THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

INTRODUCED BY MIRABITO, GEORGE, BRIGGS, BROWNLEE, CARROLL, CONKLIN, DEAN, DERMODY, FABRIZIO, FRANKEL, GIBBONS, GOODMAN, HANNA, HORNAMAN, KIRKLAND, KOTIK, LONGIETTI, MAHONEY, MUNDY, M. O'BRIEN, PASHINSKI, READSHAW, SCHMOTZER, STURLA, YOUNGBLOOD AND MULLERY, MAY 21, 2012

REFERRED TO COMMITTEE ON ENVIRONMENTAL RESOURCES AND ENERGY, MAY 21, 2012  

AN ACT

Amending Titles 58 (Oil and Gas) and 72 (Taxation and Fiscal

Affairs) of the Pennsylvania Consolidated Statutes, further

providing for distribution of unconventional gas well fee;

providing for the establishment, implementation and

administration of the Marcellus Shale Job Creation Tax

Credit; and imposing additional duties on the Department of

Community and Economic Development.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  Section 2314(c.1) of Title 58 of the Pennsylvania

Consolidated Statutes is amended by adding a paragraph to read:

§ 2314.  Distribution of fee.

* * *

(c.1)  Additional distributions.--From fees collected under

this chapter and deposited in the fund for 2011 and each year

thereafter:

* * *

(7)  Twenty-five million dollars to the Department of

Community and Economic Development for the Marcellus Shale

Job Creation Tax Credit.

* * *

Section 2.  Title 72 is amended by adding a part to read:

PART III

TAX CREDITS

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 Community and Economic

Development 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.

§ 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 of Labor and Industry, 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)  Applicant priority.--The department shall give priority

to eligible applicants that will place the following workers in

new jobs:

(1)  Workers who have completed a qualified

apprenticeship training program or a job training program

approved by the Department of Labor and Industry.

(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.

(c)  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 new jobs to be created.

(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)  Such other information as the department deems

appropriate.

(d)  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 new job created 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 new job created, 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,

$25,000,000 in tax credits shall be made available to the

department and may be awarded by the department in accordance

with this chapter.

§ 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 create jobs.--A company which receives job

creation tax credits and fails to create the approved number of

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.

(b)  Waiver.--The department may waive the penalties outlined

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

operations were not maintained or the new jobs were not created

because of circumstances beyond the company's control. Such

circumstances include natural disasters or unforeseen industry

trends.

§ 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 3.  This act shall take effect immediately.