PRINTER'S NO. 2098
No. 1503 Session of 2000
INTRODUCED BY THOMPSON, GERLACH, STOUT, EARLL, WAUGH, MOWERY,
ROBBINS, LEMMOND, BRIGHTBILL, WENGER AND TILGHMAN,
AUGUST 23, 2000
REFERRED TO FINANCE, AUGUST 23, 2000
AN ACT
1 Amending the act of March 4, 1971 (P.L.6, No.2), entitled "An
2 act relating to tax reform and State taxation by codifying
3 and enumerating certain subjects of taxation and imposing
4 taxes thereon; providing procedures for the payment,
5 collection, administration and enforcement thereof; providing
6 for tax credits in certain cases; conferring powers and
7 imposing duties upon the Department of Revenue, certain
8 employers, fiduciaries, individuals, persons, corporations
9 and other entities; prescribing crimes, offenses and
10 penalties," further defining "average net income" for
11 purposes of capital stock franchise tax.
12 The General Assembly of the Commonwealth of Pennsylvania
13 hereby enacts as follows:
14 Section 1. The definition of "average net income" in section
15 601 of the act of March 4, 1971 (P.L.6, No.2), known as the Tax
16 Reform Code of 1971, amended May 7, 1997 (P.L.85, No.7), is
17 amended to read:
18 Section 601. Definitions and Reports.--(a) The following
19 words, terms and phrases when used in this Article VI shall have
20 the meaning ascribed to them in this section, except where the
21 context clearly indicates a different meaning:
22 "Average net income." The sum of the net income or loss for
1 each of the current and immediately preceding four years,
2 divided by five. If the entity has not been in existence for a
3 period of five years, the average net income shall be the
4 average net income for the number of years that the entity has
5 actually been in existence. In computing average net income,
6 losses shall be entered as computed, but in no case shall
7 average net income be less than zero. The net income or loss of
8 the entity for any taxable year shall be the amount set forth as
9 income per books on the income tax return filed by the entity
10 with the Federal Government for such taxable year, or if no such
11 return is made, as would have been set forth had such a return
12 been made, subject, however, in either case to any correction
13 thereof, for fraud, evasion or error. In the case of any entity
14 which has an investment in another corporation, the net income
15 or loss shall be computed on an unconsolidated basis exclusive
16 of the net income or loss of such other corporation. In the case
17 of a Pennsylvania S corporation, limited liability company or
18 business trust taxable as a partnership for Federal income tax
19 purposes, the net income or loss of the Pennsylvania S
20 corporation, limited liability company or business trust for any
21 given year shall be reduced by the amount of distributions made
22 by such Pennsylvania S corporation, limited liability company or
23 business trust to any member of such Pennsylvania S corporation,
24 limited liability company or business trust who is deemed to be
25 materially participating in the activities conducted by such
26 Pennsylvania S corporation, limited liability company or
27 business trust for purposes of section 469 of the Internal
28 Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. § 469). For
29 this purpose, distributions which are made to a member of a
30 Pennsylvania S corporation, limited liability company or
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1 business trust within thirty (30) days of the end of a given
2 year may be treated as having been made in the preceding year
3 and not in the year in which such distribution is actually made.
4 * * *
5 Section 2. This act shall take effect in 60 days.
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