THE GENERAL ASSEMBLY OF PENNSYLVANIA

SENATE BILL

INTRODUCED BY DINNIMAN, MELLOW, FONTANA, BOSCOLA, COSTA, ERICKSON, FARNESE, FERLO, KITCHEN, O'PAKE, STACK, STOUT, D. WHITE, WILLIAMS, WOZNIAK, HUGHES, TARTAGLIONE AND GREENLEAF, NOVEMBER 8, 2010

REFERRED TO FINANCE, NOVEMBER 8, 2010  

AN ACT

Amending Title 72 (Taxation and Fiscal Affairs) of the

Pennsylvania Consolidated Statutes, providing for Marcellus

shale job creation tax credit.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  Title 72 of the Pennsylvania Consolidated

Statutes is amended by adding a chapter to read:

Chapter

31.  Marcellus Shale Job Creation Tax Credit

CHAPTER 31

MARCELLUS SHALE JOB CREATION TAX CREDIT

Sec.

3101.  Definitions.

3102.  Eligibility.

3103.  Application process.

3104.  Tax credits.

3105.  Prohibitions.

3106.  Penalties.

3107.  Annual reports.

3108.  Notice of availability of tax credits.

§ 3101.  Definitions.

The following words and phrases when used in this chapter

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

context clearly indicates otherwise:

"Base period."  As follows:

(1)  Except as set forth in paragraph (2), the three

years immediately preceding the date on which a company may

begin creating new jobs which may be eligible for job

creation tax credits.

(2)  If a company has been in business in this

Commonwealth for less than three years, the period which it

has been in business in this Commonwealth.

"Department."  The Department of Labor and Industry of the

Commonwealth.

"Job creation tax credits."  Tax credits for job creation for

which the department has issued a certificate under this

chapter.

"New job."  A full-time job, the average hourly rate,

excluding benefits, for which must be at least 350% of the

Federal minimum wage, created within a municipality located in

this Commonwealth by a company within three years from the start

date. The term includes a job which was previously held by a

nonresident and is filled by a resident. The term does not

include a temporary or seasonal job.

"Nonresident."  An individual who does not reside in this

Commonwealth.

"Qualified apprenticeship training program."  A program

registered with the Apprenticeship and Training council within

the Department of Labor and Industry that is in compliance with

applicable Federal and State laws and regulations and which

requires at least 2,000 but not more than 10,000 hours of on-

the-job apprenticeship training.

"Resident."  Any natural person who is considered a resident

of this Commonwealth under the act of March 4, 1971 (P.L.6,

No.2), known as the Tax Reform Code of 1971.

"Start date."  The date on which a company may begin creating

new jobs which may be eligible for job creation tax credits.

"Year one."  A one-year period immediately following the

start date.

"Year three."  A one-year period immediately following the

end of year two.

"Year two."  A one-year period immediately following the end

of year one.

§ 3102.  Eligibility.

In order to be eligible to receive job creation tax credits

under this chapter, a company must demonstrate to the department

the following:

(1)  The company's financial stability and the project's

financial viability.

(2)  The company's express intent to maintain operations

in this Commonwealth for a period of five years from the date

the company submits its tax credit certificate to the

Department of Revenue.

(3)  The company is in conformity with industry laws and

regulations overseen and enforced by the Department of

Environmental Protection.

(4)  The ability to conduct business in this Commonwealth

including the appropriate licenses and certifications.

(5)  The intent to employ residents in new jobs that are

full-time, family sustaining and provide an average hourly

rate and benefits.

§ 3103.  Application process.

(a)  Application.--A company must complete and submit to the

department a job creation tax credit application along with a

copy of the permit issued by the Department of Environmental

Protection providing that the company has obtained the necessary

permit allowing the company to drill in this Commonwealth or a

statement from the Department of Environmental Protection

stating the same. The Department of Environmental Protection

shall notify the department, the Department of Revenue and the

department upon suspension or revocation of drilling permits or

other changes that affect the company's ability to continuously

drill in this Commonwealth.

(b)  Employment of residents.--At least 80% of the

applicant's work force in this Commonwealth must be composed of

residents.

(c)  Applicant priority.--The department shall give priority

to eligible applicants that will place the following residents

in new jobs:

(1)  Workers who have completed a qualified

apprenticeship training program or a job training program

approved by the department.

(2)  Dislocated workers under the act of December 18,

2001 (P.L.949, No.114), known as the Workforce Development

Act, who meet any one of the following conditions:

(i)  Have been terminated or laid off or have

received notice of termination or layoff, and are

eligible for or have exhausted unemployment compensation

benefits.

(ii)  Are unlikely to return to the industry or

occupation in which the individuals were employed.

(iii)  Have been terminated or received notice of

termination as a result of the permanent closure or

relocation of a plant, facility or plant operation in

which the individuals were employed.

(iv)  Are chronically unemployed.

(v)  Have limited opportunities of employment in the

geographic area in which the individuals reside.

(vi)  Are individuals who may face substantial

barriers to employment because of age or disability.

(3)  Workers who have been unemployed for at least six

months.

(4)  Underemployed workers who require skill training to

meet industry demands or increase employment opportunities.

(d)  Approval.--If the department approves the company's

application, the department and the company shall execute a

commitment letter containing the following:

(1)  A description of the project.

(2)  The number of Pennsylvania residents employed in new

jobs.

(3)  The amount of private capital investment in the

project.

(4)  The maximum job creation tax credit amount the

company may claim.

(5)  A signed statement that the company intends to

maintain its operation in this Commonwealth for five years

from the start date.

(6)  A signed statement from the company that the company

will provide to the department a list of workers which

satisfies the requirements of subsection (b) for which the

company will claim tax credit, including documentation of

each worker's status as a resident of this Commonwealth.

(7)  A signed statement that the company will refund the

Commonwealth all job creation tax credits in accordance with

section 3106 (relating to penalties) for noncompliance.

(8)  Such other information as the department deems

appropriate.

(e)  Commitment letter.--After a commitment letter has been

signed by both the Commonwealth and the company, the company

shall receive a job creation tax credit certificate and filing

information.

§ 3104.  Tax credits.

(a)  Maximum amount.--A company may claim a tax credit of

$2,500 per resident employed in a new job and up to the maximum

job creation tax credit amount specified in the commitment

letter.

(b)  Determination of new jobs created.--

(1)  New jobs shall be deemed created in year one to the

extent that the company's average employment by quarter

during year one exceeds the company's average employment

level during the company's base period, as adjusted for any

job held by a nonresident during the period which is no

longer held by a nonresident.

(2)  New jobs shall be deemed created in year two to the

extent that the company's average employment by quarter

during year two exceeds the company's average employment by

quarter during year one.

(3)  New jobs shall be deemed created in year three to

the extent that the company's average employment by quarter

during year three exceeds the company's average employment by

quarter during year two.

(c)  Applicable taxes.--A company may apply the tax credit to

100% of the company's corporate net income tax, capital stock

and franchise tax or the capital stock and franchise tax of a

shareholder of the company if the company is a Pennsylvania S

corporation, personal income tax or the personal income tax of

shareholders of a Pennsylvania S corporation or any combination

thereof.

(d)  Tax credit term.--A company may claim the job creation

tax credit for each resident employed in a new job, as approved

by the department, for a period determined by the department but

not to exceed five years from the date the company first submits

a job creation tax credit certificate.

(e)  Availability of tax credits.--Each fiscal year,

$24,000,000 in tax credits shall be made available to the

department and may be awarded by the department in accordance

with this chapter. In addition, in any fiscal year, the

department may reissue or assign prior fiscal year tax credits

which have been recaptured under section 3106(a) or (b)

(relating to penalties) and may award prior fiscal year credits

not previously issued. Prior fiscal year credits may be

reissued, assigned or awarded by the department.

§ 3105.  Prohibitions.

The following actions with regard to job creation tax credits

are prohibited:

(1)  Approval of jobs that have been created prior to the

start date, unless the job was held by a nonresident who has

been replaced by a resident.

(2)  The assignment, transfer or use of credits by any

other company, provided, however, that tax credits may be

assigned in whole or in part to an affiliated entity. As used

in this paragraph, the term "affiliated entity" means an

entity which is part of the same "affiliated group," as

defined by section 1504(a)(1) of the Internal Revenue Code of

1986 (Public Law 99-514, 26 U.S.C. § 1504(a)(1)), as the

company awarded the credit.

§ 3106.  Penalties.

(a)  Failure to maintain operations.--A company which

receives job creation tax credits and fails to substantially

maintain existing operations and the operations related to the

job creation tax credits in this Commonwealth for a period of

five years from the date the company first submits a job

creation tax credit certificate to the Department of Revenue

shall be required to refund to the Commonwealth the total amount

of credit or credits granted.

(b)  Failure to employ residents in new jobs.--A company

which receives job creation tax credits and fails to:

(1)  Continuously employ the approved number of residents

in new jobs within three years of the start date will be

required to refund to the Commonwealth the total amount of

credit or credits granted.

(2)  It shall not be considered failure to employ

residents under this section if a company continues to

provide remuneration to employees during a work stoppage that

is due to an event or circumstances beyond the employer's

control.

(c)  Waiver.--

(1)  The department may waive the penalties outlined in

subsection (b) if it is determined that a company's

operations were not maintained or the residents employed in

new jobs because of circumstances beyond the company's

control. Such circumstances include natural disasters or

unforeseen industry trends or a loss of a major supplier

market.

(2)  A company may seek a waiver for failure to employ

residents in at least 80% of its Commonwealth work force due

to the availability of technical or professional personnel

needed if the company has conducted a reasonable search to

employ residents.

§ 3107.  Annual reports.

(a)  Contents.--The department shall provide an annual report

on job creation tax credits which at a minimum shall include:

(1)  A list of all job creation tax credit certificates

provided during the previous fiscal year.

(2)  The name and location of each company receiving job

creation tax credit certificates.

(3)  An analysis of the job creation tax credits' ability

to create jobs in this Commonwealth.

(4)  Any other information that may be deemed relevant by

the department.

(b)  Submission.--The annual report shall be submitted to the

Governor, the Majority Leader of the Senate, the Minority Leader

of the Senate, the Majority Leader of the House of

Representatives and the Minority Leader of the House of

Representatives by March 1 of the first full year following the

effective date of this section and March 1 of each year

thereafter.

§ 3108.  Notice of availability of tax credits.

The department shall publish notice of the availability of

the job creation tax credit on its publicly accessible Internet

website and make information available annually to the

Department of Labor and Industry Workforce Investment Board for

distribution to local boards.

Section 2.  This act shall take effect in 60 days.