THE GENERAL ASSEMBLY OF PENNSYLVANIA

SENATE BILL

INTRODUCED BY STACK, FONTANA, SOLOBAY, ALLOWAY, BOSCOLA, RAFFERTY, VOGEL, MENSCH AND BRUBAKER, MARCH 7, 2011

REFERRED TO FINANCE, MARCH 7, 2011  

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," providing for manufacturing and agriculture 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 XIX-B

MANUFACTURING AND AGRICULTURE TAX CREDIT

Section 1901-B.  Short title.

This article shall be known and may be cited as the

Manufacturing and Agriculture Tax Credit Act.

Section 1902-B.  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:

"Business firm."  An agricultural, manufacturing or research

and development enterprise as defined in section 3 of the act of

May 17, 1956 (1955 P.L.1609, No.537), known as the Pennsylvania

Industrial Development Authority Act, authorized to do business

in this Commonwealth subject to taxes imposed by Article III,

IV, VI, VII, VIII, IX or XV, and physical product production

generates 51% or more of the firm's daily business. The term

shall include a pass-through entity.

"New product development."  Activities directly related to

the product development process, including, but not limited to,

the referral screen and formation of a product development

committee, the initial screen, preliminary and detailed

investigations of business plans and models, markets and project

needs, product development and postdevelopment review, testing

and validation.

"Pass-through entity."  A partnership as defined under

section 301(n.0) or a Pennsylvania S corporation as defined

under section 301(n.1).

"Product development."  Creating a new good to sell to

consumers.

"Qualified investment."  An investment made by a business

firm that develops, sustains or enhances Pennsylvania's

manufacturing or agriculture sectors through new product

development. Eligible activities include, but are not limited

to, new construction, infrastructure improvements, machine and

equipment purchases, new product development and market

research.

"Secretary."  The Secretary of Community and Economic

Development of the Commonwealth.

Section 1903-B.  Tax credit.

(a)  Eligibility.--A business firm that makes qualified

investment shall receive a tax credit as provided in section

1904-B if the secretary annually approves the proposal of the

business firm. The proposal shall set forth the qualified

investment to be made, the estimated amount to be invested and

the plans for implementing the investment.

(b)  Report of proposals.--The secretary is hereby authorized

to promulgate rules and regulations for the approval or

disapproval of the proposals by business firms. The secretary

shall provide a report listing all applications received and

their disposition in each fiscal year to the General Assembly by

October 1 of the following fiscal year. The secretary's report

shall include all taxpayers utilizing the credit and the amount

of credits approved, sold or assigned. Notwithstanding any law

providing for the confidentiality of tax records, the

information in the report shall be public information, and all

report information shall be posted on the secretary's Internet

website.

(c)  Special consideration.--The secretary shall take into

special consideration, when approving applications for the tax

credit under this article, applications that involve multiple

projects in various markets throughout this Commonwealth.

(d)  Limit.--The total amount of tax credit granted for

programs approved under this article shall not exceed

$18,000,000 of tax credit in any fiscal year.

(e)  Distribution.--The tax credits shall have two rounds of

funding each fiscal year. The grants shall be evenly distributed

over the two rounds. The grant funds shall be distributed as

follows:

(1)  Ten million dollars to companies with 500 employees

or more. Five million dollars shall be distributed during

each round of funding.

(2)  Four million dollars to companies with 100-499

employees. Two million dollars shall be distributed during

each round of funding.

(3)  Three million dollars to companies with 20-99

employees. One million five hundred thousand dollars shall be

distributed during each round of funding.

(4)  One million dollars to companies with 1-19

employees. Five hundred thousand dollars shall be distributed

during each round of funding.

(f)  Sale or assignment.--A taxpayer, upon application to and

approval by the Department of Community and Economic

Development, may sell or assign, in whole or in part, a tax

credit granted to the business firm under this article if no

claim for allowance of the credit is filed within one year from

the date the credit is granted by the Department of Revenue

under section 1904-B. The Department of Community and Economic

Development and the Department of Revenue shall jointly

promulgate guidelines for the approval of applications under

this subsection.

(g)  Time provisions.--The purchaser or assignee of a tax

credit under subsection (f) shall immediately claim the credit

in the taxable year in which the purchase or assignment is made.

The purchaser or assignee may not carry over, carry back, obtain

a refund or sell or assign the tax credit. The purchaser or

assignee shall notify the Department of Revenue of the seller or

assignor of the tax credit in compliance with procedures

specified by the Department of Revenue.

(h)  Application.--The tax credit approved by the Department

of Community and Economic Development shall be applied against

the business firm's tax liability for the taxes under section

1904-B for the current taxable year as of the date on which the

credit was approved before the tax credit may be carried over,

sold or assigned.

Section 1904-B.  Grant of tax credit.

The Department of Revenue shall grant a tax credit against

any tax due under Article III, IV, VI, VII, VIII, IX or XV, or

any tax substituted in lieu thereof, in an amount that shall not

exceed 45% of the total amount invested during the taxable year

by a business firm as approved pursuant to section 1903-B. A tax

credit of up to 75% of the total amount invested during the

taxable year by a business firm may be allowed for investment in

projects where activities fall within the scope of special

program priorities as defined with the approval of the Governor

in regulations promulgated by the secretary. No tax credit may

be granted to any bank, bank and trust company, insurance

company, trust company, national bank, savings association,

mutual savings bank or building and loan association for

activities that are a part of its normal course of business. Any

tax credit not used in the period the contribution or investment

was made may be carried over for the next five succeeding

calendar or fiscal years until the full credit has been allowed.

A business firm shall not be entitled to carry back or obtain a

refund of an unused tax credit. The total amount of all tax

credits allowed pursuant to this article shall not exceed

$18,000,000 in any one fiscal year. Of that amount, $2,000,000

shall be allocated exclusively for pass-through entities.

However, if the total amounts allocated to either the group of

applicants, exclusive of pass-through entities, or the group of

pass-through entity applicants is not approved in any fiscal

year, the unused portion shall become available for use by the

other group of qualifying taxpayers.

Section 1905-B.  Decision in writing.

The decision of the secretary to approve or disapprove a

proposal pursuant to section 1903-B of this article shall be in

writing, and, if it approves the proposal, it shall state the

maximum credit allowable to the business firm. A copy of the

decision of the secretary shall be transmitted to the Governor

and to the Secretary of Revenue.

Section 1906-B.  Pass-through entity.

(a)  General rule.--If a pass-through entity has any unused

tax credit under section 1904-B, the entity may elect, in

writing, according to the Department of Revenue's procedures, to

transfer all or a portion of the credit to shareholders, members

or partners in proportion to the share of the entity's

distributive income to which the shareholder, member or partner

is entitled.

(b)  Credit.--The credit provided under subsection (a) is in

addition to any other tax credit to which a shareholder, member

or partner of a pass-through entity is otherwise entitled under

this article. However, a pass-through entity and a shareholder,

member or partner of a pass-through entity may not claim a

credit under this article for the same investment.

(c)  Time frame for claim.--A shareholder, member or partner

of a pass-through entity to whom credit is transferred under

subsection (a) must immediately claim the credit in the taxable

year in which the transfer is made. The shareholder, member or

partner may not carry forward, carry back, obtain a refund or

sell or assign the credit.

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