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        PRIOR PRINTER'S NOS. 441, 2809, 2849          PRINTER'S NO. 3094

THE GENERAL ASSEMBLY OF PENNSYLVANIA


HOUSE BILL

No. 377 Session of 2007


        INTRODUCED BY D. EVANS, BENNINGTON, BUXTON, CALTAGIRONE, CURRY,
           FREEMAN, GALLOWAY, LEVDANSKY, MARKOSEK, MYERS, PARKER,
           PRESTON, WALKO, WHEATLEY, PETRONE, WAGNER, KORTZ, FRANKEL AND
           M. O'BRIEN, FEBRUARY 13, 2007

        AS AMENDED ON SECOND CONSIDERATION, HOUSE OF REPRESENTATIVES,
           JANUARY 16, 2008

                                     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," IN SALES AND USE TAX, FURTHER PROVIDING FOR        <--
    11     DEFINITIONS AND FOR EXCLUSIONS; IN PERSONAL INCOME TAX,
    12     FURTHER PROVIDING FOR IMPOSITION, providing an alternative
    13     special tax provision for poverty; FURTHER PROVIDING FOR       <--
    14     REQUIREMENT OF WITHHOLDING TAX; IN CORPORATE NET INCOME TAX,
    15     FURTHER PROVIDING FOR DEFINITIONS AND FOR IMPOSITION; IN
    16     CAPITAL STOCK-FRANCHISE TAX, FURTHER PROVIDING FOR
    17     DEFINITIONS AND REPORTS; IN GROSS RECEIPTS TAX, FURTHER
    18     PROVIDING FOR IMPOSITION; IN RESEARCH AND DEVELOPMENT TAX
    19     CREDITS, FURTHER PROVIDING FOR CARRYOVER, CARRYBACK, REFUND
    20     AND ASSIGNMENT OF CREDIT, FOR TIME LIMITATIONS, FOR
    21     LIMITATION ON CREDITS AND FOR TERMINATION; PROVIDING FOR A
    22     SMALL BUSINESS HEALTH SAVINGS ACCOUNT TAX CREDIT AND FOR A
    23     NEW DIESEL TECHNOLOGY TAX CREDIT; IN INHERITANCE TAX, FURTHER
    24     PROVIDING FOR IMPOSITION, FOR INHERITANCE TAX RATES AND FOR
    25     ESTATE TAX; AND MAKING A RELATED REPEAL.

    26     The General Assembly of the Commonwealth of Pennsylvania
    27  hereby enacts as follows:
    28     Section 1.  The act of March 4, 1971 (P.L.6, No.2), known as   <--

     1  the Tax Reform Code of 1971, is amended by adding a section to
     2  read:
     3     SECTION 1.  SECTION 201(M) OF THE ACT OF MARCH 4, 1971         <--
     4  (P.L.6, NO.2), KNOWN AS THE TAX REFORM CODE OF 1971, AMENDED MAY
     5  24, 2000 (P.L.106, NO.23), IS AMENDED TO READ:
     6     SECTION 201.  DEFINITIONS.--THE FOLLOWING WORDS, TERMS AND
     7  PHRASES WHEN USED IN THIS ARTICLE II SHALL HAVE THE MEANING
     8  ASCRIBED TO THEM IN THIS SECTION, EXCEPT WHERE THE CONTEXT
     9  CLEARLY INDICATES A DIFFERENT MEANING:
    10     * * *
    11     (M)  "TANGIBLE PERSONAL PROPERTY."
    12     (1)  CORPOREAL PERSONAL PROPERTY INCLUDING, BUT NOT LIMITED
    13  TO, GOODS, WARES, MERCHANDISE, STEAM AND NATURAL AND
    14  MANUFACTURED AND BOTTLED GAS FOR NON-RESIDENTIAL USE,
    15  ELECTRICITY FOR NON-RESIDENTIAL USE, PREPAID TELECOMMUNICATIONS,
    16  PREMIUM CABLE OR PREMIUM VIDEO PROGRAMMING SERVICE, SPIRITUOUS
    17  OR VINOUS LIQUOR AND MALT OR BREWED BEVERAGES AND SOFT DRINKS,
    18  INTERSTATE TELECOMMUNICATIONS SERVICE ORIGINATING OR TERMINATING
    19  IN THE COMMONWEALTH AND CHARGED TO A SERVICE ADDRESS IN THIS
    20  COMMONWEALTH, INTRASTATE TELECOMMUNICATIONS SERVICE WITH THE
    21  EXCEPTION OF (I) SUBSCRIBER LINE CHARGES AND BASIC LOCAL
    22  TELEPHONE SERVICE FOR RESIDENTIAL USE AND (II) CHARGES FOR
    23  TELEPHONE CALLS PAID FOR BY INSERTING MONEY INTO A TELEPHONE
    24  ACCEPTING DIRECT DEPOSITS OF MONEY TO OPERATE, PROVIDED FURTHER,
    25  THE SERVICE ADDRESS OF ANY INTRASTATE TELECOMMUNICATIONS SERVICE
    26  IS DEEMED TO BE WITHIN THIS COMMONWEALTH OR WITHIN A POLITICAL
    27  SUBDIVISION, REGARDLESS OF HOW OR WHERE BILLED OR PAID. IN THE
    28  CASE OF ANY SUCH INTERSTATE OR INTRASTATE TELECOMMUNICATIONS
    29  SERVICE, ANY CHARGE PAID THROUGH A CREDIT OR PAYMENT MECHANISM
    30  WHICH DOES NOT RELATE TO A SERVICE ADDRESS, SUCH AS A BANK,
    20070H0377B3094                  - 2 -     

     1  TRAVEL, CREDIT OR DEBIT CARD, BUT NOT INCLUDING PREPAID
     2  TELECOMMUNICATIONS, IS DEEMED ATTRIBUTABLE TO THE ADDRESS OF
     3  ORIGINATION OF THE TELECOMMUNICATIONS SERVICE. THE TERM SHALL
     4  NOT INCLUDE COMPUTER SOFTWARE, OTHER THAN PREWRITTEN COMPUTER
     5  SOFTWARE DELIVERED TO THE PURCHASER BY TANGIBLE STORAGE MEDIA.
     6     (2)  FOR THE PURPOSES OF THIS CLAUSE, THE FOLLOWING WORDS AND
     7  PHRASES SHALL HAVE THE MEANINGS GIVEN TO THEM IN THIS SUBCLAUSE:
     8     "COMPUTER SOFTWARE."  A SET OF CODED INSTRUCTIONS DESIGNED TO
     9  CAUSE A COMPUTER OR AUTOMATIC DATA PROCESSING EQUIPMENT TO
    10  PERFORM A TASK.
    11     "PREWRITTEN COMPUTER SOFTWARE."  THE TERM SHALL HAVE THE SAME
    12  MEANING AS "COMPUTER SOFTWARE," INCLUDING PREWRITTEN UPGRADES,
    13  WHICH IS NOT DESIGNED AND DEVELOPED BY THE AUTHOR OR OTHER
    14  CREATOR TO THE SPECIFICATIONS OF A SPECIFIC PURCHASER. THE
    15  COMBINING OF TWO OR MORE PREWRITTEN COMPUTER SOFTWARE PROGRAMS
    16  OR PREWRITTEN PORTIONS OF THE PROGRAM DOES NOT CAUSE THE
    17  COMBINATION TO BE OTHER THAN PREWRITTEN COMPUTER SOFTWARE. THE
    18  TERM INCLUDES SOFTWARE DESIGNED AND DEVELOPED BY THE AUTHOR OR
    19  OTHER CREATOR TO THE SPECIFICATIONS OF A SPECIFIC PURCHASER WHEN
    20  IT IS SOLD TO A PERSON OTHER THAN THE SPECIFIC PURCHASER. WHERE
    21  A PERSON MODIFIES OR ENHANCES COMPUTER SOFTWARE OF WHICH THE
    22  PERSON IS NOT THE AUTHOR OR CREATOR, THE PERSON SHALL BE DEEMED
    23  TO BE THE AUTHOR OR CREATOR ONLY OF THE PERSON'S MODIFICATIONS
    24  OR ENHANCEMENTS. PREWRITTEN COMPUTER SOFTWARE OR A PREWRITTEN
    25  PORTION OF PREWRITTEN COMPUTER SOFTWARE THAT IS MODIFIED OR
    26  ENHANCED TO ANY DEGREE, WHERE THE MODIFICATION OR ENHANCEMENT IS
    27  DESIGNED AND DEVELOPED TO THE SPECIFICATIONS OF A SPECIFIC
    28  PURCHASER, REMAINS PREWRITTEN COMPUTER SOFTWARE EXCEPT THAT
    29  WHERE THERE IS A REASONABLE, SEPARATELY STATED CHARGE, INVOICE
    30  OR OTHER STATEMENT OF THE PRICE GIVEN TO THE PURCHASER FOR THE
    20070H0377B3094                  - 3 -     

     1  MODIFICATION OR ENHANCEMENT, THE MODIFICATION OR ENHANCEMENT
     2  SHALL NOT CONSTITUTE PREWRITTEN COMPUTER SOFTWARE.
     3     * * *
     4     SECTION 2.  SECTION 204(10) OF THE ACT, AMENDED APRIL 23,
     5  1998 (P.L.239, NO.45), IS AMENDED AND THE SECTION IS AMENDED BY
     6  ADDING CLAUSES TO READ:
     7     SECTION 204.  EXCLUSIONS FROM TAX.--THE TAX IMPOSED BY
     8  SECTION 202 SHALL NOT BE IMPOSED UPON ANY OF THE FOLLOWING:
     9     * * *
    10     (10)  THE SALE AT RETAIL TO OR USE BY (I) ANY CHARITABLE
    11  ORGANIZATION, VOLUNTEER FIREMEN'S ORGANIZATION OR NONPROFIT
    12  EDUCATIONAL INSTITUTION, OR (II) A RELIGIOUS ORGANIZATION FOR
    13  RELIGIOUS PURPOSES OF TANGIBLE PERSONAL PROPERTY OR SERVICES
    14  OTHER THAN PURSUANT TO A CONSTRUCTION CONTRACT: PROVIDED,
    15  HOWEVER, THAT THE EXCLUSION OF THIS CLAUSE SHALL NOT APPLY WITH
    16  RESPECT TO ANY TANGIBLE PERSONAL PROPERTY OR SERVICES USED IN
    17  ANY UNRELATED TRADE OR BUSINESS CARRIED ON BY SUCH ORGANIZATION
    18  OR INSTITUTION OR WITH RESPECT TO ANY MATERIALS, SUPPLIES AND
    19  EQUIPMENT USED AND TRANSFERRED TO SUCH ORGANIZATION OR
    20  INSTITUTION IN THE CONSTRUCTION, RECONSTRUCTION, REMODELING,
    21  RENOVATION, REPAIRS AND MAINTENANCE OF ANY REAL ESTATE
    22  STRUCTURE, OTHER THAN BUILDING MACHINERY AND EQUIPMENT, EXCEPT
    23  MATERIALS AND SUPPLIES WHEN PURCHASED BY SUCH ORGANIZATIONS OR
    24  INSTITUTIONS FOR ROUTINE MAINTENANCE AND REPAIRS[.], UNLESS THE
    25  ORGANIZATION OR INSTITUTION IS A CHARITABLE ORGANIZATION IN THE
    26  TRADE OR BUSINESS OF CONSTRUCTION, RECONSTRUCTION, REMODELING OR
    27  RENOVATION OF ANY REAL ESTATE STRUCTURE.
    28     * * *
    29     (67)  FEES CHARGED BY NONPROFIT HUMANE ORGANIZATIONS TO
    30  TRANSFER CUSTODY AND POSSESSION OF ANIMALS THAT ARE USED AS
    20070H0377B3094                  - 4 -     

     1  HOUSEHOLD PETS.
     2     (68)  THE SALE AT RETAIL OR USE OF BUILDING MATERIALS AND
     3  SUPPLIES USED FOR THE CONSTRUCTION OR REPAIR OF ANIMAL
     4  PRODUCTION BUILDINGS REGARDLESS IF THE SALE IS MADE TO THE
     5  PURCHASER DIRECTLY OR PURSUANT TO A CONSTRUCTION CONTRACT.
     6     SECTION 3.  SECTION 302 OF THE ACT, AMENDED DECEMBER 23, 2003
     7  (P.L.250, NO.46), IS AMENDED TO READ:
     8     SECTION 302.  IMPOSITION OF TAX.--(A)  EVERY RESIDENT
     9  INDIVIDUAL, ESTATE OR TRUST SHALL BE SUBJECT TO, AND SHALL PAY
    10  FOR THE PRIVILEGE OF RECEIVING EACH OF THE CLASSES OF INCOME
    11  HEREINAFTER ENUMERATED IN SECTION 303, A TAX UPON EACH DOLLAR OF
    12  INCOME RECEIVED BY THAT RESIDENT DURING THAT RESIDENT'S TAXABLE
    13  YEAR AT THE [RATE OF THREE AND SEVEN HUNDREDTHS PER CENT.]
    14  FOLLOWING RATES:
    15     (1)  THREE AND SEVEN HUNDREDTHS PER CENT FOR THE FIRST HALF
    16  OF THE TAXABLE YEAR COMMENCING WITH OR WITHIN CALENDAR YEAR
    17  2008.
    18     (2)  TWO AND NINETY-THREE HUNDREDTHS PER CENT FOR THE SECOND
    19  HALF OF THE TAXABLE YEAR COMMENCING WITH OR WITHIN CALENDAR YEAR
    20  2008.
    21     (3)  TWO AND EIGHT-TENTHS PER CENT FOR THE TAXABLE YEAR
    22  COMMENCING WITH OR WITHIN CALENDAR YEAR 2009 AND EACH TAXABLE
    23  YEAR THEREAFTER.
    24     (B)  EVERY NONRESIDENT INDIVIDUAL, ESTATE OR TRUST SHALL BE
    25  SUBJECT TO, AND SHALL PAY FOR THE PRIVILEGE OF RECEIVING EACH OF
    26  THE CLASSES OF INCOME HEREINAFTER ENUMERATED IN SECTION 303 FROM
    27  SOURCES WITHIN THIS COMMONWEALTH, A TAX UPON EACH DOLLAR OF
    28  INCOME RECEIVED BY THAT NONRESIDENT DURING THAT NONRESIDENT'S
    29  TAXABLE YEAR AT THE [RATE OF THREE AND SEVEN HUNDREDTHS PER
    30  CENT.] FOLLOWING RATES:
    20070H0377B3094                  - 5 -     

     1     (1)  THREE AND SEVEN HUNDREDTHS PER CENT FOR THE FIRST HALF
     2  OF THE TAXABLE YEAR COMMENCING WITH OR WITHIN CALENDAR YEAR
     3  2008.
     4     (2)  TWO AND NINETY-THREE HUNDREDTHS PER CENT FOR THE SECOND
     5  HALF OF THE TAXABLE YEAR COMMENCING WITH OR WITHIN CALENDAR YEAR
     6  2008.
     7     (3)  TWO AND EIGHT-TENTHS PER CENT FOR THE TAXABLE YEAR
     8  COMMENCING WITH OR WITHIN CALENDAR YEAR 2009 AND EACH TAXABLE
     9  YEAR THEREAFTER.
    10     SECTION 4.  THE ACT IS AMENDED BY ADDING A SECTION TO READ:
    11     Section 304.1.  Alternative Special Tax Provision for
    12  Poverty.--(a)  Pursuant to section 2(b)(ii) of Article VIII of
    13  the Constitution of the Commonwealth of Pennsylvania, which
    14  provides for establishing as a class or classes of subjects of
    15  taxation the property or privileges of persons who, because of
    16  poverty, are determined to be in need of special tax provisions,
    17  the General Assembly hereby declares its intent and purpose to
    18  exercise its power pursuant to that section by enacting the
    19  alternative tax provisions of this section.
    20     (b)  Having determined that there are certain persons in this
    21  Commonwealth whose incomes are such that imposition of an income
    22  tax would deprive them and their dependents of bare necessities
    23  of life, and having determined that poverty is a relative
    24  concept inextricably joined with actual income and the number of
    25  people dependent upon such income, the General Assembly deems it
    26  to be a matter of public policy to provide special tax
    27  provisions for that class of persons to relieve their economic
    28  burden.
    29     (c)  For the taxable year beginning after December 31, 2007,
    30  an individual having one or more dependents may, in lieu of
    20070H0377B3094                  - 6 -     

     1  utilizing the special tax provisions for poverty in section 304,
     2  claim a refund equal to fifteen per cent of the earned income
     3  credit allowable under section 32 of the Internal Revenue Code
     4  of 1986 (Public Law 99-514, 26 U.S.C. § 32), as amended.
     5     (d)  For taxable years beginning after December 31, 2008, an
     6  individual having one or more dependents may, in lieu of
     7  utilizing the special tax provisions for poverty in section 304,
     8  claim a refund equal to thirty per cent of the earned income
     9  credit allowable under section 32 of the Internal Revenue Code
    10  of 1986, as amended.
    11     Section 2.  This act shall take effect immediately.            <--
    12     SECTION 5.  SECTION 316 OF THE ACT, ADDED AUGUST 31, 1971      <--
    13  (P.L.362, NO.93), IS AMENDED TO READ:
    14     SECTION 316.  REQUIREMENT OF WITHHOLDING TAX.--[EVERY] (A)
    15  EXCEPT AS PROVIDED UNDER SUBSECTION (B), EVERY EMPLOYER
    16  MAINTAINING AN OFFICE OR TRANSACTING BUSINESS WITHIN THIS
    17  COMMONWEALTH AND MAKING PAYMENT OF COMPENSATION [(I)] (1) TO A
    18  RESIDENT INDIVIDUAL, OR [(II)] (2) TO A NONRESIDENT INDIVIDUAL
    19  TAXPAYER PERFORMING SERVICES ON BEHALF OF SUCH EMPLOYER WITHIN
    20  THIS COMMONWEALTH, SHALL DEDUCT AND WITHHOLD FROM SUCH
    21  COMPENSATION FOR EACH PAYROLL PERIOD A TAX COMPUTED IN SUCH
    22  MANNER AS TO RESULT, SO FAR AS PRACTICABLE, IN WITHHOLDING FROM
    23  THE EMPLOYE'S COMPENSATION DURING EACH CALENDAR YEAR AN AMOUNT
    24  SUBSTANTIALLY EQUIVALENT TO THE TAX REASONABLY ESTIMATED TO BE
    25  DUE FOR SUCH YEAR WITH RESPECT TO SUCH COMPENSATION. THE METHOD
    26  OF DETERMINING THE AMOUNT TO BE WITHHELD SHALL BE PRESCRIBED BY
    27  REGULATIONS OF THE DEPARTMENT.
    28     (B)  SUBSECTION (A) SHALL NOT APPLY TO THE WITHHOLDING OF TAX
    29  FROM COMPENSATION OF ANY RESIDENT OR NONRESIDENT INDIVIDUAL
    30  SERVING IN THE ARMED FORCES OF THE UNITED STATES IN AN AREA
    20070H0377B3094                  - 7 -     

     1  DESIGNATED BY THE PRESIDENT OF THE UNITED STATES BY EXECUTIVE
     2  ORDER AS A COMBAT ZONE AS DESCRIBED UNDER SECTION 7508 OF THE
     3  INTERNAL REVENUE CODE OF 1986 (PUBLIC LAW 99-514, 26 U.S.C. §
     4  7508), AS AMENDED, AT ANY TIME DURING THE PERIOD DESIGNATED BY
     5  THE PRESIDENT BY EXECUTIVE ORDER AS THE PERIOD OF COMBATANT
     6  ACTIVITIES IN THE COMBAT ZONE OR HOSPITALIZED AS A RESULT OF
     7  INJURY RECEIVED WHILE SERVING IN THE COMBAT ZONE DURING SUCH
     8  TIME.
     9     SECTION 6.  SECTION 401(3)2(A)(9) AND 4(C) OF THE ACT,
    10  AMENDED JULY 12, 2006 (P.L.1137, NO.116), ARE AMENDED TO READ:
    11     SECTION 401.  DEFINITIONS.--THE FOLLOWING WORDS, TERMS, AND
    12  PHRASES, WHEN USED IN THIS ARTICLE, SHALL HAVE THE MEANING
    13  ASCRIBED TO THEM IN THIS SECTION, EXCEPT WHERE THE CONTEXT
    14  CLEARLY INDICATES A DIFFERENT MEANING:
    15     * * *
    16     (3)  "TAXABLE INCOME."  * * *
    17     2.  IN CASE THE ENTIRE BUSINESS OF ANY CORPORATION, OTHER
    18  THAN A CORPORATION ENGAGED IN DOING BUSINESS AS A REGULATED
    19  INVESTMENT COMPANY AS DEFINED BY THE INTERNAL REVENUE CODE OF
    20  1986, IS NOT TRANSACTED WITHIN THIS COMMONWEALTH, THE TAX
    21  IMPOSED BY THIS ARTICLE SHALL BE BASED UPON SUCH PORTION OF THE
    22  TAXABLE INCOME OF SUCH CORPORATION FOR THE FISCAL OR CALENDAR
    23  YEAR, AS DEFINED IN SUBCLAUSE 1 HEREOF, AND MAY BE DETERMINED AS
    24  FOLLOWS:
    25     (A)  DIVISION OF INCOME.
    26     * * *
    27     (9)  (A)  EXCEPT AS PROVIDED IN SUBPARAGRAPH (B):
    28     (I)  FOR TAXABLE YEARS BEGINNING BEFORE JANUARY 1, 2007, ALL
    29  BUSINESS INCOME SHALL BE APPORTIONED TO THIS STATE BY
    30  MULTIPLYING THE INCOME BY A FRACTION, THE NUMERATOR OF WHICH IS
    20070H0377B3094                  - 8 -     

     1  THE PROPERTY FACTOR PLUS THE PAYROLL FACTOR PLUS THREE TIMES THE
     2  SALES FACTOR AND THE DENOMINATOR OF WHICH IS FIVE.
     3     (II)  FOR TAXABLE YEARS BEGINNING AFTER DECEMBER 31, 2006,
     4  AND ENDING BEFORE JANUARY 1, 2008, ALL BUSINESS INCOME SHALL BE
     5  APPORTIONED TO THIS STATE BY MULTIPLYING THE INCOME BY A
     6  FRACTION, THE NUMERATOR OF WHICH IS THE SUM OF FIFTEEN TIMES THE
     7  PROPERTY FACTOR, FIFTEEN TIMES THE PAYROLL FACTOR AND SEVENTY
     8  TIMES THE SALES FACTOR AND THE DENOMINATOR OF WHICH IS ONE
     9  HUNDRED.
    10     (III)  FOR TAXABLE YEARS BEGINNING AFTER DECEMBER 31, 2007,
    11  ALL BUSINESS INCOME SHALL BE APPORTIONED TO THIS STATE BY
    12  MULTIPLYING THE INCOME BY THE SALES FACTOR.
    13     (B)  FOR PURPOSES OF APPORTIONMENT OF THE CAPITAL STOCK -
    14  FRANCHISE TAX AS PROVIDED IN SECTION 602 OF ARTICLE VI OF THIS
    15  ACT, THE APPORTIONMENT FRACTION SHALL BE THE PROPERTY FACTOR
    16  PLUS THE PAYROLL FACTOR PLUS THE SALES FACTOR AS THE NUMERATOR,
    17  AND THE DENOMINATOR SHALL BE THREE.
    18     * * *
    19     4.  * * *
    20     (C)  (1)  THE NET LOSS DEDUCTION SHALL BE THE LESSER OF:
    21     (A)  (I)  FOR TAXABLE YEARS BEGINNING BEFORE JANUARY 1, 2007,
    22  TWO MILLION DOLLARS ($2,000,000);
    23     (II)  FOR TAXABLE YEARS BEGINNING AFTER DECEMBER 31, 2006,
    24  AND BEFORE JANUARY 1, 2008, THE GREATER OF TWELVE AND ONE-HALF
    25  PER CENT OF TAXABLE INCOME AS DETERMINED UNDER SUBCLAUSE 1 OR,
    26  IF APPLICABLE, SUBCLAUSE 2 OR THREE MILLION DOLLARS
    27  ($3,000,000); [OR]
    28     (III)  FOR TAXABLE YEARS BEGINNING AFTER DECEMBER 31, 2007,
    29  ONE HUNDRED PER CENT OF TAXABLE INCOME AS DETERMINED UNDER
    30  SUBCLAUSE 1 OR, IF APPLICABLE, SUBCLAUSE 2; OR
    20070H0377B3094                  - 9 -     

     1     (B)  THE AMOUNT OF THE NET LOSS OR LOSSES WHICH MAY BE
     2  CARRIED OVER TO THE TAXABLE YEAR OR TAXABLE INCOME AS DETERMINED
     3  UNDER SUBCLAUSE 1 OR, IF APPLICABLE, SUBCLAUSE 2.
     4     [(1.1)  IN NO EVENT SHALL THE NET LOSS DEDUCTION INCLUDE MORE
     5  THAN FIVE HUNDRED THOUSAND DOLLARS ($500,000), IN THE AGGREGATE,
     6  OF NET LOSSES FROM TAXABLE YEARS 1988 THROUGH 1994.]
     7     (2)  (A)  A NET LOSS FOR A TAXABLE YEAR MAY ONLY BE CARRIED
     8  OVER PURSUANT TO THE FOLLOWING SCHEDULE:
     9             TAXABLE YEAR                        CARRYOVER
    10                 1981                        1 TAXABLE YEAR
    11                 1982                        2 TAXABLE YEARS
    12                 1983-1987                   3 TAXABLE YEARS
    13                 1988                        2 TAXABLE YEARS PLUS
    14                                             1 TAXABLE YEAR
    15                                             STARTING WITH THE
    16                                             1995 TAXABLE YEAR
    17                 1989                        1 TAXABLE YEAR PLUS
    18                                             2 TAXABLE YEARS
    19                                             STARTING WITH THE
    20                                             1995 TAXABLE YEAR
    21                 1990-1993                   3 TAXABLE YEARS
    22                                             STARTING WITH THE
    23                                             1995 TAXABLE YEAR
    24                 1994                        1 TAXABLE YEAR
    25                 1995-1997                   10 TAXABLE YEARS
    26                 1998 AND THEREAFTER         20 TAXABLE YEARS
    27     (B)  THE EARLIEST NET LOSS SHALL BE CARRIED OVER TO THE
    28  EARLIEST TAXABLE YEAR TO WHICH IT MAY BE CARRIED UNDER THIS
    29  SCHEDULE. THE TOTAL NET LOSS DEDUCTION ALLOWED IN ANY TAXABLE
    30  YEAR SHALL NOT EXCEED:
    20070H0377B3094                 - 10 -     

     1     (I)  TWO MILLION DOLLARS ($2,000,000) FOR TAXABLE YEARS
     2  BEGINNING BEFORE JANUARY 1, 2007.
     3     (II)  THE GREATER OF TWELVE AND ONE-HALF PER CENT OF THE
     4  TAXABLE INCOME AS DETERMINED UNDER SUBCLAUSE 1 OR, IF
     5  APPLICABLE, SUBCLAUSE 2 OR THREE MILLION DOLLARS ($3,000,000)
     6  FOR TAXABLE YEARS BEGINNING AFTER DECEMBER 31, 2006[.], AND
     7  BEFORE JANUARY 1, 2008.
     8     (III)  ONE HUNDRED PER CENT OF TAXABLE INCOME AS DETERMINED
     9  UNDER SUBCLAUSE 1 OR, IF APPLICABLE, SUBCLAUSE 2 FOR TAXABLE
    10  YEARS BEGINNING AFTER DECEMBER 31, 2007.
    11     * * *
    12     SECTION 7.  SECTION 402(B) OF THE ACT, AMENDED JUNE 29, 2002
    13  (P.L.559, NO.89), IS AMENDED TO READ:
    14     SECTION 402.  IMPOSITION OF TAX.--* * *
    15     (B)  THE ANNUAL RATE OF TAX ON CORPORATE NET INCOME IMPOSED
    16  BY SUBSECTION (A) FOR TAXABLE YEARS BEGINNING FOR THE CALENDAR
    17  YEAR OR FISCAL YEAR ON OR AFTER THE DATES SET FORTH SHALL BE AS
    18  FOLLOWS:
    19          TAXABLE YEAR         TAX RATE
    20  JANUARY 1, 1995, [AND
    21     EACH TAXABLE
    22     YEAR THEREAFTER]
    23     THROUGH TAXABLE
    24     YEARS BEGINNING
    25     ON OR BEFORE
    26     DECEMBER 31, 2008            9.99%
    27  JANUARY 1, 2009, AND
    28     EACH TAXABLE
    29     YEAR THROUGH
    30     DECEMBER 31, 2009            7.90%
    20070H0377B3094                 - 11 -     

     1  JANUARY 1, 2010, AND
     2     EACH TAXABLE
     3     YEAR THROUGH
     4     DECEMBER 31, 2010            7.70%
     5  JANUARY 1, 2011, AND
     6     EACH TAXABLE
     7     YEAR THROUGH
     8  DECEMBER 31, 2011               7.50%
     9  JANUARY 1, 2012, AND
    10     EACH TAXABLE
    11     YEAR THROUGH
    12  DECEMBER 31, 2012               7.30%
    13  JANUARY 1, 2013, AND
    14     EACH TAXABLE
    15     YEAR THROUGH
    16  DECEMBER 31, 2013               7.10%
    17  JANUARY 1, 2014, AND
    18     EACH TAXABLE
    19     YEAR THEREAFTER              6.90%
    20     * * *
    21     SECTION 8.  THE DEFINITION OF "CAPITAL STOCK VALUE" IN
    22  SECTION 601(A) OF THE ACT, AMENDED JULY 6, 2006 (P.L.319,
    23  NO.67), IS AMENDED TO READ:
    24     SECTION 601.  DEFINITIONS AND REPORTS.--(A)  THE FOLLOWING
    25  WORDS, TERMS AND PHRASES WHEN USED IN THIS ARTICLE VI SHALL HAVE
    26  THE MEANING ASCRIBED TO THEM IN THIS SECTION, EXCEPT WHERE THE
    27  CONTEXT CLEARLY INDICATES A DIFFERENT MEANING:
    28     * * *
    29     "CAPITAL STOCK VALUE."  THE AMOUNT COMPUTED PURSUANT TO THE
    30  FOLLOWING FORMULA: THE PRODUCT OF ONE-HALF TIMES THE SUM OF THE
    20070H0377B3094                 - 12 -     

     1  AVERAGE NET INCOME CAPITALIZED AT THE RATE OF NINE AND ONE-HALF
     2  PER CENT PLUS SEVENTY-FIVE PER CENT OF NET WORTH, FROM WHICH
     3  PRODUCT SHALL BE SUBTRACTED [ONE HUNDRED FIFTY THOUSAND DOLLARS
     4  ($150,000)] THREE HUNDRED THOUSAND DOLLARS ($300,000), THE
     5  ALGEBRAIC EQUIVALENT OF WHICH IS
     6               (.5 X (AVERAGE NET INCOME/.095 + (.75)
     7                (NET WORTH))) - [$150,000] $300,000
     8     * * *
     9     SECTION 9.  SECTION 1101(A), (A.1) AND (J) OF THE ACT,
    10  AMENDED OR ADDED DECEMBER 23, 2003 (P.L.250, NO.46), ARE AMENDED
    11  TO READ:
    12     SECTION 1101.  IMPOSITION OF TAX.--(A)  GENERAL RULE.--EVERY
    13  PIPELINE COMPANY, CONDUIT COMPANY, STEAMBOAT COMPANY, CANAL
    14  COMPANY, SLACK WATER NAVIGATION COMPANY, TRANSPORTATION COMPANY,
    15  AND EVERY OTHER COMPANY, ASSOCIATION, JOINT-STOCK ASSOCIATION,
    16  OR LIMITED PARTNERSHIP, NOW OR HEREAFTER INCORPORATED OR
    17  ORGANIZED BY OR UNDER ANY LAW OF THIS COMMONWEALTH, OR NOW OR
    18  HEREAFTER ORGANIZED OR INCORPORATED BY ANY OTHER STATE OR BY THE
    19  UNITED STATES OR ANY FOREIGN GOVERNMENT, AND DOING BUSINESS IN
    20  THIS COMMONWEALTH, AND EVERY COPARTNERSHIP, PERSON OR PERSONS
    21  OWNING, OPERATING OR LEASING TO OR FROM ANOTHER CORPORATION,
    22  COMPANY, ASSOCIATION, JOINT-STOCK ASSOCIATION, LIMITED
    23  PARTNERSHIP, COPARTNERSHIP, PERSON OR PERSONS, ANY PIPELINE,
    24  CONDUIT, STEAMBOAT, CANAL, SLACK WATER NAVIGATION, OR OTHER
    25  DEVICE FOR THE TRANSPORTATION OF FREIGHT, PASSENGERS, BAGGAGE,
    26  OR OIL, EXCEPT MOTOR VEHICLES AND RAILROADS, AND EVERY LIMITED
    27  PARTNERSHIP, ASSOCIATION, JOINT-STOCK ASSOCIATION, CORPORATION
    28  OR COMPANY ENGAGED IN, OR HEREAFTER ENGAGED IN, THE
    29  TRANSPORTATION OF FREIGHT OR OIL WITHIN THIS STATE, AND EVERY
    30  TELEPHONE COMPANY , TELEGRAPH COMPANY OR PROVIDER OF MOBILE
    20070H0377B3094                 - 13 -     

     1  TELECOMMUNICATIONS SERVICES NOW OR HEREAFTER INCORPORATED OR
     2  ORGANIZED BY OR UNDER ANY LAW OF THIS COMMONWEALTH, OR NOW OR
     3  HEREAFTER ORGANIZED OR INCORPORATED BY ANY OTHER STATE OR BY THE
     4  UNITED STATES OR ANY FOREIGN GOVERNMENT AND DOING BUSINESS IN
     5  THIS COMMONWEALTH, AND EVERY LIMITED PARTNERSHIP, ASSOCIATION,
     6  JOINT-STOCK ASSOCIATION, COPARTNERSHIP, PERSON OR PERSONS,
     7  ENGAGED IN TELEPHONE OR TELEGRAPH BUSINESS OR PROVIDING MOBILE
     8  TELECOMMUNICATIONS SERVICES IN THIS COMMONWEALTH, SHALL PAY TO
     9  THE STATE TREASURER, THROUGH THE DEPARTMENT OF REVENUE, A TAX OF
    10  FORTY-FIVE MILLS WITH A SURTAX EQUAL TO FIVE MILLS UPON EACH
    11  DOLLAR OF THE GROSS RECEIPTS OF THE CORPORATION, COMPANY OR
    12  ASSOCIATION, LIMITED PARTNERSHIP, JOINT-STOCK ASSOCIATION,
    13  COPARTNERSHIP, PERSON OR PERSONS, RECEIVED FROM:
    14     (1)  PASSENGERS, BAGGAGE, OIL AND FREIGHT TRANSPORTED WHOLLY
    15  WITHIN THIS STATE;
    16     (2)  TELEGRAPH OR TELEPHONE MESSAGES TRANSMITTED WHOLLY
    17  WITHIN THIS STATE AND TELEGRAPH OR TELEPHONE MESSAGES
    18  TRANSMITTED IN INTERSTATE COMMERCE AFTER DECEMBER 31, 2003, AND
    19  BEFORE JANUARY 1, 2008, WHERE SUCH MESSAGES ORIGINATE OR
    20  TERMINATE IN THIS STATE AND THE CHARGES FOR SUCH MESSAGES ARE
    21  BILLED TO A SERVICE ADDRESS IN THIS STATE, EXCEPT GROSS RECEIPTS
    22  DERIVED FROM:
    23     (I)  THE SALES OF ACCESS TO THE INTERNET, AS SET FORTH IN
    24  ARTICLE II, MADE TO THE ULTIMATE CONSUMER; AND
    25     (II)  THE SALES FOR RESALE TO PERSONS, PARTNERSHIPS,
    26  ASSOCIATIONS, CORPORATIONS OR POLITICAL SUBDIVISIONS SUBJECT TO
    27  THE TAX IMPOSED BY THIS ARTICLE UPON GROSS RECEIPTS DERIVED FROM
    28  SUCH RESALE OF TELECOMMUNICATIONS SERVICES, INCLUDING:
    29     (A)  TELECOMMUNICATIONS EXCHANGE ACCESS TO INTERCONNECT WITH
    30  A LOCAL EXCHANGE CARRIER'S NETWORK;
    20070H0377B3094                 - 14 -     

     1     (B)  NETWORK ELEMENTS ON AN UNBUNDLED BASIS; AND
     2     (C)  SALES OF TELECOMMUNICATIONS SERVICES TO INTERCONNECT
     3  WITH PROVIDERS OF MOBILE TELECOMMUNICATIONS SERVICES; AND
     4     (3)  MOBILE TELECOMMUNICATIONS SERVICES MESSAGES SOURCED TO
     5  THIS COMMONWEALTH AFTER DECEMBER 31, 2003, AND BEFORE JANUARY 1,
     6  2008, BASED ON THE PLACE OF PRIMARY USE STANDARD SET FORTH IN
     7  THE MOBILE TELECOMMUNICATIONS SOURCING ACT (4 U.S.C. § 117),
     8  EXCEPT GROSS RECEIPTS DERIVED FROM:
     9     (I)  THE SALES OF ACCESS TO THE INTERNET, AS SET FORTH IN
    10  ARTICLE II, MADE TO THE ULTIMATE CONSUMER; AND
    11     (II)  THE SALES FOR RESALE TO PERSONS, PARTNERSHIPS,
    12  ASSOCIATIONS, CORPORATIONS OR POLITICAL SUBDIVISIONS SUBJECT TO
    13  THE TAX IMPOSED BY THIS ARTICLE UPON GROSS RECEIPTS DERIVED FROM
    14  SUCH RESALE OF MOBILE TELECOMMUNICATIONS SERVICES, INCLUDING
    15  SALES OF MOBILE TELECOMMUNICATIONS SERVICES TO INTERCONNECT WITH
    16  PROVIDERS OF TELECOMMUNICATIONS SERVICES.
    17     (A.1)  CREDIT.--TELEGRAPH OR TELEPHONE COMPANIES OR PROVIDERS
    18  OF MOBILE TELECOMMUNICATIONS SERVICES THAT PAY A GROSS RECEIPTS
    19  TAX TO ANOTHER STATE ON MESSAGES OR SERVICES AFTER DECEMBER 31,
    20  2003, AND BEFORE JANUARY 1, 2008, WHICH ARE TAXABLE UNDER THIS
    21  ARTICLE ARE ENTITLED TO A CREDIT AGAINST THE TAX DUE UNDER THIS
    22  ARTICLE. THE CREDIT ALLOWED WITH RESPECT TO THE MESSAGES OR
    23  SERVICES SHALL NOT EXCEED THE TAX UNDER THIS ARTICLE WITH
    24  RESPECT TO THE MESSAGES OR SERVICES.
    25     * * *
    26     (J)  SCHEDULE FOR ESTIMATED PAYMENTS.--
    27     (1)  FOR CALENDAR YEAR 2004, THE FOLLOWING SCHEDULE APPLIES
    28  TO THE PAYMENT OF THE TAX UNDER SUBSECTION(A)(3):
    29     (I)  FORTY PER CENT OF THE ESTIMATED TAX SHALL BE DUE ON
    30  MARCH 15, 2004.
    20070H0377B3094                 - 15 -     

     1     (II)  FORTY PER CENT OF THE ESTIMATED TAX SHALL BE DUE ON
     2  JUNE 15, 2004.
     3     (III)  TWENTY PER CENT OF THE ESTIMATED TAX SHALL BE DUE ON
     4  SEPTEMBER 15, 2004.
     5     (2)  FOR CALENDAR [YEARS AFTER 2004] YEAR 2007, THE PAYMENT
     6  OF THE ESTIMATED TAX UNDER SUBSECTION (A)(3) SHALL BE DUE IN
     7  ACCORDANCE WITH SECTION 3003.2.
     8     (3)  THIS SUBSECTION SHALL EXPIRE JANUARY 1, 2008.
     9     * * *
    10     SECTION 10.  SECTION 1704-B OF THE ACT, AMENDED DECEMBER 23,
    11  2003 (P.L.250, NO.46), IS AMENDED TO READ:
    12     SECTION 1704-B.  CARRYOVER, CARRYBACK, REFUND AND ASSIGNMENT
    13  OF CREDIT.--(A)  IF THE TAXPAYER, PURCHASER OR ASSIGNEE CANNOT
    14  USE THE ENTIRE AMOUNT OF THE RESEARCH AND DEVELOPMENT TAX CREDIT
    15  FOR THE TAXABLE YEAR IN WHICH THE RESEARCH AND DEVELOPMENT TAX
    16  CREDIT IS FIRST APPROVED, PURCHASED OR ASSIGNED, THEN THE EXCESS
    17  MAY BE CARRIED OVER TO SUCCEEDING TAXABLE YEARS AND USED AS A
    18  CREDIT AGAINST THE QUALIFIED TAX LIABILITY OF THE TAXPAYER FOR
    19  THOSE TAXABLE YEARS. EACH TIME THAT THE RESEARCH AND DEVELOPMENT
    20  TAX CREDIT IS CARRIED OVER TO A SUCCEEDING TAXABLE YEAR, IT IS
    21  TO BE REDUCED BY THE AMOUNT THAT WAS USED AS A CREDIT DURING THE
    22  IMMEDIATELY PRECEDING TAXABLE YEAR. THE RESEARCH AND DEVELOPMENT
    23  TAX CREDIT PROVIDED BY THIS ARTICLE MAY BE CARRIED OVER AND
    24  APPLIED TO SUCCEEDING TAXABLE YEARS FOR NO MORE THAN FIFTEEN
    25  TAXABLE YEARS FOLLOWING THE FIRST TAXABLE YEAR FOR WHICH THE
    26  TAXPAYER WAS ENTITLED TO CLAIM THE CREDIT.
    27     (B)  A RESEARCH AND DEVELOPMENT TAX CREDIT APPROVED BY THE
    28  DEPARTMENT FOR PENNSYLVANIA QUALIFIED RESEARCH AND DEVELOPMENT
    29  EXPENSE IN A TAXABLE YEAR FIRST SHALL BE APPLIED AGAINST THE
    30  TAXPAYER'S QUALIFIED TAX LIABILITY FOR THE CURRENT TAXABLE YEAR
    20070H0377B3094                 - 16 -     

     1  AS OF THE DATE ON WHICH THE CREDIT WAS APPROVED BEFORE THE
     2  RESEARCH AND DEVELOPMENT TAX CREDIT IS APPLIED AGAINST ANY TAX
     3  LIABILITY UNDER SUBSECTION (A).
     4     (C)  A TAXPAYER, PURCHASER OR ASSIGNEE IS NOT ENTITLED TO
     5  CARRY BACK OR OBTAIN A REFUND OF AN UNUSED RESEARCH AND
     6  DEVELOPMENT TAX CREDIT.
     7     (D)  A TAXPAYER, UPON APPLICATION TO AND APPROVAL BY THE
     8  DEPARTMENT OF COMMUNITY AND ECONOMIC DEVELOPMENT, MAY SELL OR
     9  ASSIGN, IN WHOLE OR IN PART, A RESEARCH AND DEVELOPMENT TAX
    10  CREDIT GRANTED TO THE TAXPAYER UNDER THIS ARTICLE IF NO CLAIM
    11  FOR ALLOWANCE OF THE CREDIT IS FILED [WITHIN ONE YEAR] FROM THE
    12  DATE THE CREDIT IS APPROVED BY THE DEPARTMENT UNDER SECTION
    13  1703-B. THE DEPARTMENT OF COMMUNITY AND ECONOMIC DEVELOPMENT
    14  SHALL ESTABLISH GUIDELINES FOR THE APPROVAL OF APPLICATIONS
    15  UNDER THIS SUBSECTION.
    16     (E)  THE PURCHASER OR ASSIGNEE OF A PORTION OF A RESEARCH AND
    17  DEVELOPMENT TAX CREDIT UNDER SUBSECTION (D) SHALL IMMEDIATELY
    18  CLAIM THE CREDIT IN THE TAXABLE YEAR IN WHICH THE PURCHASE OR
    19  ASSIGNMENT IS MADE. THE AMOUNT OF THE RESEARCH AND DEVELOPMENT
    20  CREDIT THAT A PURCHASER OR ASSIGNEE MAY USE AGAINST ANY ONE
    21  QUALIFIED TAX LIABILITY MAY NOT EXCEED SEVENTY-FIVE PER CENT OF
    22  SUCH QUALIFIED TAX LIABILITY FOR THE TAXABLE YEAR. THE PURCHASER
    23  OR ASSIGNEE MAY NOT [CARRY OVER,] CARRY BACK, OBTAIN A REFUND OF
    24  OR ASSIGN THE RESEARCH AND DEVELOPMENT TAX CREDIT. THE PURCHASER
    25  OR ASSIGNEE SHALL NOTIFY THE DEPARTMENT OF THE SELLER OR
    26  ASSIGNOR OF THE RESEARCH AND DEVELOPMENT TAX CREDIT IN
    27  COMPLIANCE WITH PROCEDURES SPECIFIED BY THE DEPARTMENT.
    28     SECTION 11.  SECTION 1707-B OF THE ACT, AMENDED JULY 12, 2006
    29  (P.L.1137, NO.116), IS REPEALED:
    30     [SECTION 1707-B.  TIME LIMITATIONS.--A TAXPAYER IS NOT
    20070H0377B3094                 - 17 -     

     1  ENTITLED TO A RESEARCH AND DEVELOPMENT TAX CREDIT FOR
     2  PENNSYLVANIA QUALIFIED RESEARCH AND DEVELOPMENT EXPENSES
     3  INCURRED IN TAXABLE YEARS ENDING AFTER DECEMBER 31, 2015. THE
     4  TERMINATION DATE IN SECTION 41(H) OF THE INTERNAL REVENUE CODE
     5  OF 1986 (PUBLIC LAW 99-514, 26 U.S.C. § 41(H)) DOES NOT APPLY TO
     6  A TAXPAYER WHO IS ELIGIBLE FOR THE RESEARCH AND DEVELOPMENT TAX
     7  CREDIT UNDER THIS ARTICLE FOR THE TAXABLE YEAR IN WHICH THE
     8  PENNSYLVANIA QUALIFIED RESEARCH AND DEVELOPMENT EXPENSE IS
     9  INCURRED.]
    10     SECTION 12.  SECTION 1709-B OF THE ACT, AMENDED OR ADDED MAY
    11  7, 1997 (P.L.85, NO.7) AND JULY 12, 2006 (P.L.1137, NO.116), IS
    12  REPEALED:
    13     [SECTION 1709-B.  LIMITATION ON CREDITS.--(A)  THE TOTAL
    14  AMOUNT OF CREDITS APPROVED BY THE DEPARTMENT SHALL NOT EXCEED
    15  FORTY MILLION DOLLARS ($40,000,000) IN ANY FISCAL YEAR. OF THAT
    16  AMOUNT, EIGHT MILLION DOLLARS ($8,000,000) SHALL BE ALLOCATED
    17  EXCLUSIVELY FOR SMALL BUSINESSES. HOWEVER, IF THE TOTAL AMOUNTS
    18  ALLOCATED TO EITHER THE GROUP OF APPLICANTS EXCLUSIVE OF SMALL
    19  BUSINESSES OR THE GROUP OF SMALL BUSINESS APPLICANTS IS NOT
    20  APPROVED IN ANY FISCAL YEAR, THE UNUSED PORTION WILL BECOME
    21  AVAILABLE FOR USE BY THE OTHER GROUP OF QUALIFYING TAXPAYERS.
    22     (B)  IF THE TOTAL AMOUNT OF RESEARCH AND DEVELOPMENT TAX
    23  CREDITS APPLIED FOR BY ALL TAXPAYERS, EXCLUSIVE OF SMALL
    24  BUSINESSES, EXCEEDS THE AMOUNT ALLOCATED FOR THOSE CREDITS, THEN
    25  THE RESEARCH AND DEVELOPMENT TAX CREDIT TO BE RECEIVED BY EACH
    26  APPLICANT SHALL BE THE PRODUCT OF THE ALLOCATED AMOUNT
    27  MULTIPLIED BY THE QUOTIENT OF THE RESEARCH AND DEVELOPMENT TAX
    28  CREDIT APPLIED FOR BY THE APPLICANT DIVIDED BY THE TOTAL OF ALL
    29  RESEARCH AND DEVELOPMENT CREDITS APPLIED FOR BY ALL APPLICANTS,
    30  THE ALGEBRAIC EQUIVALENT OF WHICH IS:
    20070H0377B3094                 - 18 -     

     1         TAXPAYER'S RESEARCH AND DEVELOPMENT TAX CREDIT=AMOUNT
     2         ALLOCATED FOR THOSE CREDITS X (RESEARCH AND DEVELOPMENT
     3         TAX CREDIT APPLIED FOR BY THE APPLICANT/TOTAL OF ALL
     4         RESEARCH AND DEVELOPMENT TAX CREDITS APPLIED FOR BY ALL
     5         APPLICANTS).
     6     (C)  IF THE TOTAL AMOUNT OF RESEARCH AND DEVELOPMENT TAX
     7  CREDITS APPLIED FOR BY ALL SMALL BUSINESS TAXPAYERS EXCEEDS THE
     8  AMOUNT ALLOCATED FOR THOSE CREDITS, THEN THE RESEARCH AND
     9  DEVELOPMENT TAX CREDIT TO BE RECEIVED BY EACH SMALL BUSINESS
    10  APPLICANT SHALL BE THE PRODUCT OF THE ALLOCATED AMOUNT
    11  MULTIPLIED BY THE QUOTIENT OF THE RESEARCH AND DEVELOPMENT TAX
    12  CREDIT APPLIED FOR BY THE SMALL BUSINESS APPLICANT DIVIDED BY
    13  THE TOTAL OF ALL RESEARCH AND DEVELOPMENT CREDITS APPLIED FOR BY
    14  ALL SMALL BUSINESS APPLICANTS, THE ALGEBRAIC EQUIVALENT OF WHICH
    15  IS:
    16         TAXPAYER'S RESEARCH AND DEVELOPMENT TAX CREDIT=AMOUNT
    17         ALLOCATED FOR THOSE CREDITS X (RESEARCH AND DEVELOPMENT
    18         TAX CREDIT APPLIED FOR BY THE SMALL BUSINESS/TOTAL OF ALL
    19         RESEARCH AND DEVELOPMENT TAX CREDITS APPLIED FOR BY ALL
    20         SMALL BUSINESS APPLICANTS).]
    21     SECTION 13.  SECTION 1712-B OF THE ACT, AMENDED JULY 12, 2006
    22  (P.L.1137, NO.116), IS REPEALED:
    23     [SECTION 1712-B.  TERMINATION.--THE DEPARTMENT SHALL NOT
    24  APPROVE A RESEARCH AND DEVELOPMENT TAX CREDIT UNDER THIS ARTICLE
    25  FOR TAXABLE YEARS ENDING AFTER DECEMBER 31, 2015.]
    26     SECTION 14.  THE ACT IS AMENDED BY ADDING ARTICLES TO READ:
    27                           ARTICLE XVII-F
    28          SMALL BUSINESS HEALTH SAVINGS ACCOUNT TAX CREDIT
    29  SECTION 1701-F.  SCOPE.
    30     THIS ARTICLE RELATES TO SMALL BUSINESS HEALTH SAVINGS ACCOUNT
    20070H0377B3094                 - 19 -     

     1  TAX CREDIT.
     2  SECTION 1702-F.  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     "EMPLOYEE" OR "EMPLOYEES."  AN INDIVIDUAL OR GROUP OF
     8  INDIVIDUALS EMPLOYED BY A SMALL BUSINESS. THE TERM SHALL ALSO
     9  INCLUDE A SOLE PROPRIETOR.
    10     "HEALTH INSURANCE POLICY."  AN INDIVIDUAL OR GROUP HEALTH,
    11  SICKNESS OR ACCIDENT POLICY OR SUBSCRIBER CONTRACT OR
    12  CERTIFICATE ISSUED BY AN ENTITY SUBJECT TO ANY ONE OF THE
    13  FOLLOWING:
    14         (1)  THE ACT OF MAY 17, 1921 (P.L.682, NO.284), KNOWN AS
    15     THE INSURANCE COMPANY LAW OF 1921.
    16         (2)  THE ACT OF DECEMBER 29, 1972 (P.L.1701, NO.364),
    17     KNOWN AS THE HEALTH MAINTENANCE ORGANIZATION ACT.
    18         (3)  THE ACT OF MAY 18, 1976 (P.L.123, NO.54), KNOWN AS
    19     THE INDIVIDUAL ACCIDENT AND SICKNESS INSURANCE MINIMUM
    20     STANDARDS ACT.
    21         (4)  40 PA.C.S. CH. 61 (RELATING TO HOSPITAL PLAN
    22     CORPORATIONS) OR 63 (RELATING TO PROFESSIONAL HEALTH SERVICES
    23     PLAN CORPORATIONS).
    24     "HEALTH SAVINGS ACCOUNT."  AS DEFINED IN SECTION 223(D) OF
    25  THE INTERNAL REVENUE CODE OF 1986 (PUBLIC LAW 99-514, 26 U.S.C.
    26  § 223(D)).
    27     "PASS-THROUGH ENTITY."  ANY OF THE FOLLOWING:
    28         (1)  A PARTNERSHIP, LIMITED PARTNERSHIP, LIMITED
    29     LIABILITY COMPANY, BUSINESS TRUST OR OTHER UNINCORPORATED
    30     ENTITY THAT FOR FEDERAL INCOME TAX PURPOSES IS TAXABLE AS A
    20070H0377B3094                 - 20 -     

     1     PARTNERSHIP.
     2         (2)  A PENNSYLVANIA S CORPORATION.
     3     "QUALIFIED HIGH DEDUCTIBLE HEALTH PLAN."  A HEALTH INSURANCE
     4  POLICY THAT WOULD QUALIFY AS A HIGH DEDUCTIBLE HEALTH PLAN UNDER
     5  SECTION 223(C)(2) OF THE INTERNAL REVENUE CODE OF 1986 (PUBLIC
     6  LAW 99-514, 26 U.S.C. § 223(C)(2)).
     7     "QUALIFIED TAX LIABILITY."  THE LIABILITY FOR TAXES IMPOSED
     8  UNDER ARTICLE III, IV OR VI. THE TERM SHALL INCLUDE THE
     9  LIABILITY FOR TAXES IMPOSED UNDER ARTICLE III ON AN OWNER OF A
    10  PASS-THROUGH ENTITY.
    11     "SECRETARY."  THE SECRETARY OF REVENUE OF THE COMMONWEALTH.
    12     "SMALL BUSINESS."  AN EMPLOYER WHO, ON AT LEAST 50% OF ITS
    13  WORKING DAYS DURING THE TAXABLE YEAR, EMPLOYED FEWER THAN 100
    14  EMPLOYEES.
    15     "TAX CREDIT."  THE SMALL BUSINESS HEALTH SAVINGS ACCOUNT TAX
    16  CREDIT AUTHORIZED UNDER THIS ARTICLE.
    17     "TAXPAYER."  A SMALL BUSINESS SUBJECT TO TAX UNDER ARTICLE
    18  III, IV OR VI. THE TERM INCLUDES:
    19         (1)  THE PARTNER, SHAREHOLDER, OWNER OR MEMBER OF A PASS-
    20     THROUGH ENTITY; OR
    21         (2)  A SOLE PROPRIETOR.
    22  SECTION 1703-F.  CREDIT FOR HEALTH SAVINGS ACCOUNT
    23                     CONTRIBUTIONS.
    24     (A)  APPLICATION.--A TAXPAYER WHO PURCHASES AND PROVIDES A
    25  QUALIFIED HIGH DEDUCTIBLE HEALTH INSURANCE POLICY TO EMPLOYEES
    26  AND MAKES A CONTRIBUTION TO A HEALTH SAVINGS ACCOUNT ON BEHALF
    27  OF EMPLOYEES IN A TAXABLE YEAR MAY APPLY FOR A TAX CREDIT AS
    28  PROVIDED IN THIS ARTICLE. BY SEPTEMBER 15, A TAXPAYER MUST
    29  SUBMIT AN APPLICATION TO THE DEPARTMENT FOR THE AGGREGATE
    30  CONTRIBUTION MADE BY THE TAXPAYER TO EMPLOYEE HEALTH SAVINGS
    20070H0377B3094                 - 21 -     

     1  ACCOUNTS IN THE TAXABLE YEAR THAT ENDED IN THE PRIOR CALENDAR
     2  YEAR.
     3     (B)  COMPUTATION.--A TAXPAYER WHO QUALIFIES UNDER SUBSECTION
     4  (A) SHALL RECEIVE A TAX CREDIT FOR THE TAXABLE YEAR IN
     5  ACCORDANCE WITH THE FOLLOWING:
     6         (1)  FIFTY PERCENT OF THE AGGREGATE CONTRIBUTION MADE BY
     7     THE TAXPAYER TO EMPLOYEE HEALTH SAVINGS ACCOUNTS WHEN THE
     8     CONTRIBUTION IS PROVIDED FOR THE BENEFIT OF EMPLOYEES,
     9     SPOUSES AND DEPENDENTS FOR THE TAXABLE YEAR.
    10         (2)  TWENTY-FIVE PERCENT OF THE AGGREGATE CONTRIBUTION
    11     MADE BY THE TAXPAYER TO EMPLOYEE HEALTH SAVINGS ACCOUNTS WHEN
    12     THE CONTRIBUTION IS PROVIDED SOLELY FOR THE BENEFIT OF AN
    13     EMPLOYEE.
    14     (C)  NOTIFICATION.--BY DECEMBER 15 OF THE CALENDAR YEAR
    15  FOLLOWING THE CLOSE OF THE TAXABLE YEAR DURING WHICH THE
    16  CONTRIBUTION TO EMPLOYEE HEALTH SAVINGS ACCOUNTS WAS MADE, THE
    17  DEPARTMENT SHALL NOTIFY THE TAXPAYER OF THE AMOUNT OF THE
    18  TAXPAYER'S TAX CREDIT APPROVED BY THE DEPARTMENT.
    19  SECTION 1704-F.  LIMITATION ON CREDITS.
    20     (A)  LIMIT.--THE TOTAL AMOUNT OF CREDITS APPROVED BY THE
    21  DEPARTMENT SHALL NOT EXCEED $30,000,000 IN ANY FISCAL YEAR.
    22     (B)  CALCULATION.--IF THE TOTAL AMOUNT OF SMALL BUSINESS
    23  HEALTH SAVINGS ACCOUNT TAX CREDITS APPLIED FOR BY ALL TAXPAYERS
    24  EXCEEDS THE AMOUNT ALLOCATED FOR THOSE CREDITS, THEN THE SMALL
    25  BUSINESS HEALTH SAVINGS ACCOUNT TAX CREDIT TO BE RECEIVED BY
    26  EACH APPLICANT SHALL BE THE PRODUCT OF THE ALLOCATED AMOUNT
    27  MULTIPLIED BY THE QUOTIENT OF THE SMALL BUSINESS HEALTH SAVINGS
    28  ACCOUNT TAX CREDIT APPLIED FOR BY THE APPLICANT DIVIDED BY THE
    29  TOTAL OF ALL SMALL BUSINESS HEALTH SAVINGS ACCOUNT CREDITS
    30  APPLIED FOR BY ALL APPLICANTS, THE ALGEBRAIC EQUIVALENT OF WHICH
    20070H0377B3094                 - 22 -     

     1  IS:
     2         TAXPAYER'S SMALL BUSINESS HEALTH SAVINGS ACCOUNT TAX
     3         CREDIT=AMOUNT ALLOCATED FOR THOSE CREDITS X (SMALL
     4         BUSINESS HEALTH SAVINGS ACCOUNT TAX CREDIT APPLIED FOR BY
     5         THE APPLICANT/TOTAL OF ALL SMALL BUSINESS HEALTH SAVINGS
     6         ACCOUNT TAX CREDITS APPLIED FOR BY ALL APPLICANTS).
     7  SECTION 1705-F.  CARRYOVER, CARRYBACK, REFUND AND ASSIGNMENT OF
     8                     CREDIT.
     9     (A)  CARRYOVER.--IF THE TAXPAYER CANNOT USE THE ENTIRE AMOUNT
    10  OF THE TAX CREDIT FOR THE TAXABLE YEAR IN WHICH THE TAX CREDIT
    11  IS FIRST APPROVED, THEN THE EXCESS MAY BE CARRIED OVER TO
    12  SUCCEEDING TAXABLE YEARS AND USED AS A CREDIT AGAINST THE
    13  QUALIFIED TAX LIABILITY OF THE TAXPAYER FOR THOSE TAXABLE YEARS.
    14  EACH TIME THAT THE TAX CREDIT IS CARRIED OVER TO A SUCCEEDING
    15  TAXABLE YEAR, IT IS TO BE REDUCED BY THE AMOUNT THAT WAS USED AS
    16  A CREDIT DURING THE IMMEDIATELY PRECEDING TAXABLE YEAR. THE TAX
    17  CREDIT MAY BE CARRIED OVER AND APPLIED TO SUCCEEDING TAXABLE
    18  YEARS FOR NO MORE THAN 15 TAXABLE YEARS FOLLOWING THE FIRST
    19  TAXABLE YEAR FOR WHICH THE TAXPAYER WAS ENTITLED TO CLAIM THE
    20  CREDIT.
    21     (B)  APPLICATION OF CREDIT.--A TAX CREDIT APPROVED BY THE
    22  DEPARTMENT FOR MONETARY CONTRIBUTIONS MADE TO EMPLOYEE HEALTH
    23  SAVINGS ACCOUNTS IN A TAXABLE YEAR FIRST SHALL BE APPLIED
    24  AGAINST THE TAXPAYER'S QUALIFIED TAX LIABILITY FOR THE CURRENT
    25  TAXABLE YEAR AS OF THE DATE ON WHICH THE CREDIT WAS APPROVED
    26  BEFORE THE TAX CREDIT IS APPLIED AGAINST ANY TAX LIABILITY UNDER
    27  SUBSECTION (A).
    28     (C)  PROHIBITION.--A TAXPAYER IS NOT ENTITLED TO ASSIGN,
    29  CARRY BACK OR OBTAIN A REFUND OF AN UNUSED TAX CREDIT.
    30  SECTION 1706-F.  SHAREHOLDER, OWNER OR MEMBER PASS-THROUGH.
    20070H0377B3094                 - 23 -     

     1     (A)  SHAREHOLDER'S CALCULATION.--IF A PENNSYLVANIA S
     2  CORPORATION DOES NOT HAVE AN ELIGIBLE TAX LIABILITY AGAINST
     3  WHICH THE TAX CREDIT MAY BE APPLIED, A SHAREHOLDER OF THE
     4  PENNSYLVANIA S CORPORATION IS ENTITLED TO A TAX CREDIT EQUAL TO
     5  THE TAX CREDIT DETERMINED FOR THE PENNSYLVANIA S CORPORATION FOR
     6  THE TAXABLE YEAR MULTIPLIED BY THE PERCENTAGE OF THE
     7  PENNSYLVANIA S CORPORATION'S DISTRIBUTIVE INCOME TO WHICH THE
     8  SHAREHOLDER IS ENTITLED.
     9     (B)  OWNER OR MEMBER CALCULATION.--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 ENTITY'S DISTRIBUTIVE INCOME TO
    16  WHICH THE OWNER OR MEMBER IS ENTITLED.
    17     (C)  APPLICATION; RESTRICTIONS.--THE CREDIT PROVIDED UNDER
    18  SUBSECTION (A) OR (B) IS IN ADDITION TO ANY TAX CREDIT TO WHICH
    19  A 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  CONTRIBUTIONS MADE TO EMPLOYEE HEALTH SAVINGS ACCOUNTS.
    24  SECTION 1707-F.  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
    20070H0377B3094                 - 24 -     

     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 1708-F.  REGULATIONS.
     7     THE SECRETARY SHALL PROMULGATE REGULATIONS NECESSARY FOR THE
     8  IMPLEMENTATION AND ADMINISTRATION OF THIS ARTICLE.
     9                           ARTICLE XVII-G
    10                  NEW DIESEL TECHNOLOGY TAX CREDIT
    11  SECTION 1701-G.  SCOPE OF ARTICLE.
    12     THIS ARTICLE RELATES TO NEW DIESEL TECHNOLOGY TAX CREDITS.
    13  SECTION 1702-G.  DEFINITIONS.
    14     THE FOLLOWING WORDS AND PHRASES WHEN USED IN THIS ARTICLE
    15  SHALL HAVE THE MEANINGS GIVEN TO THEM IN THIS SECTION UNLESS THE
    16  CONTEXT CLEARLY INDICATES OTHERWISE:
    17     "DEPARTMENT."  THE DEPARTMENT OF REVENUE OF THE COMMONWEALTH.
    18     "PASS-THROUGH ENTITY."  ANY OF THE FOLLOWING:
    19         (1)  A PARTNERSHIP, LIMITED PARTNERSHIP, LIMITED
    20     LIABILITY COMPANY, BUSINESS TRUST OR OTHER UNINCORPORATED
    21     ENTITY THAT FOR FEDERAL INCOME TAX PURPOSES IS TAXABLE AS A
    22     PARTNERSHIP.
    23         (2)  A PENNSYLVANIA S CORPORATION.
    24     "QUALIFIED NEW DIESEL TECHNOLOGY EXPENSES."  THE COST
    25  INCURRED FOR THE PURCHASE OF A CLASS 8 HIGHWAY VEHICLE WITH A
    26  REGISTERED GROSS OR COMBINATION WEIGHT AS PROVIDED UNDER 75
    27  PA.C.S. § 1916 (RELATING TO TRUCKS AND TRUCK TRACTORS) AND WITH
    28  A DIESEL ENGINE IF THE VEHICLE PURCHASED HAS BEEN CERTIFIED AS
    29  COMPLIANT WITH THE EMISSIONS LIMITS CONTAINED IN 40 CFR 86.007-
    30  11 (RELATING TO EMISSION STANDARDS AND SUPPLEMENTAL REQUIREMENTS
    20070H0377B3094                 - 25 -     

     1  FOR 2007 AND LATER MODEL YEAR DIESEL HEAVY-DUTY ENGINES AND
     2  VEHICLES), EXCEPT THAT 40 CFR 86.007-15 (RELATING TO NOX AND
     3  PARTICULATE AVERAGING, TRADING, AND BANKING FOR HEAVY-DUTY
     4  ENGINES), SHALL NOT APPLY TO EXHAUST EMISSIONS ATTAINMENT LEVELS
     5  FOR PARTICULATES.
     6     "QUALIFIED TAX LIABILITY."  THE LIABILITY FOR TAXES IMPOSED
     7  UNDER ARTICLE III, IV OR VI. THE TERM SHALL INCLUDE THE
     8  LIABILITY FOR TAXES IMPOSED UNDER ARTICLE III ON AN OWNER OF A
     9  PASS-THROUGH ENTITY.
    10     "SECRETARY."  THE SECRETARY OF REVENUE OF THE COMMONWEALTH.
    11     "TAX CREDIT."  THE NEW DIESEL TECHNOLOGY TAX CREDIT
    12  AUTHORIZED UNDER THIS ARTICLE.
    13     "TAXPAYER."  AN ENTITY SUBJECT TO TAX UNDER ARTICLE III, IV
    14  OR VI. THE TERM SHALL INCLUDE THE SHAREHOLDER, OWNER OR MEMBER
    15  OF A PASS-THROUGH ENTITY THAT RECEIVES A TAX CREDIT.
    16  SECTION 1703-G.  CREDIT FOR NEW DIESEL TECHNOLOGY.
    17     (A)  APPLICATION.--A TAXPAYER WHO INCURS A QUALIFIED NEW
    18  DIESEL TECHNOLOGY EXPENSE IN A TAXABLE YEAR MAY APPLY FOR A TAX
    19  CREDIT AS PROVIDED IN THIS ARTICLE. BY SEPTEMBER 15, A TAXPAYER
    20  MUST SUBMIT AN APPLICATION TO THE DEPARTMENT FOR QUALIFIED NEW
    21  DIESEL TECHNOLOGY EXPENSES INCURRED IN THE TAXABLE YEAR THAT
    22  ENDED IN THE PRIOR CALENDAR YEAR.
    23     (B)  AMOUNT.--A TAXPAYER THAT IS QUALIFIED UNDER SUBSECTION
    24  (A) SHALL RECEIVE A TAX CREDIT FOR THE TAXABLE YEAR IN THE
    25  AMOUNT OF $5,000 PER QUALIFIED NEW DIESEL TECHNOLOGY EXPENSE.
    26     (C)  NOTIFICATION.--BY DECEMBER 15 OF THE CALENDAR YEAR
    27  FOLLOWING THE CLOSE OF THE TAXABLE YEAR DURING WHICH QUALIFIED
    28  NEW DIESEL TECHNOLOGY EXPENSE WAS INCURRED, THE DEPARTMENT SHALL
    29  NOTIFY THE TAXPAYER OF THE AMOUNT OF THE TAXPAYER'S TAX CREDIT
    30  APPROVED BY THE DEPARTMENT.
    20070H0377B3094                 - 26 -     

     1  SECTION 1704-G.  CARRYOVER, CARRYBACK, REFUND AND ASSIGNMENT OF
     2                     CREDIT.
     3     (A)  CARRYOVER.--IF THE TAXPAYER CANNOT USE THE ENTIRE AMOUNT
     4  OF THE TAX CREDIT FOR THE TAXABLE YEAR IN WHICH THE TAX CREDIT
     5  IS FIRST APPROVED, THE EXCESS MAY BE CARRIED OVER TO SUCCEEDING
     6  TAXABLE YEARS AND USED AS A CREDIT AGAINST THE QUALIFIED TAX
     7  LIABILITY OF THE TAXPAYER FOR THOSE TAXABLE YEARS. EACH TIME
     8  THAT THE TAX CREDIT IS CARRIED OVER TO A SUCCEEDING TAXABLE
     9  YEAR, IT SHALL BE REDUCED BY THE AMOUNT THAT WAS USED AS A
    10  CREDIT DURING THE IMMEDIATELY PRECEDING TAXABLE YEAR. THE TAX
    11  CREDIT MAY BE CARRIED OVER AND APPLIED TO SUCCEEDING TAXABLE
    12  YEARS FOR NO MORE THAN 15 TAXABLE YEARS FOLLOWING THE FIRST
    13  TAXABLE YEAR FOR WHICH THE TAXPAYER WAS ENTITLED TO CLAIM THE
    14  CREDIT.
    15     (B)  APPLICATION.--A TAX CREDIT APPROVED BY THE DEPARTMENT
    16  FOR QUALIFIED NEW DIESEL TECHNOLOGY EXPENSES IN A TAXABLE YEAR
    17  FIRST SHALL BE APPLIED AGAINST THE TAXPAYER'S QUALIFIED TAX
    18  LIABILITY FOR THE CURRENT TAXABLE YEAR AS OF THE DATE ON WHICH
    19  THE CREDIT WAS APPROVED BEFORE THE TAX CREDIT IS APPLIED AGAINST
    20  ANY TAX LIABILITY UNDER SUBSECTION (A).
    21     (C)  UNUSED CREDIT.--A TAXPAYER IS NOT ENTITLED TO ASSIGN,
    22  CARRY BACK OR OBTAIN A REFUND OF AN UNUSED TAX CREDIT.
    23  SECTION 1705-G.  TIME LIMITATIONS.
    24     A TAXPAYER IS NOT ENTITLED TO A TAX CREDIT FOR QUALIFIED NEW
    25  DIESEL TECHNOLOGY EXPENSES INCURRED IN TAXABLE YEARS ENDING
    26  AFTER DECEMBER 31, 2009.
    27  SECTION 1706-G.  SHAREHOLDER, OWNER OR MEMBER PASS-THROUGH.
    28     (A)  PENNSYLVANIA S CORPORATIONS.--IF A PENNSYLVANIA S
    29  CORPORATION DOES NOT HAVE AN ELIGIBLE TAX LIABILITY AGAINST
    30  WHICH THE TAX CREDIT MAY BE APPLIED, A SHAREHOLDER OF THE
    20070H0377B3094                 - 27 -     

     1  PENNSYLVANIA S CORPORATION IS ENTITLED TO A TAX CREDIT EQUAL TO
     2  THE TAX CREDIT DETERMINED FOR THE PENNSYLVANIA S CORPORATION FOR
     3  THE TAXABLE YEAR MULTIPLIED BY THE PERCENTAGE OF THE
     4  PENNSYLVANIA S CORPORATION'S DISTRIBUTIVE INCOME TO WHICH THE
     5  SHAREHOLDER IS ENTITLED UNDER THIS ARTICLE.
     6     (B)  PASS-THROUGH ENTITIES.--IF A PASS-THROUGH ENTITY OTHER
     7  THAN A PENNSYLVANIA S CORPORATION DOES NOT HAVE AN ELIGIBLE TAX
     8  LIABILITY AGAINST WHICH THE TAX CREDIT MAY BE APPLIED, AN OWNER
     9  OR MEMBER OF THE PASS-THROUGH ENTITY IS ENTITLED TO A TAX CREDIT
    10  EQUAL TO THE TAX CREDIT DETERMINED FOR THE PASS-THROUGH ENTITY
    11  FOR THE TAXABLE YEAR MULTIPLIED BY THE PERCENTAGE OF THE PASS-
    12  THROUGH ENTITY'S DISTRIBUTIVE INCOME TO WHICH THE OWNER OR
    13  MEMBER IS ENTITLED UNDER THIS ARTICLE.
    14     (C)  ADDITIONAL CREDITS.--THE CREDIT PROVIDED UNDER
    15  SUBSECTION (A) OR (B) SHALL BE IN ADDITION TO ANY TAX CREDIT TO
    16  WHICH A SHAREHOLDER, OWNER OR MEMBER OF A PASS-THROUGH ENTITY IS
    17  OTHERWISE ENTITLED UNDER THIS ARTICLE. HOWEVER, A PASS-THROUGH
    18  ENTITY AND A SHAREHOLDER, OWNER OR MEMBER OF A PASS-THROUGH
    19  ENTITY MAY NOT CLAIM A CREDIT UNDER THIS ARTICLE FOR THE SAME
    20  QUALIFIED NEW DIESEL TECHNOLOGY EXPENSE.
    21  SECTION 1707-G.  REPORT TO GENERAL ASSEMBLY.
    22     THE SECRETARY SHALL SUBMIT AN ANNUAL REPORT TO THE GENERAL
    23  ASSEMBLY INDICATING THE EFFECTIVENESS OF THE CREDIT PROVIDED BY
    24  THIS ARTICLE NO LATER THAN MARCH 15 FOLLOWING THE YEAR IN WHICH
    25  THE CREDITS WERE APPROVED. THE REPORT SHALL INCLUDE THE NAMES OF
    26  ALL TAXPAYERS UTILIZING THE CREDIT AS OF THE DATE OF THE REPORT
    27  AND THE AMOUNT OF CREDITS APPROVED AND UTILIZED BY EACH
    28  TAXPAYER. NOTWITHSTANDING ANY LAW PROVIDING FOR THE
    29  CONFIDENTIALITY OF TAX RECORDS, THE INFORMATION CONTAINED IN THE
    30  REPORT SHALL BE PUBLIC INFORMATION. THE REPORT MAY ALSO INCLUDE
    20070H0377B3094                 - 28 -     

     1  ANY RECOMMENDATIONS FOR CHANGES IN THE CALCULATION OR
     2  ADMINISTRATION OF THE CREDIT.
     3  SECTION 1708-G.  TERMINATION.
     4     THE DEPARTMENT SHALL NOT APPROVE A TAX CREDIT UNDER THIS
     5  ARTICLE FOR TAXABLE YEARS ENDING AFTER DECEMBER 31, 2009.
     6  SECTION 1709-G.  REGULATIONS.
     7     THE SECRETARY SHALL PROMULGATE REGULATIONS NECESSARY FOR THE
     8  IMPLEMENTATION AND ADMINISTRATION OF THIS ARTICLE.
     9     SECTION 15.  SECTION 2106 OF THE ACT, ADDED AUGUST 4, 1991
    10  (P.L.97, NO.22), IS AMENDED TO READ:
    11     SECTION 2106.  IMPOSITION OF TAX.--(A)  AN INHERITANCE TAX
    12  FOR THE USE OF THE COMMONWEALTH IS IMPOSED UPON EVERY TRANSFER
    13  SUBJECT TO TAX UNDER THIS ARTICLE AT THE RATES SPECIFIED IN
    14  SECTION 2116.
    15     (B)  THIS SECTION SHALL NOT APPLY TO THE ESTATES OF DECEDENTS
    16  DYING ON OR AFTER JANUARY 1, 2012.
    17     SECTION 16.  SECTION 2116(A) OF THE ACT, AMENDED MAY 24, 2000
    18  (P.L.106, NO.23), IS AMENDED TO READ:
    19     SECTION 2116.  INHERITANCE TAX.--(A)  (1)  INHERITANCE TAX
    20  UPON THE TRANSFER OF PROPERTY PASSING TO OR FOR THE USE OF [ANY
    21  OF THE FOLLOWING SHALL BE AT THE RATE OF FOUR AND ONE-HALF PER
    22  CENT:
    23     (I)  GRANDFATHER, GRANDMOTHER, FATHER, MOTHER, EXCEPT
    24  TRANSFERS UNDER SUBCLAUSE (1.2), AND LINEAL DESCENDANTS; OR
    25     (II)  WIFE OR WIDOW AND HUSBAND OR WIDOWER OF A CHILD.] A
    26  GRANDFATHER, GRANDMOTHER, FATHER, MOTHER, EXCEPT TRANSFERS UNDER
    27  SUBCLAUSE (1.2), LINEAL DESCENDANTS, WIFE OR WIDOW AND HUSBAND
    28  OR WIDOWER OF A CHILD SHALL BE AT THE RATE PROVIDED IN THE
    29  FOLLOWING SCHEDULE:
    30     (I)  FOUR AND ONE-HALF PER CENT FOR THE ESTATE OF A DECEDENT
    20070H0377B3094                 - 29 -     

     1  DYING BEFORE OR DURING CALENDAR YEAR 2009.
     2     (II)  TWO PER CENT FOR THE ESTATE OF A DECEDENT DYING DURING
     3  CALENDAR YEAR 2010.
     4     (III)  ZERO PER CENT FOR THE ESTATE OF A DECEDENT DYING
     5  DURING OR AFTER CALENDAR YEAR 2011.
     6     (1.1)  INHERITANCE TAX UPON THE TRANSFER OF PROPERTY PASSING
     7  TO OR FOR THE USE OF A HUSBAND OR WIFE SHALL BE:
     8     (I)  AT THE RATE OF THREE PER CENT FOR ESTATES OF DECEDENTS
     9  DYING ON OR AFTER JULY 1, 1994, AND BEFORE JANUARY 1, 1995.
    10     (II)  AT A RATE OF ZERO PER CENT FOR ESTATES OF DECEDENTS
    11  DYING ON OR AFTER JANUARY 1, 1995.
    12     (1.2)  INHERITANCE TAX UPON THE TRANSFER OF PROPERTY FROM A
    13  CHILD TWENTY-ONE YEARS OF AGE OR YOUNGER TO OR FOR THE USE OF A
    14  NATURAL PARENT, AN ADOPTIVE PARENT OR A STEPPARENT OF THE CHILD
    15  SHALL BE AT THE RATE OF ZERO PER CENT.
    16     (1.3)  INHERITANCE TAX UPON THE TRANSFER OF PROPERTY PASSING
    17  TO OR FOR THE USE OF A SIBLING SHALL BE AT THE RATE [OF TWELVE
    18  PER CENT.] PROVIDED IN THE FOLLOWING SCHEDULE:
    19     (I)  TWELVE PER CENT FOR THE ESTATE OF A DECEDENT DYING
    20  BEFORE OR DURING CALENDAR YEAR 2007.
    21     (II)  NINE PER CENT FOR THE ESTATE OF A DECEDENT DYING DURING
    22  CALENDAR YEAR 2008.
    23     (III)  SIX PER CENT FOR THE ESTATE OF A DECEDENT DYING DURING
    24  CALENDAR YEAR 2009.
    25     (IV)  FOUR AND ONE-HALF PER CENT FOR THE ESTATE OF A DECEDENT
    26  DYING DURING CALENDAR YEAR 2010.
    27     (V)  TWO PER CENT FOR THE ESTATE OF A DECEDENT DYING DURING
    28  CALENDAR YEAR 2011.
    29     (VI)  ZERO PER CENT FOR THE ESTATE OF A DECEDENT DYING DURING
    30  OR AFTER CALENDAR YEAR 2012.
    20070H0377B3094                 - 30 -     

     1     (1.4)  INHERITANCE TAX UPON THE TRANSFER OF PROPERTY THAT IS
     2  JOINTLY HELD BETWEEN A CHILD AND A NATURAL PARENT, AN ADOPTIVE
     3  PARENT OR A STEPPARENT OF THE CHILD TO THE NATURAL PARENT,
     4  ADOPTIVE PARENT OR THE STEPPARENT SHALL BE AT THE RATE OF ZERO
     5  PER CENT.
     6     (2)  INHERITANCE TAX UPON THE TRANSFER OF PROPERTY PASSING TO
     7  OR FOR THE USE OF ALL PERSONS OTHER THAN THOSE DESIGNATED IN
     8  SUBCLAUSE (1), (1.1), (1.2) OR (1.3) OR EXEMPT UNDER SECTION
     9  2111(M) SHALL BE AT THE RATE [OF FIFTEEN PER CENT.] PROVIDED IN
    10  THE FOLLOWING SCHEDULE:
    11     (I)  FIFTEEN PER CENT FOR THE ESTATE OF A DECEDENT DYING
    12  BEFORE OR DURING CALENDAR YEAR 2007.
    13     (II)  TEN PER CENT FOR THE ESTATE OF A DECEDENT DYING DURING
    14  CALENDAR YEAR 2008.
    15     (III)  SEVEN PER CENT FOR THE ESTATE OF A DECEDENT DYING
    16  DURING CALENDAR YEAR 2009.
    17     (IV)  FOUR AND ONE-HALF PER CENT FOR THE ESTATE OF A DECEDENT
    18  DYING DURING CALENDAR YEAR 2010.
    19     (V)  TWO PER CENT FOR THE ESTATE OF A DECEDENT DYING DURING
    20  CALENDAR YEAR 2011.
    21     (VI)  ZERO PER CENT FOR THE ESTATE OF A DECEDENT DYING DURING
    22  OR AFTER CALENDAR YEAR 2012.
    23     (3)  WHEN PROPERTY PASSES TO OR FOR THE USE OF A HUSBAND AND
    24  WIFE WITH RIGHT OF SURVIVORSHIP, ONE OF WHOM IS TAXABLE AT A
    25  RATE LOWER THAN THE OTHER, THE LOWER RATE OF TAX SHALL BE
    26  APPLIED TO THE ENTIRE INTEREST.
    27     * * *
    28     SECTION 17.  SECTION 2117 OF THE ACT IS AMENDED BY ADDING A
    29  SUBSECTION TO READ:
    30     SECTION 2117.  ESTATE TAX.--* * *
    20070H0377B3094                 - 31 -     

     1     (D)  THIS SECTION SHALL NOT APPLY TO THE ESTATES OF DECEDENTS
     2  DYING ON OR AFTER JANUARY 1, 2012.
     3     SECTION 18.  REPEALS ARE AS FOLLOWS:
     4         (1)  THE GENERAL ASSEMBLY DECLARES THAT THE REPEAL UNDER
     5     PARAGRAPH (2) IS NECESSARY TO EFFECTUATE THE PURPOSES OF THIS
     6     ACT.
     7         (2)  SECTION 33(12) OF THE ACT OF DECEMBER 23, 2003
     8     (P.L.250, NO.46), ENTITLED "AN ACT AMENDING THE ACT OF MARCH
     9     4, 1971 (P.L.6, NO.2), ENTITLED 'AN ACT RELATING TO TAX
    10     REFORM AND STATE TAXATION BY CODIFYING AND ENUMERATING
    11     CERTAIN SUBJECTS OF TAXATION AND IMPOSING TAXES THEREON;
    12     PROVIDING PROCEDURES FOR THE PAYMENT, COLLECTION,
    13     ADMINISTRATION AND ENFORCEMENT THEREOF; PROVIDING FOR TAX
    14     CREDITS IN CERTAIN CASES; CONFERRING POWERS AND IMPOSING
    15     DUTIES UPON THE DEPARTMENT OF REVENUE, CERTAIN EMPLOYERS,
    16     FIDUCIARIES, INDIVIDUALS, PERSONS, CORPORATIONS AND OTHER
    17     ENTITIES; PRESCRIBING CRIMES, OFFENSES AND PENALTIES,'
    18     FURTHER PROVIDING, IN SALES AND USE TAX, FOR DEFINITIONS, FOR
    19     EXCLUSIONS, FOR CREDITS, FOR LICENSES AND FOR TRANSFERS TO
    20     PUBLIC TRANSPORTATION ASSISTANCE FUND; FURTHER PROVIDING, IN
    21     PERSONAL INCOME TAX, FOR DEFINITIONS, FOR IMPOSITION, FOR
    22     SPECIAL TAX PROVISIONS FOR POVERTY, FOR RETURNS AND LIABILITY
    23     AND FOR RETURNS AND RECORDS; FURTHER PROVIDING, IN CORPORATE
    24     NET INCOME TAX, FOR DEFINITIONS AND FOR INTERESTS IN
    25     UNINCORPORATED ENTITIES; PROVIDING, IN CORPORATE NET INCOME
    26     TAX, FOR ADDITIONAL WITHHOLDING REQUIREMENTS; FURTHER
    27     PROVIDING, IN CAPITAL STOCK FRANCHISE TAX, FOR DEFINITIONS
    28     AND REPORTS, FOR IMPOSITION AND FOR EXPIRATION; FURTHER
    29     PROVIDING, IN UTILITIES GROSS RECEIPTS TAX, FOR IMPOSITION;
    30     FURTHER PROVIDING, IN PUBLIC UTILITY REALTY TAX, FOR
    20070H0377B3094                 - 32 -     

     1     SURCHARGES; PROVIDING, IN PUBLIC UTILITY REALTY TAX, FOR
     2     ADDITIONAL TAX; FURTHER PROVIDING, IN CIGARETTE TAX, FOR
     3     INCIDENCE AND RATE OF TAX, FOR FLOOR TAX, FOR STAMP TO
     4     EVIDENCE THE TAX AND FOR COMMISSIONS ON SALES; ESTABLISHING,
     5     IN RELATION TO CIGARETTE TAX, THE HEALTH CARE PROVIDER
     6     RETENTION ACCOUNT; FURTHER PROVIDING, IN RESEARCH AND
     7     DEVELOPMENT TAX CREDIT, FOR CARRYOVER, FOR LIMITATIONS AND
     8     FOR REPORTS; FURTHER PROVIDING, IN MALT BEVERAGE TAX, FOR
     9     LIMITED TAX CREDITS; FURTHER PROVIDING, IN INHERITANCE TAX,
    10     FOR DEFINITIONS, FOR EXEMPT TRANSFERS, FOR ESTATE TAX AND FOR
    11     ESTATE TAX RETURNS; FURTHER PROVIDING FOR THE PUBLIC
    12     TRANSPORTATION ASSISTANCE FUND AND PROVIDING FOR ITS
    13     ADMINISTRATION; FURTHER PROVIDING FOR ESTIMATED TAX AND FOR
    14     UNDERPAYMENT OF ESTIMATED TAX; PROVIDING FOR AUTHORITY TO
    15     ATTACH WAGES; AND REPEALING PROVISIONS RELATING TO THE PUBLIC
    16     TRANSPORTATION ASSISTANCE FUND," IS REPEALED.
    17     SECTION 19.  THE FOLLOWING PROVISIONS SHALL APPLY TO TAXABLE
    18  YEARS BEGINNING AFTER DECEMBER 31, 2007:
    19         (1)  THE AMENDMENT OF 316 OF THE ACT.
    20         (2)  THE AMENDMENT OF SECTION 401(3)4(C) OF THE ACT.
    21         (3)  THE AMENDMENT OF SECTION 601(A) OF THE ACT.
    22         (4)  THE AMENDMENT OF SECTION 1704-B OF THE ACT.
    23         (5)  THE ADDITION OF ARTICLE XVII-F OF THE ACT.
    24     SECTION 20.  THIS ACT SHALL TAKE EFFECT AS FOLLOWS:
    25         (1)  THE FOLLOWING PROVISIONS SHALL TAKE EFFECT JULY 1,
    26     2008:
    27             (I)  THE AMENDMENT OF SECTION 201(M) OF THE ACT.
    28             (II)  THE AMENDMENT OR ADDITION OF SECTION 204(10),
    29         (67) AND (68) OF THE ACT.
    30             (III)  THE ADDITION OF SECTION 304.1 OF THE ACT.
    20070H0377B3094                 - 33 -     

     1             (IV)  THE AMENDMENT OF SECTION 1101(A), (A.1) AND (J)
     2         OF THE ACT.
     3             (V)  THE REPEAL OF SECTION 1707-B OF THE ACT.
     4             (VI)  THE REPEAL OF SECTION 1709-B OF THE ACT.
     5             (VII)  THE REPEAL OF SECTION 1712-B OF THE ACT.
     6             (V)  THE ADDITION OF ARTICLE XVII-F OF THE ACT.
     7             (VI)  THE ADDITION OF ARTICLE XVII-G OF THE ACT.
     8             (VII)  SECTION 18 OF THIS ACT.
     9         (2)  THE FOLLOWING PROVISIONS SHALL TAKE EFFECT JULY 1,
    10     2008, OR IMMEDIATELY, WHICHEVER IS LATER:
    11             (I)  THE AMENDMENT OF SECTION 302 OF THE ACT.
    12             (II)  THE AMENDMENT OF SECTION 316 OF THE ACT.
    13             (III)  THE AMENDMENT OF SECTION 401(3)2(A)(9) OF THE
    14         ACT.
    15             (IV)  THE AMENDMENT OF SECTION 402(B) OF THE ACT.
    16         (3)  THE REMAINDER OF THIS ACT SHALL TAKE EFFECT
    17     IMMEDIATELY.









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