SENATE AMENDED PRIOR PRINTER'S NOS. 441, 2809, 2849, PRINTER'S NO. 4086 3094
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
SENATOR BROWNE, FINANCE, IN SENATE, AS AMENDED, JUNE 26, 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. IN PERSONAL INCOME <-- 26 TAX, FURTHER PROVIDING FOR CLASSES OF INCOME AND FOR SPECIAL 27 TAX PROVISIONS FOR POVERTY; AND, IN CORPORATE NET INCOME TAX, 28 FURTHER PROVIDING FOR THE DEFINITION OF "TAXABLE INCOME." 29 The General Assembly of the Commonwealth of Pennsylvania
1 hereby enacts as follows: 2 Section 1. Section 201(m) of the act of March 4, 1971 <-- 3 (P.L.6, No.2), known as the Tax Reform Code of 1971, amended May 4 24, 2000 (P.L.106, No.23), is amended to read: 5 Section 201. Definitions.--The following words, terms and 6 phrases when used in this Article II shall have the meaning 7 ascribed to them in this section, except where the context 8 clearly indicates a different meaning: 9 * * * 10 (m) "Tangible personal property." 11 (1) Corporeal personal property including, but not limited 12 to, goods, wares, merchandise, steam and natural and 13 manufactured and bottled gas for non-residential use, 14 electricity for non-residential use, prepaid telecommunications, 15 premium cable or premium video programming service, spirituous 16 or vinous liquor and malt or brewed beverages and soft drinks, 17 interstate telecommunications service originating or terminating 18 in the Commonwealth and charged to a service address in this 19 Commonwealth, intrastate telecommunications service with the 20 exception of (i) subscriber line charges and basic local 21 telephone service for residential use and (ii) charges for 22 telephone calls paid for by inserting money into a telephone 23 accepting direct deposits of money to operate, provided further, 24 the service address of any intrastate telecommunications service 25 is deemed to be within this Commonwealth or within a political 26 subdivision, regardless of how or where billed or paid. In the 27 case of any such interstate or intrastate telecommunications 28 service, any charge paid through a credit or payment mechanism 29 which does not relate to a service address, such as a bank, 30 travel, credit or debit card, but not including prepaid 20070H0377B4086 - 2 -
1 telecommunications, is deemed attributable to the address of 2 origination of the telecommunications service. The term shall 3 not include computer software, other than prewritten computer 4 software delivered to the purchaser by tangible storage media. 5 (2) For the purposes of this clause, the following words and 6 phrases shall have the meanings given to them in this subclause: 7 "Computer software." A set of coded instructions designed to 8 cause a computer or automatic data processing equipment to 9 perform a task. 10 "Prewritten computer software." The term shall have the same 11 meaning as "computer software," including prewritten upgrades, 12 which is not designed and developed by the author or other 13 creator to the specifications of a specific purchaser. The 14 combining of two or more prewritten computer software programs 15 or prewritten portions of the program does not cause the 16 combination to be other than prewritten computer software. The 17 term includes software designed and developed by the author or 18 other creator to the specifications of a specific purchaser when 19 it is sold to a person other than the specific purchaser. Where 20 a person modifies or enhances computer software of which the 21 person is not the author or creator, the person shall be deemed 22 to be the author or creator only of the person's modifications 23 or enhancements. Prewritten computer software or a prewritten 24 portion of prewritten computer software that is modified or 25 enhanced to any degree, where the modification or enhancement is 26 designed and developed to the specifications of a specific 27 purchaser, remains prewritten computer software except that 28 where there is a reasonable, separately stated charge, invoice 29 or other statement of the price given to the purchaser for the 30 modification or enhancement, the modification or enhancement 20070H0377B4086 - 3 -
1 shall not constitute prewritten computer software. 2 * * * 3 Section 2. Section 204(10) of the act, amended April 23, 4 1998 (P.L.239, No.45), is amended and the section is amended by 5 adding clauses to read: 6 Section 204. Exclusions from Tax.--The tax imposed by 7 section 202 shall not be imposed upon any of the following: 8 * * * 9 (10) The sale at retail to or use by (i) any charitable 10 organization, volunteer firemen's organization or nonprofit 11 educational institution, or (ii) a religious organization for 12 religious purposes of tangible personal property or services 13 other than pursuant to a construction contract: Provided, 14 however, That the exclusion of this clause shall not apply with 15 respect to any tangible personal property or services used in 16 any unrelated trade or business carried on by such organization 17 or institution or with respect to any materials, supplies and 18 equipment used and transferred to such organization or 19 institution in the construction, reconstruction, remodeling, 20 renovation, repairs and maintenance of any real estate 21 structure, other than building machinery and equipment, except 22 materials and supplies when purchased by such organizations or 23 institutions for routine maintenance and repairs[.], unless the 24 organization or institution is a charitable organization in the 25 trade or business of construction, reconstruction, remodeling or 26 renovation of any real estate structure. 27 * * * 28 (67) Fees charged by nonprofit humane organizations to 29 transfer custody and possession of animals that are used as 30 household pets. 20070H0377B4086 - 4 -
1 (68) The sale at retail or use of building materials and 2 supplies used for the construction or repair of animal 3 production buildings regardless if the sale is made to the 4 purchaser directly or pursuant to a construction contract. 5 Section 3. Section 302 of the act, amended December 23, 2003 6 (P.L.250, No.46), is amended to read: 7 Section 302. Imposition of Tax.--(a) Every resident 8 individual, estate or trust shall be subject to, and shall pay 9 for the privilege of receiving each of the classes of income 10 hereinafter enumerated in section 303, a tax upon each dollar of 11 income received by that resident during that resident's taxable 12 year at the [rate of three and seven hundredths per cent.] 13 following rates: 14 (1) Three and seven hundredths per cent for the first half 15 of the taxable year commencing with or within calendar year 16 2008. 17 (2) Two and ninety-three hundredths per cent for the second 18 half of the taxable year commencing with or within calendar year 19 2008. 20 (3) Two and eight-tenths per cent for the taxable year 21 commencing with or within calendar year 2009 and each taxable 22 year thereafter. 23 (b) Every nonresident individual, estate or trust shall be 24 subject to, and shall pay for the privilege of receiving each of 25 the classes of income hereinafter enumerated in section 303 from 26 sources within this Commonwealth, a tax upon each dollar of 27 income received by that nonresident during that nonresident's 28 taxable year at the [rate of three and seven hundredths per 29 cent.] following rates: 30 (1) Three and seven hundredths per cent for the first half 20070H0377B4086 - 5 -
1 of the taxable year commencing with or within calendar year 2 2008. 3 (2) Two and ninety-three hundredths per cent for the second 4 half of the taxable year commencing with or within calendar year 5 2008. 6 (3) Two and eight-tenths per cent for the taxable year 7 commencing with or within calendar year 2009 and each taxable 8 year thereafter. 9 Section 4. The act is amended by adding a section to read: 10 Section 304.1. Alternative Special Tax Provision for 11 Poverty.--(a) Pursuant to section 2(b)(ii) of Article VIII of 12 the Constitution of the Commonwealth of Pennsylvania, which 13 provides for establishing as a class or classes of subjects of 14 taxation the property or privileges of persons who, because of 15 poverty, are determined to be in need of special tax provisions, 16 the General Assembly hereby declares its intent and purpose to 17 exercise its power pursuant to that section by enacting the 18 alternative tax provisions of this section. 19 (b) Having determined that there are certain persons in this 20 Commonwealth whose incomes are such that imposition of an income 21 tax would deprive them and their dependents of bare necessities 22 of life, and having determined that poverty is a relative 23 concept inextricably joined with actual income and the number of 24 people dependent upon such income, the General Assembly deems it 25 to be a matter of public policy to provide special tax 26 provisions for that class of persons to relieve their economic 27 burden. 28 (c) For the taxable year beginning after December 31, 2007, 29 an individual having one or more dependents may, in lieu of 30 utilizing the special tax provisions for poverty in section 304, 20070H0377B4086 - 6 -
1 claim a refund equal to fifteen per cent of the earned income 2 credit allowable under section 32 of the Internal Revenue Code 3 of 1986 (Public Law 99-514, 26 U.S.C. § 32), as amended. 4 (d) For taxable years beginning after December 31, 2008, an 5 individual having one or more dependents may, in lieu of 6 utilizing the special tax provisions for poverty in section 304, 7 claim a refund equal to thirty per cent of the earned income 8 credit allowable under section 32 of the Internal Revenue Code 9 of 1986, as amended. 10 Section 5. Section 316 of the act, added August 31, 1971 11 (P.L.362, No.93), is amended to read: 12 Section 316. Requirement of Withholding Tax.--[Every] (a) 13 Except as provided under subsection (b), every employer 14 maintaining an office or transacting business within this 15 Commonwealth and making payment of compensation [(i)] (1) to a 16 resident individual, or [(ii)] (2) to a nonresident individual 17 taxpayer performing services on behalf of such employer within 18 this Commonwealth, shall deduct and withhold from such 19 compensation for each payroll period a tax computed in such 20 manner as to result, so far as practicable, in withholding from 21 the employe's compensation during each calendar year an amount 22 substantially equivalent to the tax reasonably estimated to be 23 due for such year with respect to such compensation. The method 24 of determining the amount to be withheld shall be prescribed by 25 regulations of the department. 26 (b) Subsection (a) shall not apply to the withholding of tax 27 from compensation of any resident or nonresident individual 28 serving in the armed forces of the United States in an area 29 designated by the President of the United States by Executive 30 Order as a combat zone as described under section 7508 of the 20070H0377B4086 - 7 -
1 Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. § 2 7508), as amended, at any time during the period designated by 3 the President by Executive Order as the period of combatant 4 activities in the combat zone or hospitalized as a result of 5 injury received while serving in the combat zone during such 6 time. 7 Section 6. Section 401(3)2(a)(9) and 4(c) of the act, 8 amended July 12, 2006 (P.L.1137, No.116), are amended to read: 9 Section 401. Definitions.--The following words, terms, and 10 phrases, when used in this article, shall have the meaning 11 ascribed to them in this section, except where the context 12 clearly indicates a different meaning: 13 * * * 14 (3) "Taxable income." * * * 15 2. In case the entire business of any corporation, other 16 than a corporation engaged in doing business as a regulated 17 investment company as defined by the Internal Revenue Code of 18 1986, is not transacted within this Commonwealth, the tax 19 imposed by this article shall be based upon such portion of the 20 taxable income of such corporation for the fiscal or calendar 21 year, as defined in subclause 1 hereof, and may be determined as 22 follows: 23 (a) Division of Income. 24 * * * 25 (9) (A) Except as provided in subparagraph (B): 26 (i) For taxable years beginning before January 1, 2007, all 27 business income shall be apportioned to this State by 28 multiplying the income by a fraction, the numerator of which is 29 the property factor plus the payroll factor plus three times the 30 sales factor and the denominator of which is five. 20070H0377B4086 - 8 -
1 (ii) For taxable years beginning after December 31, 2006, 2 and ending before January 1, 2008, all business income shall be 3 apportioned to this State by multiplying the income by a 4 fraction, the numerator of which is the sum of fifteen times the 5 property factor, fifteen times the payroll factor and seventy 6 times the sales factor and the denominator of which is one 7 hundred. 8 (iii) For taxable years beginning after December 31, 2007, 9 all business income shall be apportioned to this State by 10 multiplying the income by the sales factor. 11 (B) For purposes of apportionment of the capital stock - 12 franchise tax as provided in section 602 of Article VI of this 13 act, the apportionment fraction shall be the property factor 14 plus the payroll factor plus the sales factor as the numerator, 15 and the denominator shall be three. 16 * * * 17 4. * * * 18 (c) (1) The net loss deduction shall be the lesser of: 19 (A) (I) For taxable years beginning before January 1, 2007, 20 two million dollars ($2,000,000); 21 (II) For taxable years beginning after December 31, 2006, 22 and before January 1, 2008, the greater of twelve and one-half 23 per cent of taxable income as determined under subclause 1 or, 24 if applicable, subclause 2 or three million dollars 25 ($3,000,000); [or] 26 (III) For taxable years beginning after December 31, 2007, 27 one hundred per cent of taxable income as determined under 28 subclause 1 or, if applicable, subclause 2; or 29 (B) The amount of the net loss or losses which may be 30 carried over to the taxable year or taxable income as determined 20070H0377B4086 - 9 -
1 under subclause 1 or, if applicable, subclause 2. 2 [(1.1) In no event shall the net loss deduction include more 3 than five hundred thousand dollars ($500,000), in the aggregate, 4 of net losses from taxable years 1988 through 1994.] 5 (2) (A) A net loss for a taxable year may only be carried 6 over pursuant to the following schedule: 7 Taxable Year Carryover 8 1981 1 taxable year 9 1982 2 taxable years 10 1983-1987 3 taxable years 11 1988 2 taxable years plus 12 1 taxable year 13 starting with the 14 1995 taxable year 15 1989 1 taxable year plus 16 2 taxable years 17 starting with the 18 1995 taxable year 19 1990-1993 3 taxable years 20 starting with the 21 1995 taxable year 22 1994 1 taxable year 23 1995-1997 10 taxable years 24 1998 and thereafter 20 taxable years 25 (B) The earliest net loss shall be carried over to the 26 earliest taxable year to which it may be carried under this 27 schedule. The total net loss deduction allowed in any taxable 28 year shall not exceed: 29 (I) Two million dollars ($2,000,000) for taxable years 30 beginning before January 1, 2007. 20070H0377B4086 - 10 -
1 (II) The greater of twelve and one-half per cent of the 2 taxable income as determined under subclause 1 or, if 3 applicable, subclause 2 or three million dollars ($3,000,000) 4 for taxable years beginning after December 31, 2006[.], and 5 before January 1, 2008. 6 (III) One hundred per cent of taxable income as determined 7 under subclause 1 or, if applicable, subclause 2 for taxable 8 years beginning after December 31, 2007. 9 * * * 10 Section 7. Section 402(b) of the act, amended June 29, 2002 11 (P.L.559, No.89), is amended to read: 12 Section 402. Imposition of Tax.--* * * 13 (b) The annual rate of tax on corporate net income imposed 14 by subsection (a) for taxable years beginning for the calendar 15 year or fiscal year on or after the dates set forth shall be as 16 follows: 17 Taxable Year Tax Rate 18 January 1, 1995, [and 19 each taxable 20 year thereafter] 21 through taxable 22 years beginning 23 on or before 24 December 31, 2008 9.99% 25 January 1, 2009, and 26 each taxable 27 year through 28 December 31, 2009 7.90% 29 January 1, 2010, and 30 each taxable 20070H0377B4086 - 11 -
1 year through 2 December 31, 2010 7.70% 3 January 1, 2011, and 4 each taxable 5 year through 6 December 31, 2011 7.50% 7 January 1, 2012, and 8 each taxable 9 year through 10 December 31, 2012 7.30% 11 January 1, 2013, and 12 each taxable 13 year through 14 December 31, 2013 7.10% 15 January 1, 2014, and 16 each taxable 17 year thereafter 6.90% 18 * * * 19 Section 8. The definition of "capital stock value" in 20 section 601(a) of the act, amended July 6, 2006 (P.L.319, 21 No.67), is amended to read: 22 Section 601. Definitions and Reports.--(a) The following 23 words, terms and phrases when used in this Article VI shall have 24 the meaning ascribed to them in this section, except where the 25 context clearly indicates a different meaning: 26 * * * 27 "Capital stock value." The amount computed pursuant to the 28 following formula: the product of one-half times the sum of the 29 average net income capitalized at the rate of nine and one-half 30 per cent plus seventy-five per cent of net worth, from which 20070H0377B4086 - 12 -
1 product shall be subtracted [one hundred fifty thousand dollars 2 ($150,000)] three hundred thousand dollars ($300,000), the 3 algebraic equivalent of which is 4 (.5 X (average net income/.095 + (.75) 5 (net worth))) - [$150,000] $300,000 6 * * * 7 Section 9. Section 1101(a), (a.1) and (j) of the act, 8 amended or added December 23, 2003 (P.L.250, No.46), are amended 9 to read: 10 Section 1101. Imposition of Tax.--(a) General Rule.--Every 11 pipeline company, conduit company, steamboat company, canal 12 company, slack water navigation company, transportation company, 13 and every other company, association, joint-stock association, 14 or limited partnership, now or hereafter incorporated or 15 organized by or under any law of this Commonwealth, or now or 16 hereafter organized or incorporated by any other state or by the 17 United States or any foreign government, and doing business in 18 this Commonwealth, and every copartnership, person or persons 19 owning, operating or leasing to or from another corporation, 20 company, association, joint-stock association, limited 21 partnership, copartnership, person or persons, any pipeline, 22 conduit, steamboat, canal, slack water navigation, or other 23 device for the transportation of freight, passengers, baggage, 24 or oil, except motor vehicles and railroads, and every limited 25 partnership, association, joint-stock association, corporation 26 or company engaged in, or hereafter engaged in, the 27 transportation of freight or oil within this State, and every 28 telephone company , telegraph company or provider of mobile 29 telecommunications services now or hereafter incorporated or 30 organized by or under any law of this Commonwealth, or now or 20070H0377B4086 - 13 -
1 hereafter organized or incorporated by any other state or by the 2 United States or any foreign government and doing business in 3 this Commonwealth, and every limited partnership, association, 4 joint-stock association, copartnership, person or persons, 5 engaged in telephone or telegraph business or providing mobile 6 telecommunications services in this Commonwealth, shall pay to 7 the State Treasurer, through the Department of Revenue, a tax of 8 forty-five mills with a surtax equal to five mills upon each 9 dollar of the gross receipts of the corporation, company or 10 association, limited partnership, joint-stock association, 11 copartnership, person or persons, received from: 12 (1) passengers, baggage, oil and freight transported wholly 13 within this State; 14 (2) telegraph or telephone messages transmitted wholly 15 within this State and telegraph or telephone messages 16 transmitted in interstate commerce after December 31, 2003, and 17 before January 1, 2008, where such messages originate or 18 terminate in this State and the charges for such messages are 19 billed to a service address in this State, except gross receipts 20 derived from: 21 (i) the sales of access to the Internet, as set forth in 22 Article II, made to the ultimate consumer; and 23 (ii) the sales for resale to persons, partnerships, 24 associations, corporations or political subdivisions subject to 25 the tax imposed by this article upon gross receipts derived from 26 such resale of telecommunications services, including: 27 (A) telecommunications exchange access to interconnect with 28 a local exchange carrier's network; 29 (B) network elements on an unbundled basis; and 30 (C) sales of telecommunications services to interconnect 20070H0377B4086 - 14 -
1 with providers of mobile telecommunications services; and 2 (3) mobile telecommunications services messages sourced to 3 this Commonwealth after December 31, 2003, and before January 1, 4 2008, based on the place of primary use standard set forth in 5 the Mobile Telecommunications Sourcing Act (4 U.S.C. § 117), 6 except gross receipts derived from: 7 (i) the sales of access to the Internet, as set forth in 8 Article II, made to the ultimate consumer; and 9 (ii) the sales for resale to persons, partnerships, 10 associations, corporations or political subdivisions subject to 11 the tax imposed by this article upon gross receipts derived from 12 such resale of mobile telecommunications services, including 13 sales of mobile telecommunications services to interconnect with 14 providers of telecommunications services. 15 (a.1) Credit.--Telegraph or telephone companies or providers 16 of mobile telecommunications services that pay a gross receipts 17 tax to another state on messages or services after December 31, 18 2003, and before January 1, 2008, which are taxable under this 19 article are entitled to a credit against the tax due under this 20 article. The credit allowed with respect to the messages or 21 services shall not exceed the tax under this article with 22 respect to the messages or services. 23 * * * 24 (j) Schedule for Estimated Payments.-- 25 (1) For calendar year 2004, the following schedule applies 26 to the payment of the tax under subsection(a)(3): 27 (i) Forty per cent of the estimated tax shall be due on 28 March 15, 2004. 29 (ii) Forty per cent of the estimated tax shall be due on 30 June 15, 2004. 20070H0377B4086 - 15 -
1 (iii) Twenty per cent of the estimated tax shall be due on 2 September 15, 2004. 3 (2) For calendar [years after 2004] year 2007, the payment 4 of the estimated tax under subsection (a)(3) shall be due in 5 accordance with section 3003.2. 6 (3) This subsection shall expire January 1, 2008. 7 * * * 8 Section 10. Section 1704-B of the act, amended December 23, 9 2003 (P.L.250, No.46), is amended to read: 10 Section 1704-B. Carryover, Carryback, Refund and Assignment 11 of Credit.--(a) If the taxpayer, purchaser or assignee cannot 12 use the entire amount of the research and development tax credit 13 for the taxable year in which the research and development tax 14 credit is first approved, purchased or assigned, then the excess 15 may be carried over to succeeding taxable years and used as a 16 credit against the qualified tax liability of the taxpayer for 17 those taxable years. Each time that the research and development 18 tax credit is carried over to a succeeding taxable year, it is 19 to be reduced by the amount that was used as a credit during the 20 immediately preceding taxable year. The research and development 21 tax credit provided by this article may be carried over and 22 applied to succeeding taxable years for no more than fifteen 23 taxable years following the first taxable year for which the 24 taxpayer was entitled to claim the credit. 25 (b) A research and development tax credit approved by the 26 department for Pennsylvania qualified research and development 27 expense in a taxable year first shall be applied against the 28 taxpayer's qualified tax liability for the current taxable year 29 as of the date on which the credit was approved before the 30 research and development tax credit is applied against any tax 20070H0377B4086 - 16 -
1 liability under subsection (a). 2 (c) A taxpayer, purchaser or assignee is not entitled to 3 carry back or obtain a refund of an unused research and 4 development tax credit. 5 (d) A taxpayer, upon application to and approval by the 6 Department of Community and Economic Development, may sell or 7 assign, in whole or in part, a research and development tax 8 credit granted to the taxpayer under this article if no claim 9 for allowance of the credit is filed [within one year] from the 10 date the credit is approved by the department under section 11 1703-B. The Department of Community and Economic Development 12 shall establish guidelines for the approval of applications 13 under this subsection. 14 (e) The purchaser or assignee of a portion of a research and 15 development tax credit under subsection (d) shall immediately 16 claim the credit in the taxable year in which the purchase or 17 assignment is made. The amount of the research and development 18 credit that a purchaser or assignee may use against any one 19 qualified tax liability may not exceed seventy-five per cent of 20 such qualified tax liability for the taxable year. The purchaser 21 or assignee may not [carry over,] carry back, obtain a refund of 22 or assign the research and development tax credit. The purchaser 23 or assignee shall notify the department of the seller or 24 assignor of the research and development tax credit in 25 compliance with procedures specified by the department. 26 Section 11. Section 1707-B of the act, amended July 12, 2006 27 (P.L.1137, No.116), is repealed: 28 [Section 1707-B. Time Limitations.--A taxpayer is not 29 entitled to a research and development tax credit for 30 Pennsylvania qualified research and development expenses 20070H0377B4086 - 17 -
1 incurred in taxable years ending after December 31, 2015. The 2 termination date in section 41(h) of the Internal Revenue Code 3 of 1986 (Public Law 99-514, 26 U.S.C. § 41(h)) does not apply to 4 a taxpayer who is eligible for the research and development tax 5 credit under this article for the taxable year in which the 6 Pennsylvania qualified research and development expense is 7 incurred.] 8 Section 12. Section 1709-B of the act, amended or added May 9 7, 1997 (P.L.85, No.7) and July 12, 2006 (P.L.1137, No.116), is 10 repealed: 11 [Section 1709-B. Limitation on Credits.--(a) The total 12 amount of credits approved by the department shall not exceed 13 forty million dollars ($40,000,000) in any fiscal year. Of that 14 amount, eight million dollars ($8,000,000) shall be allocated 15 exclusively for small businesses. However, if the total amounts 16 allocated to either the group of applicants exclusive of small 17 businesses or the group of small business applicants is not 18 approved in any fiscal year, the unused portion will become 19 available for use by the other group of qualifying taxpayers. 20 (b) If the total amount of research and development tax 21 credits applied for by all taxpayers, exclusive of small 22 businesses, exceeds the amount allocated for those credits, then 23 the research and development tax credit to be received by each 24 applicant shall be the product of the allocated amount 25 multiplied by the quotient of the research and development tax 26 credit applied for by the applicant divided by the total of all 27 research and development credits applied for by all applicants, 28 the algebraic equivalent of which is: 29 taxpayer's research and development tax credit=amount 30 allocated for those credits X (research and development 20070H0377B4086 - 18 -
1 tax credit applied for by the applicant/total of all 2 research and development tax credits applied for by all 3 applicants). 4 (c) If the total amount of research and development tax 5 credits applied for by all small business taxpayers exceeds the 6 amount allocated for those credits, then the research and 7 development tax credit to be received by each small business 8 applicant shall be the product of the allocated amount 9 multiplied by the quotient of the research and development tax 10 credit applied for by the small business applicant divided by 11 the total of all research and development credits applied for by 12 all small business applicants, the algebraic equivalent of which 13 is: 14 taxpayer's research and development tax credit=amount 15 allocated for those credits X (research and development 16 tax credit applied for by the small business/total of all 17 research and development tax credits applied for by all 18 small business applicants).] 19 Section 13. Section 1712-B of the act, amended July 12, 2006 20 (P.L.1137, No.116), is repealed: 21 [Section 1712-B. Termination.--The department shall not 22 approve a research and development tax credit under this article 23 for taxable years ending after December 31, 2015.] 24 Section 14. The act is amended by adding articles to read: 25 ARTICLE XVII-F 26 SMALL BUSINESS HEALTH SAVINGS ACCOUNT TAX CREDIT 27 Section 1701-F. Scope. 28 This article relates to small business health savings account 29 tax credit. 30 Section 1702-F. Definitions. 20070H0377B4086 - 19 -
1 The following words and phrases when used in this article 2 shall have the meanings given to them in this section unless the 3 context clearly indicates otherwise: 4 "Department." The Department of Revenue of the Commonwealth. 5 "Employee" or "employees." An individual or group of 6 individuals employed by a small business. The term shall also 7 include a sole proprietor. 8 "Health insurance policy." An individual or group health, 9 sickness or accident policy or subscriber contract or 10 certificate issued by an entity subject to any one of the 11 following: 12 (1) The act of May 17, 1921 (P.L.682, No.284), known as 13 The Insurance Company Law of 1921. 14 (2) The act of December 29, 1972 (P.L.1701, No.364), 15 known as the Health Maintenance Organization Act. 16 (3) The act of May 18, 1976 (P.L.123, No.54), known as 17 the Individual Accident and Sickness Insurance Minimum 18 Standards Act. 19 (4) 40 Pa.C.S. Ch. 61 (relating to hospital plan 20 corporations) or 63 (relating to professional health services 21 plan corporations). 22 "Health Savings Account." As defined in section 223(d) of 23 the Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. 24 § 223(d)). 25 "Pass-through entity." Any of the following: 26 (1) A partnership, limited partnership, limited 27 liability company, business trust or other unincorporated 28 entity that for Federal income tax purposes is taxable as a 29 partnership. 30 (2) A Pennsylvania S corporation. 20070H0377B4086 - 20 -
1 "Qualified high deductible health plan." A health insurance 2 policy that would qualify as a high deductible health plan under 3 section 223(c)(2) of the Internal Revenue Code of 1986 (Public 4 Law 99-514, 26 U.S.C. § 223(c)(2)). 5 "Qualified tax liability." The liability for taxes imposed 6 under Article III, IV or VI. The term shall include the 7 liability for taxes imposed under Article III on an owner of a 8 pass-through entity. 9 "Secretary." The Secretary of Revenue of the Commonwealth. 10 "Small business." An employer who, on at least 50% of its 11 working days during the taxable year, employed fewer than 100 12 employees. 13 "Tax credit." The small business health savings account tax 14 credit authorized under this article. 15 "Taxpayer." A small business subject to tax under Article 16 III, IV or VI. The term includes: 17 (1) the partner, shareholder, owner or member of a pass- 18 through entity; or 19 (2) a sole proprietor. 20 Section 1703-F. Credit for Health Savings Account 21 contributions. 22 (a) Application.--A taxpayer who purchases and provides a 23 qualified high deductible health insurance policy to employees 24 and makes a contribution to a health savings account on behalf 25 of employees in a taxable year may apply for a tax credit as 26 provided in this article. By September 15, a taxpayer must 27 submit an application to the department for the aggregate 28 contribution made by the taxpayer to employee health savings 29 accounts in the taxable year that ended in the prior calendar 30 year. 20070H0377B4086 - 21 -
1 (b) Computation.--A taxpayer who qualifies under subsection 2 (a) shall receive a tax credit for the taxable year in 3 accordance with the following: 4 (1) Fifty percent of the aggregate contribution made by 5 the taxpayer to employee health savings accounts when the 6 contribution is provided for the benefit of employees, 7 spouses and dependents for the taxable year. 8 (2) Twenty-five percent of the aggregate contribution 9 made by the taxpayer to employee health savings accounts when 10 the contribution is provided solely for the benefit of an 11 employee. 12 (c) Notification.--By December 15 of the calendar year 13 following the close of the taxable year during which the 14 contribution to employee health savings accounts was made, the 15 department shall notify the taxpayer of the amount of the 16 taxpayer's tax credit approved by the department. 17 Section 1704-F. Limitation on credits. 18 (a) Limit.--The total amount of credits approved by the 19 department shall not exceed $30,000,000 in any fiscal year. 20 (b) Calculation.--If the total amount of small business 21 health savings account tax credits applied for by all taxpayers 22 exceeds the amount allocated for those credits, then the small 23 business health savings account tax credit to be received by 24 each applicant shall be the product of the allocated amount 25 multiplied by the quotient of the small business health savings 26 account tax credit applied for by the applicant divided by the 27 total of all small business health savings account credits 28 applied for by all applicants, the algebraic equivalent of which 29 is: 30 taxpayer's small business health savings account tax 20070H0377B4086 - 22 -
1 credit=amount allocated for those credits X (small 2 business health savings account tax credit applied for by 3 the applicant/total of all small business health savings 4 account tax credits applied for by all applicants). 5 Section 1705-F. Carryover, carryback, refund and assignment of 6 credit. 7 (a) Carryover.--If the taxpayer cannot use the entire amount 8 of the tax credit for the taxable year in which the tax credit 9 is first approved, then the excess may be carried over to 10 succeeding taxable years and used as a credit against the 11 qualified tax liability of the taxpayer for those taxable years. 12 Each time that the tax credit is carried over to a succeeding 13 taxable year, it is to be reduced by the amount that was used as 14 a credit during the immediately preceding taxable year. The tax 15 credit may be carried over and applied to succeeding taxable 16 years for no more than 15 taxable years following the first 17 taxable year for which the taxpayer was entitled to claim the 18 credit. 19 (b) Application of credit.--A tax credit approved by the 20 department for monetary contributions made to employee health 21 savings accounts in a taxable year first shall be applied 22 against the taxpayer's qualified tax liability for the current 23 taxable year as of the date on which the credit was approved 24 before the tax credit is applied against any tax liability under 25 subsection (a). 26 (c) Prohibition.--A taxpayer is not entitled to assign, 27 carry back or obtain a refund of an unused tax credit. 28 Section 1706-F. Shareholder, owner or member pass-through. 29 (a) Shareholder's calculation.--If a Pennsylvania S 30 corporation does not have an eligible tax liability against 20070H0377B4086 - 23 -
1 which the tax credit may be applied, a shareholder of the 2 Pennsylvania S corporation is entitled to a tax credit equal to 3 the tax credit determined for the Pennsylvania S corporation for 4 the taxable year multiplied by the percentage of the 5 Pennsylvania S corporation's distributive income to which the 6 shareholder is entitled. 7 (b) Owner or member calculation.--If a pass-through entity 8 other than a Pennsylvania S corporation does not have an 9 eligible tax liability against which the tax credit may be 10 applied, an owner or member of the pass-through entity is 11 entitled to a tax credit equal to the tax credit determined for 12 the pass-through entity for the taxable year multiplied by the 13 percentage of the pass-through entity's distributive income to 14 which the owner or member is entitled. 15 (c) Application; restrictions.--The credit provided under 16 subsection (a) or (b) is in addition to any tax credit to which 17 a shareholder, owner or member of a pass-through entity is 18 otherwise entitled under this article. However, a pass-through 19 entity and a shareholder, owner or member of a pass-through 20 entity may not claim a credit under this article for the same 21 contributions made to employee health savings accounts. 22 Section 1707-F. Report to General Assembly. 23 The secretary shall submit an annual report to the General 24 Assembly indicating the effectiveness of the credit provided by 25 this article no later than March 15 following the year in which 26 the credits were approved. The report shall include the names of 27 all taxpayers utilizing the credit as of the date of the report 28 and the amount of credits approved and utilized by each 29 taxpayer. Notwithstanding any law providing for the 30 confidentiality of tax records, the information contained in the 20070H0377B4086 - 24 -
1 report shall be public information. The report may also include 2 any recommendations for changes in the calculation or 3 administration of the credit. 4 Section 1708-F. Regulations. 5 The secretary shall promulgate regulations necessary for the 6 implementation and administration of this article. 7 ARTICLE XVII-G 8 NEW DIESEL TECHNOLOGY TAX CREDIT 9 Section 1701-G. Scope of article. 10 This article relates to new diesel technology tax credits. 11 Section 1702-G. Definitions. 12 The following words and phrases when used in this article 13 shall have the meanings given to them in this section unless the 14 context clearly indicates otherwise: 15 "Department." The Department of Revenue of the Commonwealth. 16 "Pass-through entity." Any of the following: 17 (1) A partnership, limited partnership, limited 18 liability company, business trust or other unincorporated 19 entity that for Federal income tax purposes is taxable as a 20 partnership. 21 (2) A Pennsylvania S corporation. 22 "Qualified new diesel technology expenses." The cost 23 incurred for the purchase of a Class 8 highway vehicle with a 24 registered gross or combination weight as provided under 75 25 Pa.C.S. § 1916 (relating to trucks and truck tractors) and with 26 a diesel engine if the vehicle purchased has been certified as 27 compliant with the emissions limits contained in 40 CFR 86.007- 28 11 (relating to emission standards and supplemental requirements 29 for 2007 and later model year diesel heavy-duty engines and 30 vehicles), except that 40 CFR 86.007-15 (relating to NOX and 20070H0377B4086 - 25 -
1 particulate averaging, trading, and banking for heavy-duty 2 engines), shall not apply to exhaust emissions attainment levels 3 for particulates. 4 "Qualified tax liability." The liability for taxes imposed 5 under Article III, IV or VI. The term shall include the 6 liability for taxes imposed under Article III on an owner of a 7 pass-through entity. 8 "Secretary." The Secretary of Revenue of the Commonwealth. 9 "Tax credit." The new diesel technology tax credit 10 authorized under this article. 11 "Taxpayer." An entity subject to tax under Article III, IV 12 or VI. The term shall include the shareholder, owner or member 13 of a pass-through entity that receives a tax credit. 14 Section 1703-G. Credit for new diesel technology. 15 (a) Application.--A taxpayer who incurs a qualified new 16 diesel technology expense in a taxable year may apply for a tax 17 credit as provided in this article. By September 15, a taxpayer 18 must submit an application to the department for qualified new 19 diesel technology expenses incurred in the taxable year that 20 ended in the prior calendar year. 21 (b) Amount.--A taxpayer that is qualified under subsection 22 (a) shall receive a tax credit for the taxable year in the 23 amount of $5,000 per qualified new diesel technology expense. 24 (c) Notification.--By December 15 of the calendar year 25 following the close of the taxable year during which qualified 26 new diesel technology expense was incurred, the department shall 27 notify the taxpayer of the amount of the taxpayer's tax credit 28 approved by the department. 29 Section 1704-G. Carryover, carryback, refund and assignment of 30 credit. 20070H0377B4086 - 26 -
1 (a) Carryover.--If the taxpayer cannot use the entire amount 2 of the tax credit for the taxable year in which the tax credit 3 is first approved, the excess may be carried over to succeeding 4 taxable years and used as a credit against the qualified tax 5 liability of the taxpayer for those taxable years. Each time 6 that the tax credit is carried over to a succeeding taxable 7 year, it shall be reduced by the amount that was used as a 8 credit during the immediately preceding taxable year. The tax 9 credit may be carried over and applied to succeeding taxable 10 years for no more than 15 taxable years following the first 11 taxable year for which the taxpayer was entitled to claim the 12 credit. 13 (b) Application.--A tax credit approved by the department 14 for qualified new diesel technology expenses in a taxable year 15 first shall be applied against the taxpayer's qualified tax 16 liability for the current taxable year as of the date on which 17 the credit was approved before the tax credit is applied against 18 any tax liability under subsection (a). 19 (c) Unused credit.--A taxpayer is not entitled to assign, 20 carry back or obtain a refund of an unused tax credit. 21 Section 1705-G. Time limitations. 22 A taxpayer is not entitled to a tax credit for qualified new 23 diesel technology expenses incurred in taxable years ending 24 after December 31, 2009. 25 Section 1706-G. Shareholder, owner or member pass-through. 26 (a) Pennsylvania S corporations.--If a Pennsylvania S 27 corporation does not have an eligible tax liability against 28 which the tax credit may be applied, a shareholder of the 29 Pennsylvania S corporation is entitled to a tax credit equal to 30 the tax credit determined for the Pennsylvania S corporation for 20070H0377B4086 - 27 -
1 the taxable year multiplied by the percentage of the 2 Pennsylvania S corporation's distributive income to which the 3 shareholder is entitled under this article. 4 (b) Pass-through entities.--If a pass-through entity other 5 than a Pennsylvania S corporation does not have an eligible tax 6 liability against which the tax credit may be applied, an owner 7 or member of the pass-through entity is entitled to a tax credit 8 equal to the tax credit determined for the pass-through entity 9 for the taxable year multiplied by the percentage of the pass- 10 through entity's distributive income to which the owner or 11 member is entitled under this article. 12 (c) Additional credits.--The credit provided under 13 subsection (a) or (b) shall be in addition to any tax credit to 14 which a shareholder, owner or member of a pass-through entity is 15 otherwise entitled under this article. However, a pass-through 16 entity and a shareholder, owner or member of a pass-through 17 entity may not claim a credit under this article for the same 18 qualified new diesel technology expense. 19 Section 1707-G. Report to General Assembly. 20 The secretary shall submit an annual report to the General 21 Assembly indicating the effectiveness of the credit provided by 22 this article no later than March 15 following the year in which 23 the credits were approved. The report shall include the names of 24 all taxpayers utilizing the credit as of the date of the report 25 and the amount of credits approved and utilized by each 26 taxpayer. Notwithstanding any law providing for the 27 confidentiality of tax records, the information contained in the 28 report shall be public information. The report may also include 29 any recommendations for changes in the calculation or 30 administration of the credit. 20070H0377B4086 - 28 -
1 Section 1708-G. Termination. 2 The department shall not approve a tax credit under this 3 article for taxable years ending after December 31, 2009. 4 Section 1709-G. Regulations. 5 The secretary shall promulgate regulations necessary for the 6 implementation and administration of this article. 7 Section 15. Section 2106 of the act, added August 4, 1991 8 (P.L.97, No.22), is amended to read: 9 Section 2106. Imposition of Tax.--(a) An inheritance tax 10 for the use of the Commonwealth is imposed upon every transfer 11 subject to tax under this article at the rates specified in 12 section 2116. 13 (b) This section shall not apply to the estates of decedents 14 dying on or after January 1, 2012. 15 Section 16. Section 2116(a) of the act, amended May 24, 2000 16 (P.L.106, No.23), is amended to read: 17 Section 2116. Inheritance Tax.--(a) (1) Inheritance tax 18 upon the transfer of property passing to or for the use of [any 19 of the following shall be at the rate of four and one-half per 20 cent: 21 (i) grandfather, grandmother, father, mother, except 22 transfers under subclause (1.2), and lineal descendants; or 23 (ii) wife or widow and husband or widower of a child.] a 24 grandfather, grandmother, father, mother, except transfers under 25 subclause (1.2), lineal descendants, wife or widow and husband 26 or widower of a child shall be at the rate provided in the 27 following schedule: 28 (i) Four and one-half per cent for the estate of a decedent 29 dying before or during calendar year 2009. 30 (ii) Two per cent for the estate of a decedent dying during 20070H0377B4086 - 29 -
1 calendar year 2010. 2 (iii) Zero per cent for the estate of a decedent dying 3 during or after calendar year 2011. 4 (1.1) Inheritance tax upon the transfer of property passing 5 to or for the use of a husband or wife shall be: 6 (i) At the rate of three per cent for estates of decedents 7 dying on or after July 1, 1994, and before January 1, 1995. 8 (ii) At a rate of zero per cent for estates of decedents 9 dying on or after January 1, 1995. 10 (1.2) Inheritance tax upon the transfer of property from a 11 child twenty-one years of age or younger to or for the use of a 12 natural parent, an adoptive parent or a stepparent of the child 13 shall be at the rate of zero per cent. 14 (1.3) Inheritance tax upon the transfer of property passing 15 to or for the use of a sibling shall be at the rate [of twelve 16 per cent.] provided in the following schedule: 17 (i) Twelve per cent for the estate of a decedent dying 18 before or during calendar year 2007. 19 (ii) Nine per cent for the estate of a decedent dying during 20 calendar year 2008. 21 (iii) Six per cent for the estate of a decedent dying during 22 calendar year 2009. 23 (iv) Four and one-half per cent for the estate of a decedent 24 dying during calendar year 2010. 25 (v) Two per cent for the estate of a decedent dying during 26 calendar year 2011. 27 (vi) Zero per cent for the estate of a decedent dying during 28 or after calendar year 2012. 29 (1.4) Inheritance tax upon the transfer of property that is 30 jointly held between a child and a natural parent, an adoptive 20070H0377B4086 - 30 -
1 parent or a stepparent of the child to the natural parent, 2 adoptive parent or the stepparent shall be at the rate of zero 3 per cent. 4 (2) Inheritance tax upon the transfer of property passing to 5 or for the use of all persons other than those designated in 6 subclause (1), (1.1), (1.2) or (1.3) or exempt under section 7 2111(m) shall be at the rate [of fifteen per cent.] provided in 8 the following schedule: 9 (i) Fifteen per cent for the estate of a decedent dying 10 before or during calendar year 2007. 11 (ii) Ten per cent for the estate of a decedent dying during 12 calendar year 2008. 13 (iii) Seven per cent for the estate of a decedent dying 14 during calendar year 2009. 15 (iv) Four and one-half per cent for the estate of a decedent 16 dying during calendar year 2010. 17 (v) Two per cent for the estate of a decedent dying during 18 calendar year 2011. 19 (vi) Zero per cent for the estate of a decedent dying during 20 or after calendar year 2012. 21 (3) When property passes to or for the use of a husband and 22 wife with right of survivorship, one of whom is taxable at a 23 rate lower than the other, the lower rate of tax shall be 24 applied to the entire interest. 25 * * * 26 Section 17. Section 2117 of the act is amended by adding a 27 subsection to read: 28 Section 2117. Estate Tax.--* * * 29 (d) This section shall not apply to the estates of decedents 30 dying on or after January 1, 2012. 20070H0377B4086 - 31 -
1 Section 18. Repeals are as follows: 2 (1) The General Assembly declares that the repeal under 3 paragraph (2) is necessary to effectuate the purposes of this 4 act. 5 (2) Section 33(12) of the act of December 23, 2003 6 (P.L.250, No.46), entitled "An act amending the act of March 7 4, 1971 (P.L.6, No.2), entitled 'An act relating to tax 8 reform and State taxation by codifying and enumerating 9 certain subjects of taxation and imposing taxes thereon; 10 providing procedures for the payment, collection, 11 administration and enforcement thereof; providing for tax 12 credits in certain cases; conferring powers and imposing 13 duties upon the Department of Revenue, certain employers, 14 fiduciaries, individuals, persons, corporations and other 15 entities; prescribing crimes, offenses and penalties,' 16 further providing, in sales and use tax, for definitions, for 17 exclusions, for credits, for licenses and for transfers to 18 Public Transportation Assistance Fund; further providing, in 19 personal income tax, for definitions, for imposition, for 20 special tax provisions for poverty, for returns and liability 21 and for returns and records; further providing, in corporate 22 net income tax, for definitions and for interests in 23 unincorporated entities; providing, in corporate net income 24 tax, for additional withholding requirements; further 25 providing, in capital stock franchise tax, for definitions 26 and reports, for imposition and for expiration; further 27 providing, in utilities gross receipts tax, for imposition; 28 further providing, in public utility realty tax, for 29 surcharges; providing, in public utility realty tax, for 30 additional tax; further providing, in cigarette tax, for 20070H0377B4086 - 32 -
1 incidence and rate of tax, for floor tax, for stamp to 2 evidence the tax and for commissions on sales; establishing, 3 in relation to cigarette tax, the Health Care Provider 4 Retention Account; further providing, in research and 5 development tax credit, for carryover, for limitations and 6 for reports; further providing, in malt beverage tax, for 7 limited tax credits; further providing, in inheritance tax, 8 for definitions, for exempt transfers, for estate tax and for 9 estate tax returns; further providing for the Public 10 Transportation Assistance Fund and providing for its 11 administration; further providing for estimated tax and for 12 underpayment of estimated tax; providing for authority to 13 attach wages; and repealing provisions relating to the Public 14 Transportation Assistance Fund," is repealed. 15 Section 19. The following provisions shall apply to taxable 16 years beginning after December 31, 2007: 17 (1) The amendment of 316 of the act. 18 (2) The amendment of section 401(3)4(c) of the act. 19 (3) The amendment of section 601(a) of the act. 20 (4) The amendment of section 1704-B of the act. 21 (5) The addition of Article XVII-F of the act. 22 Section 20. This act shall take effect as follows: 23 (1) The following provisions shall take effect July 1, 24 2008: 25 (i) The amendment of section 201(m) of the act. 26 (ii) The amendment or addition of section 204(10), 27 (67) and (68) of the act. 28 (iii) The addition of section 304.1 of the act. 29 (iv) The amendment of section 1101(a), (a.1) and (j) 30 of the act. 20070H0377B4086 - 33 -
1 (v) The repeal of section 1707-B of the act. 2 (vi) The repeal of section 1709-B of the act. 3 (vii) The repeal of section 1712-B of the act. 4 (v) The addition of Article XVII-F of the act. 5 (vi) The addition of Article XVII-G of the act. 6 (vii) Section 18 of this act. 7 (2) The following provisions shall take effect July 1, 8 2008, or immediately, whichever is later: 9 (i) The amendment of section 302 of the act. 10 (ii) The amendment of section 316 of the act. 11 (iii) The amendment of section 401(3)2(a)(9) of the 12 act. 13 (iv) The amendment of section 402(b) of the act. 14 (3) The remainder of this act shall take effect 15 immediately. 16 SECTION 1. SECTION 303(A.3) OF THE ACT OF MARCH 4, 1971 <-- 17 (P.L.6, NO.2), KNOWN AS THE TAX REFORM CODE OF 1971, ADDED JUNE 18 29, 2002 (P.L.559, NO.89), IS AMENDED TO READ: 19 SECTION 303. CLASSES OF INCOME.--* * * 20 (A.3) THE COST OF PROPERTY COMMONLY REFERRED TO AS SECTION 21 179 PROPERTY MAY BE TREATED AS A DEDUCTIBLE EXPENSE ONLY TO THE 22 EXTENT ALLOWABLE UNDER THE VERSION OF SECTION 179 OF THE 23 INTERNAL REVENUE CODE IN EFFECT AT THE TIME THE PROPERTY IS 24 PLACED IN SERVICE [OR UNDER SECTION 179 OF THE INTERNAL REVENUE 25 CODE OF 1986 (26 U.S.C. § 179), WHICHEVER IS EARLIER]. THE LIMIT 26 ON SECTION 179 PROPERTY WHICH MAY BE TREATED AS DEDUCTIBLE SHALL 27 BE FIFTY THOUSAND DOLLARS ($50,000). THE BASIS OF SECTION 179 28 PROPERTY SHALL BE REDUCED, BUT NOT BELOW ZERO, FOR COSTS TREATED 29 AS A DEDUCTIBLE EXPENSE. THE AMOUNT OF THE REDUCTION SHALL BE 30 THE AMOUNT DEDUCTED ON A RETURN AND NOT DISALLOWED, REGARDLESS 20070H0377B4086 - 34 -
1 OF WHETHER THE DEDUCTION RESULTS IN A REDUCTION OF INCOME. 2 * * * 3 SECTION 2. SECTION 304 OF THE ACT, AMENDED DECEMBER 13, 1991 4 (P.L.373, NO.40) AND DECEMBER 23, 2003 (P.L.250, NO.46), IS 5 AMENDED TO READ: 6 SECTION 304. SPECIAL TAX PROVISIONS FOR POVERTY.--(A) THE 7 GENERAL ASSEMBLY, IN RECOGNITION OF THE POWERS CONTAINED IN 8 SECTION 2(B)(II) OF ARTICLE VIII OF THE CONSTITUTION OF THE 9 COMMONWEALTH OF PENNSYLVANIA WHICH PROVIDES THEREIN FOR THE 10 ESTABLISHING AS A CLASS OR CLASSES OF SUBJECTS OF TAXATION THE 11 PROPERTY OR PRIVILEGES OF PERSONS WHO, BECAUSE OF POVERTY ARE 12 DETERMINED TO BE IN NEED OF SPECIAL TAX PROVISIONS HEREBY 13 DECLARES AS ITS LEGISLATIVE INTENT AND PURPOSE TO IMPLEMENT SUCH 14 POWER UNDER SUCH CONSTITUTIONAL PROVISION BY ESTABLISHING 15 SPECIAL TAX PROVISIONS AS HEREINAFTER PROVIDED IN THIS ACT. 16 (B) THE GENERAL ASSEMBLY HAVING DETERMINED THAT THERE ARE 17 PERSONS WITHIN THIS COMMONWEALTH WHOSE INCOMES ARE SUCH THAT 18 IMPOSITION OF A TAX THEREON WOULD DEPRIVE THEM AND THEIR 19 DEPENDENTS OF THE BARE NECESSITIES OF LIFE AND HAVING FURTHER 20 DETERMINED THAT POVERTY IS A RELATIVE CONCEPT INEXTRICABLY 21 JOINED WITH ACTUAL INCOME AND THE NUMBER OF PEOPLE DEPENDENT 22 UPON SUCH INCOME DEEMS IT TO BE A MATTER OF PUBLIC POLICY TO 23 PROVIDE SPECIAL TAX PROVISIONS FOR THAT CLASS OF PERSONS 24 HEREINAFTER DESIGNATED TO RELIEVE THEIR ECONOMIC BURDEN. 25 (C) FOR THE TAXABLE YEAR 1974 AND EACH YEAR THEREAFTER ANY 26 CLAIMANT WHO MEETS THE FOLLOWING STANDARDS OF ELIGIBILITY 27 ESTABLISHED BY THIS ACT AS THE TEST FOR POVERTY SHALL BE DEEMED 28 A SEPARATE CLASS OF SUBJECT OF TAXATION, AND, AS SUCH, SHALL BE 29 ENTITLED TO THE BENEFIT OF THE SPECIAL PROVISIONS OF THIS ACT. 30 (D) ANY CLAIM FOR SPECIAL TAX PROVISIONS HEREUNDER SHALL BE 20070H0377B4086 - 35 -
1 DETERMINED IN ACCORDANCE WITH THE FOLLOWING: 2 (1) IF THE POVERTY INCOME OF THE CLAIMANT DURING AN ENTIRE 3 TAXABLE YEAR IS [SIX THOUSAND FIVE HUNDRED DOLLARS ($6,500) OR 4 LESS, OR, IN THE CASE OF A MARRIED CLAIMANT, IF THE JOINT 5 POVERTY INCOME OF THE CLAIMANT AND THE CLAIMANT'S SPOUSE DURING 6 AN ENTIRE TAXABLE YEAR IS THIRTEEN THOUSAND DOLLARS ($13,000) OR 7 LESS] THE AMOUNT UNDER CLAUSE (1.1)(I), THE CLAIMANT SHALL BE 8 ENTITLED TO A REFUND OR FORGIVENESS OF ANY MONEYS WHICH HAVE 9 BEEN PAID OVER TO (OR WOULD EXCEPT FOR THE PROVISIONS OF THIS 10 ACT BE PAYABLE TO) THE COMMONWEALTH UNDER THE PROVISIONS OF THIS 11 ARTICLE, WITH AN ADDITIONAL INCOME ALLOWANCE OF [NINE THOUSAND 12 FIVE HUNDRED DOLLARS ($9,500)] THE AMOUNT UNDER CLAUSE (1.1)(II) 13 FOR EACH DEPENDENT OF THE CLAIMANT. FOR PURPOSES OF THIS 14 SUBSECTION, A CLAIMANT SHALL NOT BE CONSIDERED TO BE MARRIED IF: 15 (I) THE CLAIMANT AND THE CLAIMANT'S SPOUSE FILE SEPARATE 16 RETURNS; AND 17 (II) THE CLAIMANT AND THE CLAIMANT'S SPOUSE LIVE APART AT 18 ALL TIMES DURING THE LAST SIX MONTHS OF THE TAXABLE YEAR OR ARE 19 SEPARATED PURSUANT TO A WRITTEN SEPARATION AGREEMENT. 20 (1.1) (I) THE AMOUNT OF POVERTY INCOME OF A CLAIMANT DURING 21 AN ENTIRE TAXABLE YEAR UNDER CLAUSE (1) SHALL BE AS FOLLOWS: 22 (A) FOR TAXABLE YEARS ENDING BEFORE JANUARY 1, 2008, THE 23 AMOUNT SHALL BE SIX THOUSAND FIVE HUNDRED DOLLARS ($6,500) OR 24 LESS, OR, IN THE CASE OF A MARRIED CLAIMANT, THE AMOUNT SHALL BE 25 THIRTEEN THOUSAND DOLLARS ($13,000) OR LESS. 26 (B) FOR TAXABLE YEARS ENDING AFTER DECEMBER 31, 2007, AND 27 BEFORE JANUARY 1, 2009, THE AMOUNT SHALL BE SEVEN THOUSAND FIVE 28 HUNDRED DOLLARS ($7,500) OR LESS, OR, IN THE CASE OF A MARRIED 29 CLAIMANT, THE AMOUNT SHALL BE FIFTEEN THOUSAND DOLLARS ($15,000) 30 OR LESS. 20070H0377B4086 - 36 -
1 (C) FOR TAXABLE YEARS ENDING AFTER DECEMBER 31, 2008, AND 2 BEFORE JANUARY 1, 2010, THE AMOUNT SHALL BE EIGHT THOUSAND 3 DOLLARS ($8,000) OR LESS, OR, IN THE CASE OF A MARRIED CLAIMANT, 4 THE AMOUNT SHALL BE SIXTEEN THOUSAND DOLLARS ($16,000) OR LESS. 5 (D) FOR TAXABLE YEARS ENDING AFTER DECEMBER 31, 2009, THE 6 AMOUNT SHALL BE EIGHT THOUSAND FIVE HUNDRED DOLLARS ($8,500) OR 7 LESS, OR, IN THE CASE OF A MARRIED CLAIMANT, THE AMOUNT SHALL BE 8 SEVENTEEN THOUSAND DOLLARS ($17,000) OR LESS. 9 (II) THE ADDITIONAL INCOME ALLOWANCE FOR EACH DEPENDENT OF A 10 CLAIMANT UNDER CLAUSE (1) SHALL BE AS FOLLOWS: 11 (A) FOR TAXABLE YEARS ENDING BEFORE JANUARY 1, 2009, THE 12 AMOUNT SHALL BE NINE THOUSAND FIVE HUNDRED DOLLARS ($9,500). 13 (B) FOR TAXABLE YEARS ENDING AFTER DECEMBER 31, 2008, AND 14 BEFORE JANUARY 1, 2010, THE AMOUNT SHALL BE NINE THOUSAND SEVEN 15 HUNDRED AND FIFTY DOLLARS ($9,750). 16 (C) FOR TAXABLE YEARS ENDING AFTER DECEMBER 31, 2009, THE 17 AMOUNT SHALL BE TEN THOUSAND DOLLARS ($10,000). 18 (2) IF THE POVERTY INCOME OF THE CLAIMANT DURING AN ENTIRE 19 TAXABLE YEAR DOES NOT EXCEED THE POVERTY INCOME LIMITATIONS 20 PRESCRIBED BY CLAUSE (1) BY MORE THAN THE DOLLAR CATEGORY 21 CONTAINED IN SUBCLAUSES (I), (II), (III), (IV), (V), (VI), 22 (VII), (VIII) OR (IX) OF THIS CLAUSE, THE CLAIMANT SHALL BE 23 ENTITLED TO A REFUND OR FORGIVENESS BASED ON THE PER CENTAGE 24 PRESCRIBED IN SUCH SUBCLAUSES OF ANY MONEYS WHICH HAVE BEEN PAID 25 OVER TO (OR WOULD HAVE BEEN EXCEPT FOR THE PROVISIONS HEREIN BE 26 PAYABLE TO) THE COMMONWEALTH UNDER THIS ARTICLE: 27 (I) NINETY PER CENT IF NOT IN EXCESS OF TWO HUNDRED FIFTY 28 DOLLARS ($250). 29 (II) EIGHTY PER CENT IF NOT IN EXCESS OF FIVE HUNDRED 30 DOLLARS ($500). 20070H0377B4086 - 37 -
1 (III) SEVENTY PER CENT IF NOT IN EXCESS OF SEVEN HUNDRED 2 FIFTY DOLLARS ($750). 3 (IV) SIXTY PER CENT IF NOT IN EXCESS OF ONE THOUSAND DOLLARS 4 ($1,000). 5 (V) FIFTY PER CENT IF NOT IN EXCESS OF ONE THOUSAND TWO 6 HUNDRED FIFTY DOLLARS ($1,250). 7 (VI) FORTY PER CENT IF NOT IN EXCESS OF ONE THOUSAND FIVE 8 HUNDRED DOLLARS ($1,500). 9 (VII) THIRTY PER CENT IF NOT IN EXCESS OF ONE THOUSAND SEVEN 10 HUNDRED FIFTY DOLLARS ($1,750). 11 (VIII) TWENTY PER CENT IF NOT IN EXCESS OF TWO THOUSAND 12 DOLLARS ($2,000). 13 (IX) TEN PER CENT IF NOT IN EXCESS OF TWO THOUSAND TWO 14 HUNDRED FIFTY DOLLARS ($2,250). 15 (3) IF AN INDIVIDUAL HAS A TAXABLE YEAR OF LESS THAN TWELVE 16 MONTHS, THE POVERTY INCOME THEREOF SHALL BE ANNUALIZED IN SUCH 17 MANNER AS THE DEPARTMENT MAY PRESCRIBE. 18 SECTION 3. SECTION 401(3)2(A)(9) AND 4(C) OF THE ACT, 19 AMENDED JULY 12, 2006 (P.L.1137, NO.116), ARE AMENDED TO READ: 20 SECTION 401. DEFINITIONS.--THE FOLLOWING WORDS, TERMS, AND 21 PHRASES, WHEN USED IN THIS ARTICLE, SHALL HAVE THE MEANING 22 ASCRIBED TO THEM IN THIS SECTION, EXCEPT WHERE THE CONTEXT 23 CLEARLY INDICATES A DIFFERENT MEANING: 24 * * * 25 (3) "TAXABLE INCOME." * * * 26 2. IN CASE THE ENTIRE BUSINESS OF ANY CORPORATION, OTHER 27 THAN A CORPORATION ENGAGED IN DOING BUSINESS AS A REGULATED 28 INVESTMENT COMPANY AS DEFINED BY THE INTERNAL REVENUE CODE OF 29 1986, IS NOT TRANSACTED WITHIN THIS COMMONWEALTH, THE TAX 30 IMPOSED BY THIS ARTICLE SHALL BE BASED UPON SUCH PORTION OF THE 20070H0377B4086 - 38 -
1 TAXABLE INCOME OF SUCH CORPORATION FOR THE FISCAL OR CALENDAR 2 YEAR, AS DEFINED IN SUBCLAUSE 1 HEREOF, AND MAY BE DETERMINED AS 3 FOLLOWS: 4 (A) DIVISION OF INCOME. 5 * * * 6 (9) (A) EXCEPT AS PROVIDED IN SUBPARAGRAPH (B): 7 (I) FOR TAXABLE YEARS BEGINNING BEFORE JANUARY 1, 2007, ALL 8 BUSINESS INCOME SHALL BE APPORTIONED TO THIS STATE BY 9 MULTIPLYING THE INCOME BY A FRACTION, THE NUMERATOR OF WHICH IS 10 THE PROPERTY FACTOR PLUS THE PAYROLL FACTOR PLUS THREE TIMES THE 11 SALES FACTOR AND THE DENOMINATOR OF WHICH IS FIVE. 12 (II) FOR TAXABLE YEARS BEGINNING AFTER DECEMBER 31, 2006, 13 ALL BUSINESS INCOME SHALL BE APPORTIONED TO THIS STATE BY 14 MULTIPLYING THE INCOME BY A FRACTION, THE NUMERATOR OF WHICH IS 15 THE SUM OF FIFTEEN TIMES THE PROPERTY FACTOR, FIFTEEN TIMES THE 16 PAYROLL FACTOR AND SEVENTY TIMES THE SALES FACTOR AND THE 17 DENOMINATOR OF WHICH IS ONE HUNDRED. 18 (III) FOR TAXABLE YEARS BEGINNING AFTER DECEMBER 31, 2008, 19 ALL BUSINESS INCOME SHALL BE APPORTIONED TO THIS STATE BY 20 MULTIPLYING THE INCOME BY A FRACTION: THE NUMERATOR OF WHICH IS 21 THE SUM OF SEVEN AND A HALF TIMES THE PROPERTY FACTOR, SEVEN AND 22 A HALF TIMES THE PAYROLL FACTOR AND EIGHTY-FIVE TIMES THE SALES 23 FACTOR; AND THE DENOMINATOR OF WHICH IS ONE HUNDRED. 24 (B) FOR PURPOSES OF APPORTIONMENT OF THE CAPITAL STOCK - 25 FRANCHISE TAX AS PROVIDED IN SECTION 602 OF ARTICLE VI OF THIS 26 ACT, THE APPORTIONMENT FRACTION SHALL BE THE PROPERTY FACTOR 27 PLUS THE PAYROLL FACTOR PLUS THE SALES FACTOR AS THE NUMERATOR, 28 AND THE DENOMINATOR SHALL BE THREE. 29 * * * 30 4. * * * 20070H0377B4086 - 39 -
1 (C) (1) THE NET LOSS DEDUCTION SHALL BE THE LESSER OF: 2 (A) (I) FOR TAXABLE YEARS BEGINNING BEFORE JANUARY 1, 2007, 3 TWO MILLION DOLLARS ($2,000,000); 4 (II) FOR TAXABLE YEARS BEGINNING AFTER DECEMBER 31, 2006, 5 THE GREATER OF TWELVE AND ONE-HALF PER CENT OF TAXABLE INCOME AS 6 DETERMINED UNDER SUBCLAUSE 1 OR, IF APPLICABLE, SUBCLAUSE 2 OR 7 THREE MILLION DOLLARS ($3,000,000); [OR] 8 (III) FOR TAXABLE YEARS BEGINNING AFTER DECEMBER 31, 2008, 9 THE GREATER OF TWENTY PER CENT OF THE TAXABLE INCOME AS 10 DETERMINED UNDER SUBCLAUSE 1 OR, IF APPLICABLE, SUBCLAUSE 2 OR 11 FIVE MILLION DOLLARS ($5,000,000); OR 12 (B) THE AMOUNT OF THE NET LOSS OR LOSSES WHICH MAY BE 13 CARRIED OVER TO THE TAXABLE YEAR OR TAXABLE INCOME AS DETERMINED 14 UNDER SUBCLAUSE 1 OR, IF APPLICABLE, SUBCLAUSE 2. 15 (1.1) IN NO EVENT SHALL THE NET LOSS DEDUCTION INCLUDE MORE 16 THAN FIVE HUNDRED THOUSAND DOLLARS ($500,000), IN THE AGGREGATE, 17 OF NET LOSSES FROM TAXABLE YEARS 1988 THROUGH 1994. 18 (2) (A) A NET LOSS FOR A TAXABLE YEAR MAY ONLY BE CARRIED 19 OVER PURSUANT TO THE FOLLOWING SCHEDULE: 20 TAXABLE YEAR CARRYOVER 21 1981 1 TAXABLE YEAR 22 1982 2 TAXABLE YEARS 23 1983-1987 3 TAXABLE YEARS 24 1988 2 TAXABLE YEARS PLUS 25 1 TAXABLE YEAR 26 STARTING WITH THE 27 1995 TAXABLE YEAR 28 1989 1 TAXABLE YEAR PLUS 29 2 TAXABLE YEARS 30 STARTING WITH THE 20070H0377B4086 - 40 -
1 1995 TAXABLE YEAR 2 1990-1993 3 TAXABLE YEARS 3 STARTING WITH THE 4 1995 TAXABLE YEAR 5 1994 1 TAXABLE YEAR 6 1995-1997 10 TAXABLE YEARS 7 1998 AND THEREAFTER 20 TAXABLE YEARS 8 (B) THE EARLIEST NET LOSS SHALL BE CARRIED OVER TO THE 9 EARLIEST TAXABLE YEAR TO WHICH IT MAY BE CARRIED UNDER THIS 10 SCHEDULE. THE TOTAL NET LOSS DEDUCTION ALLOWED IN ANY TAXABLE 11 YEAR SHALL NOT EXCEED: 12 (I) TWO MILLION DOLLARS ($2,000,000) FOR TAXABLE YEARS 13 BEGINNING BEFORE JANUARY 1, 2007. 14 (II) THE GREATER OF TWELVE AND ONE-HALF PER CENT OF THE 15 TAXABLE INCOME AS DETERMINED UNDER SUBCLAUSE 1 OR, IF 16 APPLICABLE, SUBCLAUSE 2 OR THREE MILLION DOLLARS ($3,000,000) 17 FOR TAXABLE YEARS BEGINNING AFTER DECEMBER 31, 2006. 18 (III) THE GREATER OF TWENTY PER CENT OF THE TAXABLE INCOME 19 AS DETERMINED UNDER SUBCLAUSE 1 OR, IF APPLICABLE, SUBCLAUSE 2 20 OR FIVE MILLION DOLLARS ($5,000,000) FOR TAXABLE YEARS BEGINNING 21 AFTER DECEMBER 31, 2008. 22 * * * 23 SECTION 4. THE AMENDMENT OF SECTION 303(A.3) OF THE ACT 24 SHALL APPLY TO PROPERTY PLACED IN SERVICE AFTER DECEMBER 31, 25 2008. 26 SECTION 5. THIS ACT SHALL TAKE EFFECT IMMEDIATELY. A10L72VDL/20070H0377B4086 - 41 -