code
30 of 1954, as amended. In arriving at "taxable income" for Federal
19810H1661B1940 - 3 -
1 tax purposes for any taxable year beginning on or after January
2 1, 1971, any corporate net income tax due to the Commonwealth
3 pursuant to the provisions of this article shall not be allowed
4 as a deduction and the amount of corporate tax so due and
5 excluded from Federal taxable income under the Internal Revenue
6 Code shall not be apportioned but shall be subject to tax at the
7 rate imposed under this article.
8 * * *
9 Section 2. This act shall take effect immediately and shall
10 apply to taxable years beginning on or after January 1, 1981.
D6L72RAW/19810H1661B1940 - 4 -