PRIOR PRINTER'S NO. 4242 PRINTER'S NO. 4708
No. 2774 Session of 2006
INTRODUCED BY REED, ALLEN, BAKER, BENNINGHOFF, BOYD, BUNT, BUXTON, CALTAGIRONE, CAPPELLI, CAUSER, FAIRCHILD, GINGRICH, GODSHALL, KENNEY, MAITLAND, MARKOSEK, R. MILLER, MUSTIO, NAILOR, NICKOL, PAYNE, PERZEL, PETRI, PICKETT, QUIGLEY, ROBERTS, SAINATO, R. STEVENSON, T. STEVENSON, THOMAS, TURZAI, WANSACZ, YOUNGBLOOD, MUNDY, E. Z. TAYLOR, ZUG, GOODMAN, CLYMER, TANGRETTI, SAYLOR, GEIST, HASAY, HESS, ADOLPH, RAYMOND, DENLINGER AND WILT, JUNE 15, 2006
AS REPORTED FROM COMMITTEE ON FINANCE, HOUSE OF REPRESENTATIVES, AS AMENDED, OCTOBER 3, 2006
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," further providing, in bank and trust company 11 shares tax, for ascertainment of taxable amount and exclusion 12 of United States obligations. 13 The General Assembly of the Commonwealth of Pennsylvania 14 hereby enacts as follows: 15 Section 1. Section 701.1(c) 701.1 of the act of March 4, <-- 16 1971 (P.L.6, No.2), known as the Tax Reform Code of 1971, 17 amended June 16, 1994 (P.L.279, No.48), is amended to read: 18 Section 701.1. Ascertainment of Taxable Amount; Exclusion of <-- 19 United States Obligations.--* * *
1 SECTION 701.1. ASCERTAINMENT OF TAXABLE AMOUNT; EXCLUSION OF <-- 2 UNITED STATES OBLIGATIONS.--(A) THE TAXABLE AMOUNT OF SHARES 3 SHALL BE ASCERTAINED AND FIXED BY ADDING TOGETHER THE VALUE 4 DETERMINED UNDER SUBSECTION (B) FOR THE CURRENT AND PRECEDING 5 FIVE YEARS AND DIVIDING THE RESULTING SUM BY SIX. IF AN 6 INSTITUTION HAS NOT BEEN IN EXISTENCE FOR A PERIOD OF SIX YEARS, 7 THE TAXABLE AMOUNT OF SHARES SHALL BE ASCERTAINED AND FIXED BY 8 ADDING TOGETHER THE VALUES DETERMINED UNDER SUBSECTION (B) FOR 9 THE NUMBER OF YEARS THE INSTITUTION HAS BEEN IN EXISTENCE AND 10 DIVIDING THE RESULTING SUM BY SUCH NUMBER OF YEARS. 11 (B) THE VALUE FOR EACH YEAR REQUIRED BY SUBSECTION (A) SHALL 12 BE DETERMINED BY ADDING TOGETHER THE BOOK VALUE OF CAPITAL STOCK 13 PAID IN, THE BOOK VALUE OF THE SURPLUS AND THE BOOK VALUE OF 14 UNDIVIDED PROFITS WITH A DEDUCTION FROM THE TOTAL THEREOF OF AN 15 AMOUNT EQUAL TO THE SAME PERCENTAGE OF SUCH TOTAL AS THE BOOK 16 VALUE OF OBLIGATIONS OF THE UNITED STATES BEARS TO THE BOOK 17 VALUE OF THE TOTAL ASSETS[.], EXCEPT THAT FOR SHARES ASSESSED AS 18 OF JANUARY 1, 2007, AND THEREAFTER, ANY GOODWILL RECORDED AS A 19 RESULT OF THE USE OF PURCHASE ACCOUNTING FOR AN ACQUISITION OR 20 COMBINATION AS DESCRIBED IN THIS SECTION AND OCCURRING AFTER 21 JUNE 30, 2001, MAY BE DISREGARDED IN DETERMINING THE BOOK VALUE 22 OF TOTAL ASSETS AND THE DEDUCTION PROVIDED FOR OBLIGATIONS OF 23 THE UNITED STATES FOR THE SIX-YEAR PERIOD DESCRIBED IN 24 SUBSECTION (A). FOR PURPOSES OF THIS SUBSECTION, BOOK VALUES AND 25 DEDUCTIONS FOR UNITED STATES OBLIGATIONS FOR EACH YEAR SHALL BE 26 DETERMINED BY THE REPORTS OF CONDITION FOR EACH CALENDAR QUARTER 27 OF THE PRECEDING CALENDAR YEAR IN ACCORDANCE WITH THE 28 REQUIREMENTS OF THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE 29 SYSTEM, THE COMPTROLLER OF THE CURRENCY, THE FEDERAL DEPOSIT 30 INSURANCE CORPORATION OR OTHER APPLICABLE REGULATORY AUTHORITY; 20060H2774B4708 - 2 -
1 AND BOOK VALUES SHALL BE AVERAGED AS CALCULATED BY AVERAGING 2 BOOK VALUES AS DETERMINED BY SUCH REPORTS OF CONDITION. FOR 3 PURPOSES OF THIS ARTICLE, UNITED STATES OBLIGATIONS SHALL BE 4 OBLIGATIONS COMING WITHIN THE SCOPE OF 31 U.S.C. § 3124. FOR ANY 5 YEAR IN WHICH AN INSTITUTION DOES NOT FILE FOUR QUARTERLY 6 REPORTS OF CONDITION, BOOK VALUES AND DEDUCTIONS FOR UNITED 7 STATES OBLIGATIONS SHALL BE DETERMINED BY ADDING TOGETHER THE 8 BOOK VALUES AND DEDUCTIONS FOR UNITED STATES OBLIGATIONS FROM 9 EACH QUARTERLY REPORTS OF CONDITION FILED FOR SUCH YEAR AND 10 DIVIDING THE RESULTING SUMS BY THE NUMBER OF SUCH REPORTS OF 11 CONDITION. IN THE CASE OF INSTITUTIONS WHICH DO NOT FILE SUCH 12 REPORTS OF CONDITION, BOOK VALUES SHALL BE DETERMINED BY 13 GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AS OF THE END OF EACH 14 CALENDAR QUARTER. FOR ANY YEAR IN WHICH AN INSTITUTION WHICH 15 DOES NOT FILE REPORTS OF CONDITION IS NOT IN EXISTENCE FOR FOUR 16 QUARTERS, THE BOOK VALUE FOR THAT YEAR SHALL BE DETERMINED BY 17 ADDING TOGETHER THE BOOK VALUES FOR EACH QUARTER IN WHICH THE 18 INSTITUTION WAS IN EXISTENCE AND DIVIDING BY THAT NUMBER OF 19 QUARTERS. FOR PURPOSES OF THIS SECTION, A PARTIAL YEAR SHALL BE 20 TREATED AS A FULL YEAR. 21 (c) For purposes of this section: 22 (1) a mere change in identity, form or place of organization 23 of one institution, however effected, shall be treated as if a 24 single institution had been in existence prior to as well as 25 after such change; and 26 (2) the combination of two or more institutions into one 27 shall be treated as if the constituent institutions had been a 28 single institution in existence prior to as well as after the 29 combination and the book values and deductions for United States 30 obligations from the Reports of Condition of the constituent 20060H2774B4708 - 3 -
1 institutions shall be combined. For purposes of [the preceding <-- 2 sentence] THIS SECTION, a combination shall include any <-- 3 acquisition required to be accounted for [by the surviving <-- 4 institution under the pooling of interest method] or BY USING <-- 5 the purchase method in accordance with generally accepted 6 accounting principles or a statutory merger or consolidation[.]: <-- 7 Provided, however, That for years beginning after December 31, 8 2006, any addition to goodwill created as a result of a 9 combination occurring after June 30, 2001, may be disregarded by 10 the institution in determining the taxable value of shares and 11 the book value of capital stock paid in, surplus and undivided 12 profits used to determine the percentage deduction provided for 13 obligations of the United States. 14 Section 2. The General Assembly declares that the amendment 15 of section 701.1(c) of the act is intended to clarify that, 16 notwithstanding the promulgation of the Statement of Financial 17 Accounting Standards No. 141 adopted by the Financial Accounting 18 Standards Board on June 30, 2001, and which requires the use of 19 the purchase method of accounting for combinations, for purposes 20 of determining the taxable value of shares, the book value of 21 any surplus may be determined on a pooled basis without any 22 addition to the value of goodwill ascribed to a combination 23 occurring after June 30, 2001. This act shall not be construed 24 to authorize institutions to seek refunds of any additional bank 25 or shares company tax paid as a result of the mandatory use of 26 purchase accounting as required by the Statement of Financial 27 Accounting Standards No. 141. 28 Section 3 2. This act shall take effect in 60 days or <-- 29 December 31, 2006, whichever is sooner. F9L72DMS/20060H2774B4708 - 4 -