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        PRIOR PRINTER'S NO. 593                       PRINTER'S NO. 1080

THE GENERAL ASSEMBLY OF PENNSYLVANIA


HOUSE BILL

No. 550 Session of 2001


        INTRODUCED BY HERMAN, BENNINGHOFF, ARMSTRONG, FEESE, FICHTER,
           McNAUGHTON, HANNA, BARRAR, BASTIAN, CALTAGIRONE, CLYMER, COY,
           EGOLF, FAIRCHILD, HORSEY, MAITLAND, McILHATTAN, NAILOR,
           PHILLIPS, READSHAW, RUBLEY, SAYLOR, SCHULER, STEELMAN, STERN,
           E. Z. TAYLOR, TIGUE, WILT AND YOUNGBLOOD, FEBRUARY 7, 2001

        AS REPORTED FROM COMMITTEE ON LOCAL GOVERNMENT, HOUSE OF
           REPRESENTATIVES, AS AMENDED, MARCH 13, 2001

                                     AN ACT

     1  Providing for optional occupation tax replacement.

     2     The General Assembly of the Commonwealth of Pennsylvania
     3  hereby enacts as follows:
     4  Section 1.  Short title.
     5     This act shall be known and may be cited as the Optional
     6  Occupation Tax Elimination Act.
     7  Section 2.  Definitions.
     8     The following words and phrases when used in this act shall
     9  have the meanings given to them in this section unless the
    10  context clearly indicates otherwise:
    11     "Earned income tax."  A tax on earned income and net profits
    12  levied under section 13 of the act of December 31, 1965
    13  (P.L.1257, No.511), known as The Local Tax Enabling Act.
    14     "ELECTION OFFICIALS."  THE COUNTY BOARD OF ELECTIONS OF A      <--
    15  COUNTY.


     1     "Governing body."  A city council, borough council,
     2  incorporated town council, board of township commissioners,
     3  board of township supervisors, a governing council of a home
     4  rule municipality or optional plan municipality, a governing
     5  council of any similar general purpose unit of government which
     6  may hereafter be created by statute or a board of school
     7  directors of a school district.
     8     "Occupation tax."  A tax based upon an assessed valuation of
     9  a particular trade, occupation or profession. The term includes
    10  a tax imposed on a flat rate on all trades, occupations or
    11  professions. The term does not include a tax upon persons
    12  employed in a taxing district, commonly known as an occupational
    13  privilege tax.
    14     "Political subdivision."  Any city, borough, incorporated
    15  town, township or school district.
    16     "The Local Tax Enabling Act."  The act of December 31, 1965
    17  (P.L.1257, No.511), known as The Local Tax Enabling Act.
    18  Section 3.  Occupation tax replacement generally.
    19     A political subdivision that levies an occupation tax may
    20  replace the revenues provided by the occupation tax by
    21  increasing the rate of the earned income tax as provided in this
    22  act.
    23  Section 4.  Earned income tax rate limits.
    24     (a)  Earned income tax rate limits.--For the first fiscal
    25  year beginning after approval of the referendum under section 7,
    26  and each fiscal year thereafter, the governing body of a
    27  political subdivision using the procedures authorized by this
    28  act shall be authorized to impose the earned income tax at a
    29  rate not exceeding the maximum earned income tax rate as
    30  calculated under subsection (b).
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     1     (b)  Calculation of maximum earned income tax rate.--The
     2  maximum earned income tax rate shall be determined by taking the
     3  sum of the rates calculated under paragraphs (1) and (2):
     4         (1)  The rate of the earned income tax that would have
     5     resulted in the collection by the political subdivision of an
     6     amount equal to the amount collected from the occupation tax.
     7     This calculation shall be made using actual revenue
     8     collections for the fiscal year ending immediately prior to
     9     the date of the referendum under section 7.
    10         (2) The rate at which the earned income tax was collected
    11     by the political subdivision for the fiscal year ending
    12     immediately prior to the date of the referendum under section
    13     7.
    14  The maximum rate of the earned income tax calculated under this
    15  subsection shall not be subject to the limits on the earned
    16  income tax specified in section 8(3) of The Local Tax Enabling
    17  Act.
    18     (c)  Other rates of taxation.--If a municipality or school
    19  district, both of which impose an earned income tax on the same
    20  individual under The Local Tax Enabling Act and both of which
    21  are limited to or have agreed upon a division of the tax rate in
    22  accordance with section 8(3) of The Local Tax Enabling Act,
    23  receives voter approval under section 7 and opts to increase the
    24  rate of earned income tax in excess of that limit or agreement,
    25  then the municipality or school district which does not receive
    26  voter approval shall remain subject to that limit or agreement.
    27  Section 5.  Occupation tax prohibited.
    28     For the first fiscal year beginning after approval of the
    29  referendum required under section 7 and each fiscal year
    30  thereafter, a political subdivision is prohibited from levying,
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     1  assessing or collecting an occupation tax. This section shall
     2  not apply to the collection of delinquent occupation taxes.
     3  Section 6.  Resolution required.
     4     The governing body may seek authority to increase the maximum
     5  limits of the earned income tax by adopting a resolution to
     6  place a referendum on the ballot pursuant to section 7. The
     7  governing body shall transmit a copy of the resolution to the
     8  appropriate election officials. Prior to approving the
     9  resolution the governing body shall:
    10         (1)  Give public notice of its intent to adopt the
    11     resolution in the manner provided by section 4 of The Local
    12     Tax Enabling Act.
    13         (2)  Conduct at least one public hearing regarding
    14     eliminating the occupation tax and increasing the maximum
    15     rate of the earned income tax.
    16  Section 7.  Binding referendum.
    17     (a)  Referendum to be held.--A political subdivision may
    18  increase the maximum rate of the earned income tax only by
    19  obtaining the approval of the electorate of the affected
    20  political subdivision in a public referendum at the general or
    21  municipal election preceding the fiscal year when the maximum
    22  rate of the earned income tax will be increased. The election
    23  officials shall cause a question to be placed on the ballot at
    24  the first general or municipal election occurring at least 90
    25  days after their receipt of the resolution required in section
    26  6.
    27     (b)  Contents of question.--The referendum question must
    28  state the maximum rate of the earned income tax calculated under
    29  section 4 and that the additional revenue generated by an
    30  increase in the earned income tax will be used to eliminate the
    20010H0550B1080                  - 4 -

     1  occupation tax. The question shall be in clear language that is
     2  readily understandable by a layperson. For the purpose of
     3  illustration, a referendum question may be framed as follows:
     4         Do you favor increasing the rate of the earned income tax
     5         to a maximum of X%, with the requirement that the
     6         increase be used to eliminate the occupation tax?
     7     (c)  Vote.--If a majority of the electors voting on the
     8  question vote "yes," then the governing body shall be authorized
     9  to implement an increase in the earned income tax pursuant to
    10  section 4 and shall be required to eliminate the occupation tax
    11  as required by section 5. If a majority of the electors voting
    12  on the question vote "no," the governing body shall have no
    13  authority to increase the rate of the earned income tax above
    14  the maximum rate otherwise provided by law.
    15     (d)  Voting proceedings.--Proceedings under this section
    16  shall be in accordance with the provisions of the act of June 3,
    17  1937 (P.L.1333, No.320), known as the Pennsylvania Election
    18  Code.
    19  Section 8.  Applicability.
    20     This act shall apply to political subdivisions which levy an
    21  occupation tax on the date of enactment of this act.
    22  Section 9.  Effective date.
    23     This act shall take effect July 1, 2001, or in 90 days,
    24  whichever is later.




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