PRINTER'S NO. 110
No. 25 Session of 2005
INTRODUCED BY METCALFE, BENNINGHOFF, CREIGHTON, FORCIER,
HERSHEY, LEH, SCAVELLO, THOMAS, WILT AND HANNA,
JANUARY 26, 2005
REFERRED TO COMMITTEE ON FINANCE, JANUARY 26, 2005
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, 2005.
19 "Department." The Department of Revenue of the Commonwealth.
20 "Fund." The School Property Tax Elimination Fund established
1 under section 5 (relating to School Property Tax Elimination
2 Fund).
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 countywide 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, 2005.
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 2006, 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 2007, 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 2008, 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, 2008, 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, 2009, 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, 2010, 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 (relating to
23 imposition of sales and use tax) and 8 (relating to
24 imposition of personal income tax) shall be collected by the
25 department and paid to the State Treasurer and, along with
26 interest and penalties, shall be credited to the fund not
27 less frequently than every two weeks. During any period prior
28 to the credit of moneys to the fund, interest earned on
29 moneys received by the department and paid to the State
30 Treasurer under this act shall be deposited into the fund.
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1 (3) All moneys in the fund, including, but not limited
2 to, moneys credited to the fund under this section, prior
3 year encumbrances and the interest earned thereon, shall not
4 lapse or be transferred to any other fund, but shall remain
5 in the fund and shall be used exclusively as provided in this
6 section.
7 (4) Pending their disbursement, moneys received on
8 behalf of or deposited into the fund shall be invested or
9 reinvested as are other moneys in the custody of the State
10 Treasurer in the manner provided by law. All earnings
11 received from the investment or reinvestment of the moneys
12 shall be credited to the fund.
13 (b) Disbursements.--On or before the tenth day of every
14 month, the State Treasurer shall make disbursements to school
15 districts out of the moneys which are contained in the fund on
16 the last day of the previous month. Distributions to school
17 districts shall be based on the amount of real property tax
18 collected by each school district during the base year as
19 follows:
20 (1) During the first fiscal year beginning after June
21 30, 2006, an amount equivalent to one-third of the real
22 property tax revenues collected by the school district during
23 the base year shall be distributed to the school district.
24 (2) During the first fiscal year beginning after June
25 30, 2007, an amount equivalent to two-thirds of the real
26 property tax revenues collected by the school district during
27 the base year shall be distributed to the school district.
28 (3) During the first fiscal year beginning after June
29 30, 2008, and each fiscal year thereafter, an amount
30 equivalent to the total real property tax revenues collected
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1 by the school district during the base year shall be
2 distributed to the school district.
3 (c) Transfer of portion of surplus.--In any fiscal year in
4 which the Secretary of the Budget certifies that there is a
5 surplus of operating funds in the General Fund, 75% of such
6 surplus shall be deposited by the end of the next succeeding
7 quarter into the School Property Tax Elimination Fund.
8 Section 6. Imposition of sales and use tax.
9 (a) Sales tax.--There is hereby imposed upon each separate
10 sale at retail of tangible personal property or services, as
11 defined in Article II of the act of March 4, 1971 (P.L.6, No.2),
12 known as the Tax Reform Code of 1971, a tax on the purchase
13 price. The tax shall be collected by the vendor from the
14 purchaser and shall be paid over to the Commonwealth as provided
15 in Article II of the Tax Reform Code of 1971.
16 (b) Use tax.--There is hereby imposed upon the use of
17 tangible personal property purchased at retail and on services
18 purchased at retail as defined in Article II of the Tax Reform
19 Code of 1971 a tax on the purchase price. The tax shall be paid
20 over to the Commonwealth by the person who makes the use. The
21 use tax imposed under this subsection shall not be paid over to
22 the Commonwealth by any person who has paid the tax imposed by
23 subsection (a) or has paid the tax imposed by this subsection to
24 the vendor with respect to the use.
25 (c) Rate.--The tax authorized by subsections (a) and (b)
26 shall be imposed at the following rates:
27 (1) For the period July 1, 2006, to June 30, 2007, 1%.
28 (2) For the period July 1, 2007, to June 30, 2008, 2%.
29 (3) After June 30, 2008, 3%.
30 (d) Construction.--The sales and use tax imposed by this act
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1 shall be in addition to any tax imposed under Article II of the
2 Tax Reform Code of 1971. The provisions of Article II of the Tax
3 Reform Code of 1971 shall apply to the tax.
4 Section 7. Computation of sales and use tax.
5 (a) One percent rate.--The amount of tax imposed by section
6 6 (relating to imposition of sales and use tax) shall be
7 computed in the manner set forth in section 503(e)(2) of the act
8 of June 5, 1991 (P.L.9, No.6), known as the Pennsylvania
9 Intergovernmental Cooperation Authority Act for Cities of the
10 First Class, for a 1% tax rate.
11 (b) Two percent rate.--The amount of tax imposed by section
12 6 shall be computed as follows for a 2% tax rate:
13 (1) If the purchase price is 30¢ or less, no additional
14 tax shall be collected.
15 (2) If the purchase price is 31¢ or more but less than
16 51¢, 1¢ shall be collected.
17 (3) If the purchase price is 51¢ or more but less than
18 $1.01, 2¢ shall be collected.
19 (4) If the purchase price is more than $1, 2% of each
20 dollar of purchase price plus the above bracket charges upon
21 any fractional part of a dollar in excess of even dollars
22 shall be collected.
23 (c) Three percent rate.--The amount of tax imposed by
24 section 6 shall be computed as follows for a 3% tax rate:
25 (1) If the purchase price is 33¢ or less, no additional
26 tax shall be collected.
27 (2) If the purchase price is 34¢ or more but less than
28 56¢, 1¢ shall be collected.
29 (3) If the purchase price is 56¢ or more but less than
30 78¢, 2¢ shall be collected.
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1 (4) If the purchase price is 78¢ or more but less than
2 $1.01, 3¢ shall be collected.
3 (5) If the purchase price is more than $1, 3% of each
4 dollar of purchase price plus the above bracket charges upon
5 any fractional part of a dollar in excess of even dollars
6 shall be collected.
7 Section 8. Imposition of personal income tax.
8 (a) Residents.--Every resident individual, estate or trust
9 shall be subject to, and shall pay for the privilege of
10 receiving each of the classes of income enumerated in section
11 303 of the act of March 4, 1971 (P.L.6, No.2), known as the Tax
12 Reform Code of 1971, a tax upon each dollar of income received
13 by that resident during that resident's taxable year at the
14 following rates:
15 (1) 0.5% for the second half of the taxable year
16 commencing with or within calendar year 2006 through the
17 first half of the taxable year commencing with or within
18 calendar year 2007;
19 (2) 1% for the second half of the taxable year
20 commencing with or within calendar year 2007 through the
21 first half of the taxable year commencing with or within
22 calendar year 2008;
23 (3) 1.5% for the second half of the taxable year
24 commencing with or within calendar year 2008 through the
25 first half of the taxable year commencing with or within
26 calendar year 2009; and
27 (4) for the second half of the taxable year commencing
28 with or within calendar year 2009, and each taxable year
29 thereafter, the rate established by the department under
30 subsection (c), not to exceed 1.5%.
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1 (b) Nonresidents.--Every nonresident individual, estate or
2 trust shall be subject to, and shall pay for the privilege of
3 receiving each of the classes of income hereinafter enumerated
4 in section 303 of the Tax Reform Code of 1971 from sources
5 within this Commonwealth, a tax upon each dollar of income
6 received by that nonresident during that nonresident's taxable
7 year at the following rates:
8 (1) 0.5% for the second half of the taxable year
9 commencing with or within calendar year 2006 through the
10 first half of the taxable year commencing with or within
11 calendar year 2007;
12 (2) 1% for the second half of the taxable year
13 commencing with or within calendar year 2007 through the
14 first half of the taxable year commencing with or within
15 calendar year 2008;
16 (3) 1.5% for the second half of the taxable year
17 commencing with or within calendar year 2008 through the
18 first half of the taxable year commencing with or within
19 calendar year 2009; and
20 (4) for the second half of the taxable year commencing
21 with or within calendar year 2009 and each taxable year
22 thereafter, the rate established by the department under
23 subsection (c), not to exceed 1.5%.
24 (c) Rates fixed annually by department.--Beginning with the
25 second half of the taxable year commencing with or within the
26 calendar year 2009, and each taxable year thereafter, the
27 department shall annually establish the rate of tax under this
28 section, uniform for residents and nonresidents, such that the
29 amounts due to be disbursed to school districts in accordance
30 with section 5(b) (relating to School Property Tax Elimination
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1 Fund) are available for payment. The department shall publish in
2 the Pennsylvania Bulletin no later than June 1 of each year the
3 rate of tax which shall take effect July 1 of each year.
4 (d) Construction.--The personal income tax imposed by this
5 act shall be in addition to any tax imposed by the Commonwealth
6 under Article III of the Tax Reform Code of 1971. The provisions
7 of Article III of the Tax Reform Code of 1971 shall apply to the
8 tax.
9 Section 9. School district tax options.
10 (a) General rule.--A school district may generate additional
11 revenue to offset revenue lost as a result of the implementation
12 of this act by using any combination of the following:
13 (1) An increase in the rate of its tax on earned income
14 beyond maximum rates provided by law.
15 (2) The imposition of an earned income tax under the
16 provisions of section 13 of the act of December 31, 1965
17 (P.L.1257, No.511), known as The Local Tax Enabling Act.
18 (3) The imposition of a personal income tax.
19 (b) Resolution required.--Taxes levied by a school district
20 shall be passed by resolution by the board of school directors
21 of the school district under the authority of this act.
22 (c) Increases subject to referendum.--Except as provided in
23 subsection (e), no school district may implement or increase a
24 tax under subsection (a) without first obtaining the approval of
25 the electorate of the affected school district in a referendum
26 at the primary election immediately preceding the fiscal year of
27 the proposed tax or tax increase.
28 (d) Disapproval.--Whenever the electorate fails to approve
29 the proposed referendum question to implement a tax or increase
30 the rate of a tax under subsection (a), the school district
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1 shall be limited to the taxes and rates in effect prior to the
2 referendum.
3 (e) Referendum exception.--
4 (1) No referendum shall be required under subsection (c)
5 if:
6 (i) there is an immediate threat of serious physical
7 harm or injury to the students, staff or residents of the
8 school district; and
9 (ii) the court of common pleas in the judicial
10 district in which the school district is located approves
11 the referendum exception.
12 (2) The court shall determine the appropriate duration
13 of the tax imposition or increase and may retain continuing
14 jurisdiction. The court may, on its own motion or on petition
15 of an interested party, revoke approval for or order
16 rescission of a tax increase imposed under this section.
17 (f) Standing.--A person shall have standing as a party to a
18 proceeding under this section as long as the person resides
19 within or pays earned income taxes to the taxing jurisdiction of
20 the school district instituting the action.
21 Section 10. Municipality tax options.
22 (a) General rule.--A municipality may offset revenues lost
23 as a direct result of the phaseout of its authority to impose a
24 tax on real property by using any combination of the following:
25 (1) An increase in the rate of its tax on earned income
26 beyond maximum rates provided by law.
27 (2) The imposition, by a county, of an earned income tax
28 under the provisions of section 13 of the act of December 31,
29 1965 (P.L.1257, No.511), known as The Local Tax Enabling Act.
30 (3) The imposition of a personal income tax.
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1 (b) Ordinance required.--Taxes levied by a municipality
2 shall be by ordinance passed under the authority of this act.
3 (c) Increases subject to referendum.--Except as provided in
4 subsection (e), no municipality may levy or increase a tax to
5 raise revenue beyond that required as an offset under subsection
6 (a) without first obtaining the approval of the electorate of
7 the affected municipality in a referendum at the primary
8 election immediately preceding the fiscal year of the proposed
9 tax increase.
10 (d) Disapproval.--Whenever the electorate fails to approve
11 the proposed referendum question to increase the tax or rate of
12 a tax under subsection (a), the municipality shall be limited to
13 the taxes and rates in effect prior to the referendum.
14 (e) Referendum exception.--
15 (1) No referendum shall be required under subsection (c)
16 if:
17 (i) there is an immediate threat of serious physical
18 harm or injury to the residents of the municipality; and
19 (ii) the court of common pleas in the judicial
20 district in which the municipality is located approves
21 the referendum exception.
22 (2) The court shall determine the appropriate duration
23 of the tax imposition or increase and may retain continuing
24 jurisdiction. The court may, on its own motion or on petition
25 of an interested party, revoke approval for or order
26 rescission of a tax imposed or increased under this section.
27 (f) Standing.--A person shall have standing as a party to a
28 proceeding under this section as long as the person resides
29 within or pays earned income taxes to the taxing jurisdiction of
30 the municipality instituting the action.
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1 Section 11. Collection of tax.
2 Any tax imposed by a school district or municipality under
3 section 9 (relating to school district tax options) or 10
4 (relating to municipality tax options) shall be collected by the
5 department in the same manner authorized for the tax imposed
6 under Article III of the act of March 4, 1971 (P.L.6, No.2),
7 known as the Tax Reform Code of 1971, and shall be transferred
8 by the State Treasurer to the school district or municipality
9 that imposed it.
10 Section 12. Annual review of budget by Legislative Budget and
11 Finance Committee.
12 (a) Duty to conduct annual review.--The Legislative Budget
13 and Finance Committee shall conduct an annual review of the
14 budget submitted by the Governor to the General Assembly in
15 accordance with law. The purpose of the review shall be to
16 identify efficiency improvements in the programs that receive
17 appropriations through the General Appropriation Act and to
18 calculate the amount of savings to the General Fund from those
19 improvements. The Legislative Budget and Finance Committee shall
20 report its findings and recommendations from the annual review
21 in a timely manner to the General Assembly.
22 (b) Legislative intent.--It is the intent of the General
23 Assembly that the savings calculated and reported by the
24 Legislative Budget and Finance Committee under this section
25 shall appear as a line item in the General Appropriation Act by
26 appropriating an amount equal to those savings for transfer from
27 the General Fund to the School Property Tax Elimination Fund.
28 Section 13. Effective date.
29 This act shall take effect immediately.
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