THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

INTRODUCED BY REED, BAKER, BEAR, BELFANTI, BEYER, BOYD, BROOKS, CAUSER, CLYMER, CREIGHTON, DENLINGER, EVERETT, FAIRCHILD, FLECK, FRANKEL, GEIST, GEORGE, GIBBONS, GOODMAN, HARKINS, HENNESSEY, HESS, HICKERNELL, HUTCHINSON, KAUFFMAN, M. KELLER, KOTIK, MAJOR, MARSICO, MUSTIO, O'NEILL, PETRI, PICKETT, RAPP, REICHLEY, ROCK, ROHRER, SCAVELLO, SIPTROTH, SONNEY, STERN, STEVENSON, TURZAI AND VULAKOVICH, FEBRUARY 13, 2009

REFERRED TO COMMITTEE ON FINANCE, FEBRUARY 13, 2009  

AN ACT

Amending the act of March 4, 1971 (P.L.6, No.2), entitled "An

act relating to tax reform and State taxation by codifying

and enumerating certain subjects of taxation and imposing

taxes thereon; providing procedures for the payment,

collection, administration and enforcement thereof; providing

for tax credits in certain cases; conferring powers and

imposing duties upon the Department of Revenue, certain

employers, fiduciaries, individuals, persons, corporations

and other entities; prescribing crimes, offenses and

penalties," establishing a career development tax credit.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  The act of March 4, 1971 (P.L.6, No.2), known as

the Tax Reform Code of 1971, is amended by adding an article to

read:

ARTICLE XVII-F

CAREER DEVELOPMENT TAX CREDIT

Section 1701-F.  Short title of article.

This article shall be known and may be cited as the Career

Development Tax Credit Act.

Section 1702-F.  Definitions.

The following words and phrases when used in this article

shall have the meanings given to them in this section unless the

context clearly indicates otherwise:

"Career development tax credit" or "tax credit."  The credit

provided under this article.

"Department."  The Department of Revenue of the Commonwealth.

"Nonqualified individual."

(1)  An individual who is one of the following:

(i)  an officer of a business entity;

(ii)  a member or shareholder owning more than 5% of

the voting power or value of all classes of stock of a

business entity; or

(iii)  an individual who, for the preceding taxable

year:

(A)  received compensation from an employer in

excess of the Federal limitation, after adjustment by

the Secretary of the United States Treasury for

inflation, set forth in section 414(q)(1)(B) of the

Internal Revenue Code of 1986 (Public Law 99-514, 26

U.S.C. § 414(q)(1)(B)); or

(B)  is in the group consisting of the top 20% of

all full-time employees of the employer with at least

three years of service when ranked on the basis of

compensation paid during the taxable year.

(2)  A partner or self-employed individual.

(3)  A physician.

(4)  A veterinarian.

(5)  An attorney.

(6)  An executive.

"Nonqualified training expense."  All of the following:

(1)  Expenditures either reimbursed or subject to

reimbursement through any Federal or State training program.

(2)  Federal, State or local grants or other payments to

provide training or retraining.

(3)  Capital expenses.

(4)  Equipment, materials and software used beyond the

training program.

(5)  Expenses for out-of-State travel.

(6)  Convention or conference expenses, unless directly

related to a qualified career development training program.

"Qualified career development training program."  A training

program that is certified by the Department of Labor and

Industry as meeting recognized industry standards, designed to

meet the special requirements of an employer, and conducted with

a commitment by the employer to continue to employ an individual

on successful completion of the training. The term does not

include the following:

(1)  Any program in which 50% or more of the employee's

time is spent on activities other than those directly related

to the training program.

(2)  An executive training program.

(3)  A personal enrichment program.

(4)  A general health program.

(5)  A seminar or conference unless directly related to

the employee's job requirements.

"Qualified employee."  A Commonwealth resident who is

employed in this Commonwealth by a taxpayer and who averages at

least 30 hours of work per week at the time training commences

and for a period of 12 months following the employee's

completion of the qualified career development program. The term

excludes an individual who is a nonqualified individual.

"Qualified tax liability."  The liability for taxes imposed

under Article III, IV or VI. The term includes the liability for

taxes imposed under Article III on a shareholder of a

Pennsylvania S corporation.

"Qualified training expense."  Wages paid to a qualified

employee during normal working hours while participating in a

qualified career development training program. The term includes

preskill and postskill assessment, direct costs of instructors,

instructional materials, instructional supplies, instructional

media, necessary training equipment, tuition reimbursement,

travel costs to and from class and other instructional

activities. The term excludes nonqualified training expense.

"Secretary."  The Secretary of Revenue of the Commonwealth.

"Taxpayer."  An entity that is engaged in the business of

manufacturing and subject to tax under Article III, IV or VI.

The term includes the shareholder of a Pennsylvania S

corporation that receives a career development tax credit or the

member of a limited liability company that receives a career

development tax credit.

Section 1703-F.  Tax credit for qualified training expenses.

(a)  General rule.--A taxpayer who incurs qualified training

expenses in a taxable year may apply for a career development

tax credit as provided in this article. By September 15, a

taxpayer must submit an application to the department for

qualified training expense incurred in the taxable year that

ended in the prior calendar year.

(b)  Amount of tax credit.--A taxpayer that is qualified

under subsection (a) shall receive a career development tax

credit for the taxable year in the amount of 25% of the

taxpayer's total qualified training expense for the taxable

year.

(c)  Notification of approved tax credit.--By December 15 of

the calendar year following the close of the taxable year during

which the qualified training expense was incurred, the

department shall notify the taxpayer of the amount of the

taxpayer's career development tax credit approved by the

department.

Section 1704-F.  Carryover, carryback, refund and assignment of

tax credit.

(a)  General rule.--If the taxpayer cannot use the entire

amount of the career development tax credit for the taxable year

in which the career development tax credit is first approved,

then the excess may be carried over to succeeding taxable years

and used as a credit against the qualified tax liability of the

taxpayer for those taxable years. Each time that the career

development tax credit is carried over to a succeeding taxable

year, it is to be reduced by the amount that was used as a

credit during the immediately preceding taxable year. The career

development tax credit provided by this article may be carried

over and applied to succeeding taxable years for no more than 15

taxable years following the first taxable year for which the

taxpayer was entitled to claim the credit.

(b)  Taxable year in which tax credit applied.--A career

development tax credit approved by the department for qualified

training expenses in a taxable year first shall be applied

against the taxpayer's qualified tax liability for the current

taxable year as of the date on which the credit was approved

before the career development tax credit is applied against any

tax liability under subsection (a).

(c)  Limitation.--A taxpayer is not entitled to carry back or

obtain a refund of an unused career development tax credit.

Section 1705-F.  Time limitations.

A taxpayer is not entitled to a career development tax credit

for qualified training expenses incurred in taxable years ending

after December 31, 2011.

Section 1706-F.  Limitation on tax credits.

(a)  General rule.--The total amount of career development

tax credits approved by the department shall not exceed

$20,000,000 in any fiscal year.

(b)  Proration required.--If the total amount of career

development tax credits applied for by all taxpayers exceeds the

amount allocated for those credits, then the career development

tax credit to be received by each applicant shall be prorated by

the department among all applicants who have qualified for the

tax credit.

Section 1707-F.  Pennsylvania S corporation shareholder pass-

through.

(a)  General rule.--If a Pennsylvania S corporation does not

have an eligible tax liability against which the career

development tax credit may be applied, a shareholder of the

Pennsylvania S corporation is entitled to a tax credit equal to

the tax credit determined for the Pennsylvania S corporation for

the taxable year multiplied by the percentage of the

Pennsylvania S corporation's distributive income to which the

shareholder is entitled.

(b)  Operation of tax credit.--The career development tax

credit provided under subsection (a) is in addition to any

career development tax credit to which a shareholder of a

Pennsylvania S corporation is otherwise entitled under this

article. However, a Pennsylvania S corporation and a shareholder

of a Pennsylvania S corporation may not claim a tax credit for

the same qualified training expense.

Section 1708-F.  Pennsylvania limited liability company member

pass-through.

(a)  General rule.--If a limited liability company does not

have an eligible tax liability against which the career

development tax credit may be applied, a member of the limited

liability company is entitled to a tax credit equal to the tax

credit determined for the limited liability company for the

taxable year multiplied by the percentage of the limited

liability company's distributive income to which the member is

entitled.

(b)  Operation of tax credit.--The career development tax

credit under subsection (a) is in addition to any career

development tax credit to which a member of a limited liability

company is otherwise entitled under this article. A limited

liability company and a member of a limited liability company

may not claim a tax credit for the same qualified training

expense.

Section 1709-F.  Recapture of credit.

(a)  General rule.--If an employee for whom a credit has been

awarded does not maintain continuous employment with the

taxpayer for a period of 12 months following the completion of

the qualified career development training program, the

department shall recapture any credit awarded to the taxpayer

for the qualified training expense of that employee.

(b)  Nonapplicability.--This section shall not apply if the

employee:

(1)  is deceased;

(2)  is disabled;

(3)  voluntarily leaves employment; or

(4)  is discharged for cause as certified by the

Department of Labor and Industry.

Section 1710-F.  Report to General Assembly.

The secretary shall submit an annual report to the General

Assembly indicating the effectiveness of the career development

tax credit no later than March 15 following the year in which

the tax credits were approved. The report shall include the

names of all taxpayers utilizing the tax credit as of the date

of the report and the amount of tax credits approved and

utilized by each taxpayer. Notwithstanding any law providing for

the confidentiality of tax records, the information contained in

the report shall be public information. The report may also

include any recommendations for changes in the calculation or

administration of the tax credit.

Section 1711-F.  Termination.

The department shall not approve a career development tax

credit for taxable years ending after December 31, 2011.

Section 1712-F.  Regulations.

The secretary shall promulgate regulations necessary for the

implementation and administration of this article.

Section 2.  This act shall apply to taxable years commencing

after December 31, 2008.

Section 3.  This act shall take effect immediately.