PRINTER'S NO. 1900
No. 1554 Session of 2001
INTRODUCED BY SAYLOR, CIVERA, MICOZZIE, LEWIS, RAYMOND, ADOLPH,
BELFANTI, CALTAGIRONE, CREIGHTON, CURRY, DAILEY, GODSHALL,
GORDNER, HARPER, KIRKLAND, MACKERETH, McCALL, McILHATTAN,
McNAUGHTON, ROHRER, STEIL, STETLER, THOMAS, TIGUE AND WATSON,
MAY 8, 2001
REFERRED TO COMMITTEE ON FINANCE, MAY 8, 2001
AN ACT
1 Amending Title 53 (Municipalities Generally) of the Pennsylvania
2 Consolidated Statutes, authorizing school districts to impose
3 a tax on personal income; providing for the levying,
4 assessment and collection of local personal income tax; and
5 imposing powers and duties on the Department of Revenue and
6 the Department of Community and Economic Development.
7 The General Assembly of the Commonwealth of Pennsylvania
8 hereby enacts as follows:
9 Section 1. Section 8401 of Title 53 of the Pennsylvania
10 Consolidated Statutes is amended by adding a definition to read:
11 § 8401. Definitions.
12 The following words and phrases when used in this subpart
13 shall have the meanings given to them in this section unless the
14 context clearly indicates otherwise:
15 * * *
16 "Personal income." Income enumerated in section 303 of the
17 act of March 4, 1971 (P.L.6, No.2), known as the Tax Reform Code
18 of 1971, as returned to and ascertained by the Department of
1 Revenue, subject, however, to any correction thereof for fraud,
2 evasion or error as finally determined by the Commonwealth.
3 * * *
4 Section 2. Sections 8402(a), 8404, 8701, 8702, 8703(a), (b)
5 and (d), 8704(a), 8705(e), 8711 and 8713 of Title 53 are amended
6 to read:
7 § 8402. Scope and limitations.
8 (a) General rule.--Except as provided in subsections (b),
9 (c), (d), (e) and (f) and section 8405 (relating to
10 applicability), it is the intent of this subpart to confer upon
11 each school district the power to levy, assess and collect an
12 earned income and net profits tax or a local personal income tax
13 as set forth in this subpart.
14 * * *
15 § 8404. Certain rates of taxation limited.
16 If a municipality and school district both impose an earned
17 income and net profits tax on the same individual under the
18 Local Tax Enabling Act and the municipality and school district
19 are limited to or have agreed upon a division of the tax rate in
20 accordance with section 8 of the Local Tax Enabling Act, then
21 the municipality that continues to levy the earned income and
22 net profits tax under the Local Tax Enabling Act shall remain
23 subject to that limitation or agreement in the event that the
24 school district opts to impose an earned income and net profits
25 tax under section 8711 (relating to earned income and net
26 profits tax) or a local personal income tax under section 8721
27 (relating to local personal income tax).
28 § 8701. General tax authorization.
29 (a) General rule.--Subject to sections 8703 (relating to
30 adoption of referendum) and 8704 (relating to public referendum
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1 requirements for increasing property taxes previously reduced)
2 and except as provided in subsection (b), each school district
3 shall have the power and may by resolution levy, assess and
4 collect or provide for the levying, assessment and collection of
5 the [earned income and net profits tax] taxes authorized under
6 this chapter.
7 (b) Exclusions.--No school district which levies [an earned
8 income and net profits tax] a tax authorized by this chapter
9 shall have any power or authority to levy, assess or collect:
10 (1) A tax based upon a flat rate or on a millage rate on
11 an assessed valuation of a particular trade, occupation or
12 profession, commonly known as an occupation tax.
13 (2) A tax at a set or flat rate upon persons employed
14 within the taxing district, commonly known as an occupational
15 privilege tax.
16 (3) A per capita, poll, residence or similar head tax.
17 (4) The earned income and net profits tax levied under
18 the Local Tax Enabling Act.
19 (5) An earned income tax under the act of August 24,
20 1961 (P.L.1135, No.508), referred to as the First Class A
21 School District Earned Income Tax Act, or under the
22 additional authority in section 652.1(a)(2) of the act of
23 March 10, 1949 (P.L.30, No.14), known as the Public School
24 Code of 1949.
25 (6) Any tax under section 652.1(a)(4) of the Public
26 School Code of 1949 except as it pertains to real estate
27 transfer taxes.
28 (7) Except for taxes permitted under section 8402(b)
29 (relating to scope and limitations), (c), (d), (e) and (f),
30 any other tax authorized or permitted under the Local Tax
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1 Enabling Act.
2 (c) Delinquent taxes.--The provisions of subsection (b)
3 shall not apply to collection of delinquent taxes.
4 § 8702. Continuity of tax.
5 The [earned income and net profits tax] taxes levied under
6 the provisions of this chapter shall continue in force on a
7 fiscal year basis without annual reenactment unless the rate of
8 tax is increased or the tax is subsequently repealed.
9 § 8703. Adoption of referendum.
10 (a) General rule.--
11 (1) In order to levy [an earned income and net profits]
12 a tax under this chapter, a governing body shall use the
13 procedures set forth in subsection (b).
14 (2) Any governing body after making an election to levy
15 [an earned income and net profits] a tax under this chapter
16 may, after a period of at least three full fiscal years,
17 elect under the provisions of subsection (c) to levy, assess
18 and collect the taxes prohibited by section 8701(b) (relating
19 to general tax authorization) to the extent otherwise
20 provided by law. If the electorate approves such referendum,
21 the governing body shall lose the authority to continue to
22 levy [an earned income and net profits] any tax authorized
23 under this chapter.
24 (b) Public referendum requirements.--Subject to the notice
25 and public hearing requirements of section 8716 (relating to
26 procedure and administration), a governing body may levy [the
27 earned income and net profits] a tax under this chapter only by
28 obtaining the approval of the electorate of the affected school
29 district in a public referendum at only the municipal election
30 preceding the fiscal year when the [earned income and net
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1 profits] tax under this chapter will be initially imposed. The
2 referendum question must state the initial rate of the proposed
3 [earned income and net profits] tax, the reason for the tax and
4 the amount of proposed budgeted revenue growth, if any, in the
5 first fiscal year following adoption of the referendum,
6 expressed as a percent increase over the prior year's budgeted
7 revenue. Any increase in budgeted revenue between the first
8 fiscal year following adoption of the referendum and the prior
9 year's budgeted revenue shall not exceed the annual percent
10 change in the Statewide average weekly wage. The question shall
11 be in clear language that is readily understandable by a
12 layperson. For the purpose of illustration, a referendum
13 question may be framed as follows:
14 Do you favor the imposition of [an earned income and net
15 profits tax of X%] a (name of tax) to be used to replace
16 (names of local taxes to be repealed), reduce real
17 property taxes by X% by means of a homestead exclusion
18 and provide for a one-time revenue increase of X% over
19 the preceding fiscal year?
20 A nonlegal interpretative statement must accompany the question
21 in accordance with section 201.1 of the act of June 3, 1937
22 (P.L.1333, No.320), known as the Pennsylvania Election Code,
23 that includes the following: the initial rate of the [earned
24 income and net profits tax] taxes imposed and the maximum
25 allowable rate of the [earned income and net profits tax] taxes
26 imposed under this chapter; the estimated revenues to be derived
27 from the [initial rate of the earned income and net profits tax]
28 taxes imposed under this chapter; the amount of proposed revenue
29 growth, if any, in the first fiscal year following adoption of
30 the referendum; the estimated reduction in real property taxes
20010H1554B1900 - 5 -
1 and the elimination of certain existing taxes under this
2 chapter; the identification of the existing taxes to be
3 eliminated under this chapter; the method to be used to reduce
4 real property taxes; the class or classes of real property for
5 which real property taxes would be reduced; and the estimated
6 amount of real property tax reduction by class, expressed as an
7 average percent reduction by class. Any governing body which
8 uses the procedures under this section shall not be subject to
9 the provisions of section 8704 (relating to public referendum
10 requirements for increasing property taxes previously reduced)
11 for any future increases in the [earned income and net profits
12 tax rates] taxes authorized under this chapter. Any future real
13 property tax rate increases are subject to the provisions of
14 section 8704. If the ballot question fails to receive a majority
15 vote pursuant to this section, approval of the electorate under
16 section 8704 shall not be required to increase the rate of any
17 tax which the governing body of the affected school district is
18 authorized to levy and increase pursuant to any other act.
19 * * *
20 (d) Public requirements to initiate referendum.--
21 (1) If the governing body of a school district fails to
22 place a referendum question on the ballot within two years
23 after the effective date of this chapter, the electors of the
24 school district may:
25 (i) Circulate a petition which, if signed by
26 electors comprising 2% of the number of electors voting
27 for the office of Governor in the last gubernatorial
28 election in the school district and filed with the
29 election officials and submitted to the governing body
30 thereof, shall require the governing body to establish a
20010H1554B1900 - 6 -
1 local tax study commission. The provisions under
2 paragraph (2)(v), (vi), (vii), (viii) (ix) and (x) shall
3 not apply to this subparagraph.
4 (ii) If the local tax study commission makes a
5 recommendation to levy [the earned income and net profits
6 tax] a tax authorized under this chapter and the
7 governing body fails to place the recommendation or other
8 alternative of the governing body authorized under this
9 chapter on the ballot in accordance with this chapter at
10 the next municipal election occurring at least 90 days
11 after the submission of the recommendation to the
12 governing body, a petition under this paragraph may be
13 circulated. If the petition is signed by the electors
14 comprising 5% of the number of electors voting for the
15 office of Governor in the last gubernatorial election in
16 the school district and filed with election officials at
17 least 90 days prior to the next municipal election, the
18 petition shall compel the election officials to place the
19 recommendation upon the ballot at the next municipal
20 election occurring at least 90 days after the filing of
21 the petition.
22 (2) The following requirements shall apply to the
23 process under paragraph (1):
24 (i) The name and street address of each elector
25 signing the petition and of the person filing the
26 petition shall be clearly stated on the petition. The
27 petition shall include an affidavit of the circulator
28 that he or she is a qualified elector of the school
29 district referred to in the petition; that the signers
30 signed with full knowledge of the contents of the
20010H1554B1900 - 7 -
1 petition; that the signers' residences are correctly
2 stated; and that, to the best of the circulator's
3 knowledge and belief, the signers are qualified electors.
4 (ii) The election officials shall, within ten days
5 after filing, review the petition as to the number and
6 qualifications of signers. If the petition appears to be
7 defective, the election officials shall immediately
8 notify the person filing the petition of the defect and
9 may reject the petition if warranted.
10 (iii) The petition as submitted to the election
11 officials, along with the list of signatories, shall be
12 open to public inspection in the office of the election
13 officials.
14 (iv) If the election officials find that the
15 petition as submitted is in proper order, they shall send
16 copies of the petition without signatures thereon to the
17 governing body involved.
18 (v) The procedure for the referendum shall be
19 governed by the act of June 3, 1937 (P.L.1333, No.320),
20 known as the Pennsylvania Election Code.
21 (vi) If the election officials find the petition
22 meets the requirements of this chapter, they shall place
23 the proposal on the ballot in a manner fairly
24 representing the content of the petition for decision by
25 referendum at the proper election.
26 (vii) The election officials shall certify the date
27 for the referendum and shall notify the governing body at
28 least 30 days prior to such date.
29 (viii) At least 30 days' notice of the referendum
30 shall be given by proclamation of the governing body. A
20010H1554B1900 - 8 -
1 copy of the proclamation shall be posted at each polling
2 place on the day of the election and shall be published
3 once in at least one newspaper of general circulation
4 which is distributed within the school district during
5 the 30-day period prior to the election.
6 (ix) Approval of a referendum shall be by majority
7 vote of those voting in the school district involved.
8 (x) The election officials shall certify the results
9 of the referendum to the governing body.
10 * * *
11 § 8704. Public referendum requirements for increasing property
12 taxes previously reduced.
13 (a) General rule.--Except as provided in subsections (c) and
14 (d), a governing body that elects to levy [an earned income and
15 net profits] a tax under this chapter pursuant to section
16 8703(a) (relating to adoption of referendum) shall not increase
17 the rate of its tax on real property without first obtaining the
18 approval of the electorate of the affected school district in a
19 referendum at the primary election immediately preceding the
20 fiscal year of the proposed tax increase.
21 * * *
22 § 8705. Local tax study commission.
23 * * *
24 (e) Recommendation.--Within 90 days of its appointment, the
25 local tax study commission shall make a nonbinding
26 recommendation to the governing body regarding the imposition of
27 [an earned income and net profits tax] a tax under this chapter,
28 to be levied, assessed and collected commencing the next fiscal
29 year. Except as provided in subsection (f), if the governing
30 body appoints a commission, [the earned income and net profits]
20010H1554B1900 - 9 -
1 a tax authorized under this chapter may not be levied, assessed
2 or collected until receipt of the recommendation. No later than
3 90 days prior to the next municipal election occurring at least
4 150 days after the submission of the recommendation, the
5 governing body shall accept or reject the recommendation of the
6 local tax study commission or adopt an alternative proposal
7 authorized under this chapter.
8 * * *
9 § 8711. Earned income and net profits tax.
10 A school district shall have the power to levy, assess and
11 collect a tax on the earned income and net profits of resident
12 individuals of the school district up to a maximum rate of
13 [1.5%] 2.0%. The earned income and net profits tax may be levied
14 by the school district at a rate of 0.75%, 1.0%, 1.25% [or
15 1.5%], 1.5%, 1.75% or 2.0%. A school district that levies a
16 local personal income tax under section 8721 (relating to local
17 personal income tax) shall have no authority to levy, assess or
18 collect an earned income and net profits tax under this section.
19 § 8713. Credits.
20 (a) General rule.--The provisions of section 14 of the Local
21 Tax Enabling Act shall be used to determine any credits under
22 the provisions of this chapter for any taxes imposed under
23 section 8711 (relating to earned income and net profits tax).
24 Notwithstanding the foregoing, a tax levied under this chapter
25 shall be in addition to any taxes on salaries, wages,
26 commissions, compensation or other income received that is
27 imposed by a city of the first class and no credit shall be
28 allowed by a school district levying a tax under this subchapter
29 for any such taxes imposed by a city of the first class.
30 (b) State tax credit.--A credit against personal income tax
20010H1554B1900 - 10 -
1 due to the Commonwealth under section 302 of the Tax Reform Code
2 shall be granted to all nonresidents of a city of the first
3 class who are subject to a tax imposed by a city of the first
4 class pursuant to the act of August 5, 1932 (Sp.Sess., P.L.45,
5 No.45), referred to as the Sterling Act. The credit shall equal
6 [0.2756% of salaries, wages, commissions, compensation or other
7 income received for work done or services performed within a
8 city of the first class.] the amount of tax levied under this
9 chapter by the taxpayer's school district of residence on the
10 taxpayer's salaries, wages, commissions, compensation or other
11 income received that is subject to tax by a city of the first
12 class. The State personal income tax withheld from the taxpayer
13 by the taxpayer's employer in a city of the first class pursuant
14 to Article III of the Tax Reform Code of 1971 shall be reduced
15 by the amount of such credit. The Secretary of Revenue shall
16 promulgate such regulations and forms as are necessary to
17 implement the provisions of this subsection. This section shall
18 only apply to residents of school districts which impose the tax
19 under this subchapter. [A governing body of a school district in
20 a county of the second class A shall, and a governing body of a
21 school district in a county of the third class may, include in
22 the referendum question under section 8703 (relating to adoption
23 of referendum) language asking whether the credit against the
24 personal income tax in this subsection should be provided to the
25 nonresident taxpayer in the city of the first class or the
26 school district in which the taxpayer resides for the purpose of
27 making additional tax reductions in the same manner as section
28 8717 (relating to disposition of earned income and net profits
29 tax revenue).] Should any court of competent jurisdiction
30 determine that this subsection is unconstitutional, the
20010H1554B1900 - 11 -
1 provisions of this subsection shall be void and no credit shall
2 be expanded or extended in any way by any court.
3 Section 3. Chapter 87 of Title 53 is amended by adding a
4 subchapter to read:
5 SUBCHAPTER C
6 LOCAL PERSONAL INCOME TAX
7 Sec.
8 8721. Local personal income tax.
9 8722. Collections.
10 8723. Credits.
11 8724. Local personal income tax exemption.
12 8725. Rules and regulations.
13 8726. Procedure and administration.
14 8727. Disposition of local personal income tax revenue.
15 § 8721. Local personal income tax.
16 A school district shall have the power to levy, assess and
17 collect a tax on the personal income of resident individuals of
18 the school district up to a maximum rate of 2.0%. The local
19 personal income tax may be levied by the school district at a
20 rate of 0.75%, 1.0%, 1.25%, 1.5%, 1.75% or 2.0%. A school
21 district that levies an earned income and net profits tax under
22 section 8711 (relating to earned income and net profits tax)
23 shall have no power to levy, assess or collect a local personal
24 income tax under this section.
25 § 8722. Collections.
26 Any school district imposing a tax under section 8721
27 (relating to local personal income tax) shall designate the tax
28 officer who is appointed under section 10 of the Local Tax
29 Enabling Act, or otherwise by law, as the collector of the local
30 personal income tax. In the performance of the tax collection
20010H1554B1900 - 12 -
1 duties under this subchapter, the designated tax officer shall
2 have all the same powers, rights, responsibilities and duties
3 for the collection of the taxes which may be imposed under the
4 Local Tax Enabling Act, Subchapter C of Chapter 84 (relating to
5 local taxpayers bill of rights) or as otherwise provided by law.
6 § 8723. Credits.
7 (a) General rule.--The provisions of section 14 of the Local
8 Tax Enabling Act shall be used to determine any credits under
9 the provisions of this subchapter for any taxes imposed under
10 section 8721 (relating to local personal income tax) on the
11 earned income portion of the personal income tax.
12 Notwithstanding the foregoing, a tax levied under this chapter
13 shall be in addition to any taxes on salaries, wages,
14 commissions, compensation or other income received that is
15 imposed by a city of the first class and no credit shall be
16 allowed by a school district levying a tax under this subchapter
17 for any such taxes imposed by a city of the first class.
18 (b) State tax credit.--A credit against personal income tax
19 due to the Commonwealth under section 302 of the Tax Reform Code
20 shall be granted to all nonresidents of a city of the first
21 class who are subject to a tax imposed by a city of the first
22 class pursuant to the act of August 5, 1932 (Sp.Sess., P.L.45,
23 No.45), referred to as the Sterling Act. The credit shall equal
24 the amount of tax levied under this chapter by the taxpayer's
25 school district of residence on the taxpayer's salaries, wages,
26 commissions, compensation or other income received that is
27 subject to tax by a city of the first class. The State personal
28 income tax withheld from the taxpayer by the taxpayer's employer
29 in a city of the first class pursuant to Article III of the Tax
30 Reform Code shall be reduced by the amount of such credit. The
20010H1554B1900 - 13 -
1 Secretary of Revenue shall promulgate such regulations and forms
2 as are necessary to implement the provisions of this subsection.
3 This section shall only apply to residents of school districts
4 which impose the tax under this subchapter. Should any court of
5 competent jurisdiction determine that this subsection is
6 unconstitutional, the provisions of this subsection shall be
7 void and no credit shall be expanded or extended in any way by
8 any court.
9 (c) Low income tax credit.--The provisions of section 304 of
10 the Tax Reform Code shall be applied by any school district that
11 levies a tax under section 8721.
12 § 8724. Local personal income tax exemption.
13 A school district that imposes a local personal income tax
14 under this subchapter may exempt from the payment of that tax
15 any person whose total income from all sources is less than
16 $7,500.
17 § 8725. Rules and regulations.
18 Taxes imposed under section 8721 (relating to local personal
19 income tax) shall be subject to all regulations adopted by the
20 Department of Revenue pursuant to Article III of the Tax Reform
21 Code. A school district may adopt regulations for the processing
22 of claims for credits or exemptions under sections 8723
23 (relating to credits) and 8724 (relating to local personal
24 income tax exemption).
25 § 8726. Procedure and administration.
26 In order to levy the tax under section 8721 (relating to
27 local personal income tax), the governing body shall adopt a
28 resolution which shall refer to this subchapter prior to placing
29 a question on the ballot under section 8703 (relating to
30 adoption of referendum). Prior to adopting a resolution imposing
20010H1554B1900 - 14 -
1 the tax authorized by section 8721, the governing body shall
2 give public notice of its intent to adopt the resolution in the
3 manner provided by section 4 of the Local Tax Enabling Act and
4 shall conduct at least one public hearing regarding the proposed
5 adoption of the resolution.
6 § 8727. Disposition of local personal income tax revenue.
7 The disposition of revenue from a local personal income tax
8 or an increase in the rate of a local personal income tax
9 imposed by school districts under the authority of this chapter
10 shall occur in the following manner:
11 (1) For the fiscal year of implementation of a newly
12 imposed local personal income tax, all local personal income
13 tax revenue received by a school district shall be used first
14 to offset any lost revenue to the school district from the
15 taxes prohibited under section 8701(b) (relating to general
16 tax authorization) in an amount equal to the revenue
17 collected from the prohibited taxes in section 8701(b) in the
18 preceding fiscal year; second, to provide for an increase in
19 budgeted revenues over the preceding fiscal year in
20 accordance with the amount specified in the referendum
21 question approved by the voters under section 8703 (relating
22 to adoption of referendum); and third, to reduce the school
23 district real property tax in the following order:
24 (i) By means of an exclusion for homestead property
25 pursuant to section 8583 (relating to exclusion for
26 homestead property).
27 (ii) By means of a reduction in the millage rate
28 after the limit on the exclusion for homestead property
29 has been reached under section 8586 (relating to
30 limitations).
20010H1554B1900 - 15 -
1 (2) For the fiscal year of implementation of an increase
2 in the rate of an existing local personal income tax imposed
3 under this chapter, all revenue received by a school district
4 directly attributable to the increased rate shall be used to
5 reduce the school district real property tax in the following
6 order:
7 (i) By means of an exclusion for homestead property
8 pursuant to section 8583.
9 (ii) By means of a reduction in the millage rate
10 after the limit on the exclusion for homestead property
11 has been reached under section 8586.
12 Section 4. Sections 8912 and 8915 of Title 53 are amended to
13 read:
14 § 8912. Register for taxes.
15 (a) General rule.--The department shall maintain an official
16 continuing register supplemented annually of all local earned
17 income and net profits taxes and local personal income taxes
18 levied under Chapter 87 (relating to other subjects of
19 taxation).
20 (b) Contents of register.--The register shall list:
21 (1) The school districts levying local earned income and
22 net profits tax or local personal income tax.
23 (2) The rate of tax as stated in the resolution levying
24 the tax.
25 (3) The rate on taxpayers.
26 (4) The name and address of the official responsible for
27 administering the collection of the tax and from whom
28 information, forms and copies of regulations are available.
29 § 8915. Effect of nonfiling.
30 Employers shall not be required by any ordinance to withhold
20010H1554B1900 - 16 -
1 from the compensation of their employees any local earned income
2 and net profits tax or local personal income tax imposed under
3 Chapter 87 (relating to other subjects of taxation) which is not
4 listed in the register or to make reports of compensation in
5 connection with taxes not so listed. If the register is not
6 available by August 15, the register of the previous year shall
7 continue to be effective for an additional period of not more
8 than one year.
9 Section 5. This act shall take effect January 1, 2002.
C22L53BIL/20010H1554B1900 - 17 -