PRINTER'S NO. 3316
No. 2327 Session of 2005
INTRODUCED BY GOOD, MANN, ALLEN, BAKER, BEBKO-JONES, BELFANTI,
BOYD, BUNT, CALTAGIRONE, CAPPELLI, CRAHALLA, DENLINGER,
J. EVANS, FABRIZIO, FAIRCHILD, FRANKEL, GEIST, GEORGE,
GINGRICH, GOODMAN, GRELL, HARRIS, HERMAN, HERSHEY, M. KELLER,
KENNEY, KILLION, KOTIK, LEDERER, MARKOSEK, McILHATTAN,
NAILOR, PETRARCA, PICKETT, READSHAW, REED, REICHLEY, ROSS,
RUBLEY, SATHER, SAYLOR, SCAVELLO, B. SMITH, SONNEY, STERN,
SURRA, J. TAYLOR, WANSACZ, WATSON, WILT, YOUNGBLOOD,
YUDICHAK, BEYER, TURZAI AND WALKO, DECEMBER 14, 2005
REFERRED TO COMMITTEE ON FINANCE, DECEMBER 14, 2005
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," providing for a tax credit for business health
11 care.
12 The General Assembly of the Commonwealth of Pennsylvania
13 hereby enacts as follows:
14 Section 1. The act of March 4, 1971 (P.L.6, No.2), known as
15 the Tax Reform Code of 1971, is amended by adding an article to
16 read:
17 ARTICLE XVII-D
18 SMALL BUSINESS HEALTH CARE TAX CREDIT
19 Section 1701-D. Scope.
1 This article relates to health care tax credits.
2 Section 1702-D. Definitions.
3 The following words and phrases when used in this article
4 shall have the meanings given to them in this section unless the
5 context clearly indicates otherwise:
6 "Department." The Department of Revenue of the Commonwealth.
7 "Health care benefits." An entitlement provided to an
8 employee in accordance with a wage agreement that provides
9 prevention, treatment and management of illness and the
10 preservation of mental health and physical well-being through
11 the services offered by the medical and allied health
12 professions.
13 "Pass-through entity." Any of the following:
14 (1) A partnership, limited partnership, limited
15 liability company, business trust or other unincorporated
16 entity that for Federal income tax purposes is taxable as a
17 partnership.
18 (2) A Pennsylvania S corporation.
19 "Qualified tax liability." The liability for taxes imposed
20 under Article III, IV or VI. The term shall include the
21 liability for taxes imposed under Article III on an owner of a
22 pass-through entity.
23 "Secretary." The Secretary of Revenue of the Commonwealth.
24 "Small business." An employer who, on at least 50% of its
25 working days during the taxable year, employed fewer than 100
26 employees.
27 "Tax credit." The small business health care tax credit
28 authorized under this article.
29 "Taxpayer." An entity subject to tax under Article III, IV
30 or VI. The term shall include the shareholder, owner or member
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1 of a pass-through entity that receives a tax credit.
2 Section 1703-D. Credit for small business health care.
3 (a) Application.--A taxpayer who is a small business and
4 provides health care benefits in a taxable year may apply for a
5 tax credit as provided in this article. By September 15, a
6 taxpayer must submit an application to the department for health
7 care benefits incurred in the taxable year that ended in the
8 prior calendar year.
9 (b) Amount.--A taxpayer that is qualified under subsection
10 (a) shall receive a tax credit for the taxable year in the
11 amount equal to 20% of the amount of expenses incurred by a
12 small business for providing health care benefits to its
13 employees.
14 (c) Notification.--By December 15 of the calendar year
15 following the close of the taxable year during which the health
16 care expense was incurred by the small business, the department
17 shall notify the taxpayer of the amount of the taxpayer's tax
18 credit approved by the department.
19 Section 1704-D. Carryover, carryback, refund and assignment of
20 credit.
21 (a) Carryover.--If the taxpayer cannot use the entire amount
22 of the tax credit for the taxable year in which the tax credit
23 is first approved, then the excess may be carried over to
24 succeeding taxable years and used as a credit against the
25 qualified tax liability of the taxpayer for those taxable years.
26 Each time that the tax credit is carried over to a succeeding
27 taxable year, it is to be reduced by the amount that was used as
28 a credit during the immediately preceding taxable year. The tax
29 credit may be carried over and applied to succeeding taxable
30 years for no more than 15 taxable years following the first
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1 taxable year for which the taxpayer was entitled to claim the
2 credit.
3 (b) Application.--A tax credit approved by the department
4 for small business health care tax credit in a taxable year
5 first shall be applied against the taxpayer's qualified tax
6 liability for the current taxable year as of the date on which
7 the credit was approved before the tax credit is applied against
8 any tax liability under subsection (a).
9 (c) Unused credit.--A taxpayer is not entitled to assign,
10 carry back or obtain a refund of an unused tax credit.
11 Section 1705-D. Time limitations.
12 A taxpayer is not entitled to a tax credit for small business
13 health care expenses incurred in taxable years ending after
14 December 31, 2020.
15 Section 1706-D. Limitation on credits.
16 (a) Limit.--The total amount of tax credits approved by the
17 department shall not exceed $25,000,000 in any fiscal year.
18 (b) Proration among applicants.--If the total amount of tax
19 credits applied for by all taxpayers, exclusive of small
20 businesses, exceeds the amount allocated for those credits, then
21 the tax credit to be received by each applicant shall be
22 prorated by the department among all applicants, exclusive of
23 small businesses, who have qualified for the credit.
24 (c) Proration among small business applicants.--If the total
25 amount of tax credits applied for by all small businesses
26 exceeds the amount allocated for those credits, then the tax
27 credit to be received by each small business applicant shall be
28 prorated by the department among all small business applicants
29 who have qualified for the credit.
30 Section 1707-D. Shareholder, owner or member pass-through.
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1 (a) Shareholder credit.--If a Pennsylvania S corporation
2 does not have an eligible tax liability against which the tax
3 credit may be applied, a shareholder of the Pennsylvania S
4 corporation is entitled to a tax credit equal to the tax credit
5 determined for the Pennsylvania S corporation for the taxable
6 year multiplied by the percentage of the Pennsylvania S
7 corporation's distributive income to which the shareholder is
8 entitled.
9 (b) Pass-through entity credit.--If a pass-through entity
10 other than a Pennsylvania S corporation does not have an
11 eligible tax liability against which the tax credit may be
12 applied, an owner or member of the pass-through entity is
13 entitled to a tax credit equal to the tax credit determined for
14 the pass-through entity for the taxable year multiplied by the
15 percentage of the pass-through entities' distributive income to
16 which the owner or member is entitled.
17 (c) Additional credit.--The credit provided under subsection
18 (a) or (b) is in addition to any tax credit to which a
19 shareholder, owner or member of a pass-through entity is
20 otherwise entitled under this article. However, a pass-through
21 entity and a shareholder, owner or member of a pass-through
22 entity may not claim a credit under this article for the same
23 small business health care tax credit.
24 Section 1708-D. Report to General Assembly.
25 The secretary shall submit an annual report to the General
26 Assembly indicating the effectiveness of the credit provided by
27 this article no later than March 15 following the year in which
28 the credits were approved. The report shall include the names of
29 all taxpayers utilizing the credit as of the date of the report
30 and the amount of credits approved and utilized by each
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1 taxpayer. Notwithstanding any law providing for the
2 confidentiality of tax records, the information contained in the
3 report shall be public information. The report may also include
4 any recommendations for changes in the calculation or
5 administration of the credit.
6 Section 1709-D. Termination.
7 The department shall not approve a tax credit under this
8 article for taxable years ending after December 31, 2020.
9 Section 1710-D. Regulations.
10 The secretary shall promulgate regulations necessary for the
11 implementation and administration of this article.
12 Section 2. This act shall apply to taxable years beginning
13 after December 31, 2005.
14 Section 3. This act shall take effect in 60 days.
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