PRINTER'S NO. 31
No. 25 Session of 2003
INTRODUCED BY METCALFE, FORCIER, LEH, R. STEVENSON, CREIGHTON,
SCAVELLO, GEORGE, BENNINGHOFF, LAUGHLIN, BIRMELIN, HERSHEY,
WILT, THOMAS, CAPPELLI, HABAY, DALEY, ROHRER, BASTIAN, LEWIS,
ROBERTS, COLEMAN, DAILEY, ARMSTRONG, KIRKLAND, EGOLF AND
SOLOBAY, JANUARY 29, 2003
REFERRED TO COMMITTEE ON FINANCE, JANUARY 29, 2003
AN ACT
1 Imposing an additional sales and use tax and personal income
2 tax; prohibiting the imposition of real property tax by
3 school districts and municipalities; establishing the School
4 Property Tax Elimination Fund; and providing for school
5 district and municipality tax options and for duties of the
6 Department of Revenue and the Legislative Budget and Finance
7 Committee.
8 The General Assembly of the Commonwealth of Pennsylvania
9 hereby enacts as follows:
10 Section 1. Short title.
11 This act shall be known and may be cited as the Real Property
12 Tax Elimination Act.
13 Section 2. Definitions.
14 The following words and phrases when used in this act shall
15 have the meanings given to them in this section unless the
16 context clearly indicates otherwise:
17 "Base year." The first fiscal year of a school district,
18 municipality or county beginning after June 30, 2003.
19 "Department." The Department of Revenue of the Commonwealth.
1 "Fund." The School Property Tax Elimination Fund established
2 under section 5.
3 "Personal income." Income enumerated in section 303 of the
4 act of March 4, 1971 (P.L.6, No.2), known as the Tax Reform Code
5 of 1971, as returned to and ascertained by the Department of
6 Revenue, subject, however, to any correction thereof for fraud,
7 evasion or error as finally ascertained by the Commonwealth.
8 "Real property tax increase." An increase in real property
9 taxes resulting from a millage increase, modification in the
10 predetermined ratio or county-wide reassessment.
11 Section 3. Real property tax freeze.
12 No school district or municipality shall authorize a real
13 property tax increase in any fiscal year beginning after June
14 30, 2003.
15 Section 4. Real property tax reduction.
16 (a) School districts.--A school district shall be subject to
17 the following with respect to the levying, assessment and
18 collection of real property tax:
19 (1) For the first fiscal year beginning after June 30,
20 2004, a school district shall reduce in a uniform manner by
21 one-third the base-year amount of its real property taxes.
22 (2) For the first fiscal year beginning after June 30,
23 2005, a school district shall reduce in a uniform manner by
24 two-thirds the base-year amount of its real property taxes.
25 (3) For the first fiscal year beginning after June 30,
26 2006, and each fiscal year thereafter, no school district
27 shall have any power or authority to levy, assess or collect
28 real property taxes. This paragraph shall not apply to the
29 collection of delinquent taxes.
30 (b) Municipalities.--Municipalities shall be subject to the
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1 following with respect to the levying, assessment and collection
2 of real property tax:
3 (1) For the first fiscal year beginning after December
4 31, 2006, each municipality shall reduce in a uniform manner
5 by one-third the base-year amount of its real property tax.
6 (2) For the first fiscal year beginning after December
7 31, 2007, each municipality shall reduce in a uniform manner
8 by two-thirds the base-year amount of its real property tax.
9 (3) For the first fiscal year beginning after December
10 31, 2008, and each fiscal year thereafter, no municipality
11 shall have any power or authority to levy, assess or collect
12 real property taxes. This paragraph shall not apply to the
13 collection of delinquent taxes.
14 Section 5. School Property Tax Elimination Fund.
15 (a) Establishment.--
16 (1) The School Property Tax Elimination Fund is
17 established in the State Treasury. The State Treasurer shall
18 be custodian of the fund, which shall be subject to the
19 provisions of law applicable to funds listed in section 302
20 of the act of April 9, 1929 (P.L.343, No.176), known as The
21 Fiscal Code.
22 (2) Taxes imposed under sections 6 and 8 shall be
23 collected by the department and paid to the State Treasurer
24 and, along with interest and penalties, shall be credited to
25 the fund not less frequently than every two weeks. During any
26 period prior to the credit of moneys to the fund, interest
27 earned on moneys received by the department and paid to the
28 State Treasurer under this act shall be deposited into the
29 fund.
30 (3) All moneys in the fund, including, but not limited
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1 to, moneys credited to the fund under this section, prior
2 year encumbrances and the interest earned thereon, shall not
3 lapse or be transferred to any other fund, but shall remain
4 in the fund and shall be used exclusively as provided in this
5 section.
6 (4) Pending their disbursement, moneys received on
7 behalf of or deposited into the fund shall be invested or
8 reinvested as are other moneys in the custody of the State
9 Treasurer in the manner provided by law. All earnings
10 received from the investment or reinvestment of the moneys
11 shall be credited to the fund.
12 (b) Disbursements.--On or before the tenth day of every
13 month, the State Treasurer shall make disbursements to school
14 districts out of the moneys which are contained in the fund on
15 the last day of the previous month. Distributions to school
16 districts shall be based on the amount of real property tax
17 collected by each school district during the base year as
18 follows:
19 (1) During the first fiscal year beginning after June
20 30, 2004, an amount equivalent to one-third of the real
21 property tax revenues collected by the school district during
22 the base year shall be distributed to the school district.
23 (2) During the first fiscal year beginning after June
24 30, 2005, an amount equivalent to two-thirds of the real
25 property tax revenues collected by the school district during
26 the base year shall be distributed to the school district.
27 (3) During the first fiscal year beginning after June
28 30, 2006, and each fiscal year thereafter, an amount
29 equivalent to the total real property tax revenues collected
30 by the school district during the base year shall be
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1 distributed to the school district.
2 (c) Transfer of portion of surplus.--In any fiscal year in
3 which the Secretary of the Budget certifies that there is a
4 surplus of operating funds in the General Fund, 75% of such
5 surplus shall be deposited by the end of the next succeeding
6 quarter into the School Property Tax Elimination Fund.
7 Section 6. Imposition of sales and use tax.
8 (a) Sales tax.--There is hereby imposed upon each separate
9 sale at retail of tangible personal property or services, as
10 defined in Article II of the act of March 4, 1971 (P.L.6, No.2),
11 known as the Tax Reform Code of 1971, a tax on the purchase
12 price. The tax shall be collected by the vendor from the
13 purchaser and shall be paid over to the Commonwealth as provided
14 in Article II of the Tax Reform Code of 1971.
15 (b) Use tax.--There is hereby imposed upon the use of
16 tangible personal property purchased at retail and on services
17 purchased at retail as defined in Article II of the Tax Reform
18 Code of 1971 a tax on the purchase price. The tax shall be paid
19 over to the Commonwealth by the person who makes the use. The
20 use tax imposed under this subsection shall not be paid over to
21 the Commonwealth by any person who has paid the tax imposed by
22 subsection (a) or has paid the tax imposed by this subsection to
23 the vendor with respect to the use.
24 (c) Rate.--The tax authorized by subsections (a) and (b)
25 shall be imposed at the following rates:
26 (1) For the period July 1, 2004, to June 30, 2005, 1%.
27 (2) For the period July 1, 2005, to June 30, 2006, 2%.
28 (3) After June 30, 2006, 3%.
29 (d) Construction.--The sales and use tax imposed by this act
30 shall be in addition to any tax imposed under Article II of the
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1 Tax Reform Code of 1971. The provisions of Article II of the Tax
2 Reform Code of 1971 shall apply to the tax.
3 Section 7. Computation of sales and use tax.
4 (a) One percent rate.--The amount of tax imposed by section
5 6 shall be computed in the manner set forth in section 503(e)(2)
6 of the act of June 5, 1991 (P.L.9, No.6), known as the
7 Pennsylvania Intergovernmental Cooperation Authority Act for
8 Cities of the First Class, for a 1% tax rate.
9 (b) Two percent rate.--The amount of tax imposed by section
10 6 shall be computed as follows for a 2% tax rate:
11 (1) If the purchase price is 30¢ less or, no additional
12 tax shall be collected.
13 (2) If the purchase price is 31¢ or more but less than
14 51¢, 1¢ shall be collected.
15 (3) If the purchase price is 51¢ or more but less than
16 $1.01, 2¢ shall be collected.
17 (4) If the purchase price is more than $1, 2% of each
18 dollar of purchase price plus the above bracket charges upon
19 any fractional part of a dollar in excess of even dollars
20 shall be collected.
21 (c) Three percent rate.--The amount of tax imposed by
22 section 6 shall be computed as follows for a 3% tax rate:
23 (1) If the purchase price is 33¢ or less, no additional
24 tax shall be collected.
25 (2) If the purchase price is 34¢ or more but less than
26 56¢, 1¢ shall be collected.
27 (3) If the purchase price is 56¢ or more but less than
28 78¢, 2¢ shall be collected.
29 (4) If the purchase price is 78¢ or more but less than
30 $1.01, 3¢ shall be collected.
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1 (5) If the purchase price is more than $1, 3% of each
2 dollar of purchase price plus the above bracket charges upon
3 any fractional part of a dollar in excess of even dollars
4 shall be collected.
5 Section 8. Imposition of personal income tax.
6 (a) Residents.--Every resident individual, estate or trust
7 shall be subject to, and shall pay for the privilege of
8 receiving each of the classes of income enumerated in section
9 303 of the act of March 2, 1971 (P.L.6, No.2), known as the Tax
10 Reform Code of 1971, a tax upon each dollar of income received
11 by that resident during that resident's taxable year at the
12 following rates:
13 (1) 0.5% for the second half of the taxable year
14 commencing with or within calendar year 2004 through the
15 first half of the taxable year commencing with or within
16 calendar year 2005;
17 (2) 1% for the second half of the taxable year
18 commencing with or within calendar year 2005 through the
19 first half of the taxable year commencing with or within
20 calendar year 2006;
21 (3) 1.5% for the second half of the taxable year
22 commencing with or within calendar year 2006 through the
23 first half of the taxable year commencing with or within
24 calendar year 2007; and
25 (4) for the second half of the taxable year commencing
26 with or within calendar year 2007, and each taxable year
27 thereafter, the rate established by the department under
28 subsection (c), not to exceed 1.5%.
29 (b) Nonresidents.--Every nonresident individual, estate or
30 trust shall be subject to, and shall pay for the privilege of
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1 receiving each of the classes of income hereinafter enumerated
2 in section 303 of the Tax Reform Code of 1971 from sources
3 within this Commonwealth, a tax upon each dollar of income
4 received by that nonresident during that nonresident's taxable
5 year at the following rates:
6 (1) 0.5% for the second half of the taxable year
7 commencing with or within calendar year 2004 through the
8 first half of the taxable year commencing with or within
9 calendar year 2005;
10 (2) 1% for the second half of the taxable year
11 commencing with or within calendar year 2005 through the
12 first half of the taxable year commencing with or within
13 calendar year 2006;
14 (3) 1.5% for the second half of the taxable year
15 commencing with or within calendar year 2006 through the
16 first half of the taxable year commencing with or within
17 calendar year 2007; and
18 (4) for the second half of the taxable year commencing
19 with or within calendar year 2007 and each taxable year
20 thereafter, the rate established by the department under
21 subsection (c), not to exceed 1.5%.
22 (c) Rates fixed annually by department.--Beginning with the
23 second half of the taxable year commencing with or within the
24 calendar year 2007, and each taxable year thereafter, the
25 department shall annually establish the rate of tax under this
26 section, uniform for residents and nonresidents, such that the
27 amounts due to be disbursed to school districts in accordance
28 with section 5(b) are available for payment. The department
29 shall publish in the Pennsylvania Bulletin no later than June 1
30 of each year the rate of tax which shall take effect July 1 of
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1 each year.
2 (d) Construction.--The personal income tax imposed by this
3 act shall be in addition to any tax imposed by the Commonwealth
4 under Article III of the Tax Reform Code. The provisions of
5 Article III of the Tax Reform Code shall apply to the tax.
6 Section 9. School district tax options.
7 (a) General rule.--A school district may generate additional
8 revenue to offset revenue lost as a result of the implementation
9 of this act by using any combination of the following:
10 (1) An increase in the rate of its tax on earned income
11 beyond maximum rates provided by law.
12 (2) The imposition of an earned income tax under the
13 provisions of section 13 of the act of December 31, 1965
14 (P.L.1257, No.511), known as The Local Tax Enabling Act.
15 (3) The imposition of a personal income tax.
16 (b) Resolution required.--Taxes levied by a school district
17 shall be by resolution passed by the board of school directors
18 of the school district under the authority of this act.
19 (c) Increases subject to referendum.--Except as provided in
20 subsection (e), no school district may implement or increase a
21 tax under subsection (a) without first obtaining the approval of
22 the electorate of the affected school district in a referendum
23 at the primary election immediately preceding the fiscal year of
24 the proposed tax or tax increase.
25 (d) Disapproval.--Whenever the electorate fails to approve
26 the proposed referendum question to implement a tax or increase
27 the rate of a tax under subsection (a), the school district
28 shall be limited to the taxes and rates in effect prior to the
29 referendum.
30 (e) Referendum exception.--
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1 (1) No referendum shall be required under subsection (c)
2 if:
3 (i) there is an immediate threat of serious physical
4 harm or injury to the students, staff or residents of the
5 school district; and
6 (ii) the court of common pleas in the judicial
7 district in which the school district is located approves
8 the referendum exception.
9 (2) The court shall determine the appropriate duration
10 of the tax imposition or increase and may retain continuing
11 jurisdiction. The court may, on its own motion or on petition
12 of an interested party, revoke approval for or order
13 rescission of a tax increase imposed under this section.
14 (f) Standing.--A person shall have standing as a party to a
15 proceeding under this section as long as the person resides
16 within or pays earned income taxes to the taxing jurisdiction of
17 the school district instituting the action.
18 Section 10. Municipality tax options.
19 (a) General rule.--A municipality may offset revenues lost
20 as a direct result of the phase out of its authority to impose a
21 tax on real property by using any combination of the following:
22 (1) An increase in the rate of its tax on earned income
23 beyond maximum rates provided by law.
24 (2) The imposition, by a county, of an earned income tax
25 under the provisions of section 13 of the act of December 31,
26 1965 (P.L.1257, No.511), known as The Local Tax Enabling Act.
27 (3) The imposition of a personal income tax.
28 (b) Ordinance required.--Taxes levied by a municipality
29 shall be by ordinance passed under the authority of this act.
30 (c) Increases subject to referendum.--Except as provided in
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1 subsection (e), no municipality may levy or increase a tax to
2 raise revenue beyond that required as an offset under subsection
3 (a) without first obtaining the approval of the electorate of
4 the affected municipality in a referendum at the primary
5 election immediately preceding the fiscal year of the proposed
6 tax increase.
7 (d) Disapproval.--Whenever the electorate fails to approve
8 the proposed referendum question to increase the tax or rate of
9 a tax under subsection (a), the municipality shall be limited to
10 the taxes and rates in effect prior to the referendum.
11 (e) Referendum exception.--
12 (1) No referendum shall be required under subsection (c)
13 if:
14 (i) there is an immediate threat of serious physical
15 harm or injury to the residents of the municipality; and
16 (ii) the court of common pleas in the judicial
17 district in which the municipality is located approves
18 the referendum exception.
19 (2) The court shall determine the appropriate duration
20 of the tax imposition or increase and may retain continuing
21 jurisdiction. The court may, on its own motion or on petition
22 of an interested party, revoke approval for or order
23 rescission of a tax imposed or increased under this section.
24 (f) Standing.--A person shall have standing as a party to a
25 proceeding under this section as long as the person resides
26 within or pays earned income taxes to the taxing jurisdiction of
27 the municipality instituting the action.
28 Section 11. Collection of tax.
29 Any tax imposed by a school district or municipality under
30 section 9 or 10 shall be collected by the department in the same
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1 manner authorized for the tax imposed under Article III of the
2 act of March 4, 1971 (P.L.6, No.2), known as the Tax Reform Code
3 of 1971, and shall be transferred by the State Treasurer to the
4 school district or municipality that imposed it.
5 Section 12. Annual review of budget by Legislative Budget and
6 Finance Committee.
7 (a) Duty to conduct annual review.--The Legislative Budget
8 and Finance Committee shall conduct an annual review of the
9 budget submitted by the Governor to the General Assembly in
10 accordance with law. The purpose of the review shall be to
11 identify efficiency improvements in the programs that receive
12 appropriations through the General Appropriation Act and to
13 calculate the amount of savings to the General Fund from those
14 improvements. The Legislative Budget and Finance Committee shall
15 report its findings and recommendations from the annual review
16 in a timely manner to the General Assembly.
17 (b) Legislative intent.--It is the intent of the General
18 Assembly that the savings calculated and reported by the
19 Legislative Budget and Finance Committee under this section
20 shall appear as a line item in the General Appropriation Act by
21 appropriating an amount equal to those savings for transfer from
22 the General Fund to the School Property Tax Elimination Fund.
23 Section 13. Effective date.
24 This act shall take effect immediately.
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