THE GENERAL ASSEMBLY OF PENNSYLVANIA

SENATE BILL

INTRODUCED BY ARGALL, FOLMER, PICCOLA, ERICKSON, FERLO, SCHWANK, WOZNIAK, WAUGH, ALLOWAY, YUDICHAK, BOSCOLA, MENSCH AND EICHELBERGER, APRIL 20, 2012

REFERRED TO FINANCE, APRIL 20, 2012  

AN ACT

Providing for tax levies and information related to taxes;

authorizing the imposition of a personal income tax or an

earned income tax by a school district subject to voter

approval; providing for imposition of and exclusions from a

sales and use tax for the stabilization of education funding;

establishing the Public Transportation Reserve Fund;

providing for increase to the personal income tax, for

certain licenses, for hotel occupancy tax, for procedure and

administration of the tax, for expiration of authority to

issue certain debt and for reporting by local government

units of debt outstanding; establishing the Education

Stabilization Fund; providing for disbursements from this

fund and for certain rebates and assistance to senior

citizens; and repealing certain provisions of The Local Tax

Enabling Act, sales and use tax provisions of the Tax Reform

Code of 1971 and provisions relating to senior citizens

property tax and rent rebate assistance in the Taxpayer

Relief Act.

TABLE OF CONTENTS

Chapter 1.  Preliminary Provisions

Section 101.  Short title.

Section 102.  Definitions.

Chapter 3.  Personal Income Tax

Subchapter A.  School District Income Tax

Section 301.  Scope.

Section 302.  Definitions.

Section 303.  Preemption.

Section 304.  Personal income tax authorization.

Section 305.  Continuity of tax.

Section 306.  Exemption of low-income persons.

Section 307.  Collection of personal income tax.

Section 308.  Limitation on assessment.

Section 309.  Distress and sale of personal property of

taxpayer.

Section 310.  Collection of delinquent taxes from employers.

Section 311.  Collection of delinquent taxes from Commonwealth.

Section 312.  Notice to taxpayer.

Section 313.  Collection of taxes by suit.

Section 314.  Interest and penalties.

Section 315.  Fines and penalties for violation of resolutions.

Section 316.  Collection at source.

Subchapter B.  Education Tax

Section 321.  Education tax.

Chapter 5.  Earned Income Tax

Section 501.  Scope.

Section 502.  Definitions.

Section 503.  Preemption.

Section 504.  Earned income tax authorization.

Section 505.  Continuity of tax.

Section 506.  Exemption of low-income persons.

Section 507.  Collection of earned income tax.

Section 508.  Limitation on assessment.

Section 509.  Distress and sale of property of taxpayer.

Section 510.  Collection of delinquent taxes from employers.

Section 511.  Collection of delinquent taxes from Commonwealth.

Section 512.  Notice to taxpayer.

Section 513.  Collection of taxes by suit.

Section 514.  Interest and penalties.

Section 515.  Fines and penalties for violation of resolutions.

Section 516.  Collection at source.

Chapter 7.  Sales and Use Tax for the Stabilization of Education

Funding

Subchapter A.  Preliminary Provisions

Section 701.  Scope.

Section 701.1.  Definitions.

Subchapter B.  Sales and Use Tax

Section 702.  Imposition of tax.

Section 703.  Computation of tax.

Subchapter C.  Exclusions from Sales and Use Tax

Section 704.  Exclusions from tax.

Section 705.  Alternate imposition of tax.

Section 706.  Credit against tax.

Subchapter D.  Licenses

Section 708.  Licenses.

Subchapter E.  Hotel Occupancy Tax

Section 709.  Definitions.

Section 710.  Imposition of tax.

Section 711.  Seasonal tax returns.

Subchapter F.  Procedure and Administration

Section 715.  Persons required to make returns.

Section 716.  Form of returns.

Section 717.  Time for filing returns.

Section 718.  Extension of time for filing returns.

Section 719.  Place for filing returns.

Section 720.  Timely mailing treated as timely filing and

payment.

Section 721.  Payment of tax.

Section 722.  Time of payment.

Section 723.  Other times for payment.

Section 724.  Place for payment.

Section 725.  Tax held in trust for Commonwealth.

Section 726.  Local receivers of use tax.

Section 727.  Discount.

Section 728.  (Reserved).

Section 729.  (Reserved).

Section 730.  Assessment.

Section 731.  Mode and time of assessment.

Section 732.  Reassessment.

Section 733.  (Reserved).

Section 734.  Review by Board of Finance and Revenue.

Section 735.  (Reserved).

Section 736.  Burden of proof.

Section 737.  Collection of tax.

Section 738.  Collection of tax on motor vehicles, trailers and

semitrailers.

Section 739.  Precollection of tax.

Section 740.  Bulk and auction sales.

Section 741.  Collection on failure to request reassessment,

review or appeal.

Section 742.  Lien for taxes.

Section 743.  Suit for taxes.

Section 744.  Tax suit comity.

Section 745.  Service.

Section 746.  Collection and payment of tax on credit sales.

Section 747.  Prepayment of tax.

Section 747.1.  Refund of sales tax attributed to bad debt.

Section 748.  Registration of transient vendors.

Section 748.1.  Bond.

Section 748.2.  Notification to department.

Section 748.3.  Seizure of property.

Section 748.4.  Fines.

Section 748.5.  Transient vendors subject to chapter.

Section 748.6.  Promoters.

Section 749.  (Reserved).

Section 750.  (Reserved).

Section 751.  (Reserved).

Section 752.  Refunds.

Section 753.  Refund petition.

Section 754.  (Reserved).

Section 755.  (Reserved).

Section 756.  Extended time for filing special petition for

refund.

Section 757.  (Reserved).

Section 758.  Limitation on assessment and collection.

Section 759.  Failure to file return.

Section 760.  False or fraudulent return.

Section 761.  Extension of limitation period.

Section 762.  (Reserved).

Section 763.  (Reserved).

Section 764.  (Reserved).

Section 765.  Interest.

Section 766.  Additions to tax.

Section 767.  Penalties.

Section 768.  Criminal offenses.

Section 769.  Abatement of additions or penalties.

Section 770.  Rules and regulations.

Section 771.  Keeping of records.

Section 771.1.  Reports and records of promoters.

Section 772.  Examinations.

Section 773.  Records and examinations of delivery agents.

Section 774.  Unauthorized disclosure.

Section 775.  Cooperation with other governments.

Section 776.  Interstate compacts.

Section 777.  Bonds.

Subchapter G.  Funding Provisions

Section 780.  (Reserved).

Section 781.  Appropriation for refunds.

Section 781.1.  Construction.

Section 781.2.  Transfers to Public Transportation Reserve Fund.

Section 782.  Transfers to Education Stabilization Fund.

Chapter 9.  Senior Citizens Property Tax and Rent Rebate

Assistance

Section 901.  Scope of chapter.

Section 902.  (Reserved).

Section 903.  Definitions.

Section 904.  Property tax, rent rebate and inflation cost.

Section 905.  Filing of claim.

Section 906.  Proof of claim.

Section 907.  Incorrect claim.

Section 908.  Funds for payment of claims.

Section 909.  Claim forms and rules and regulations.

Section 910.  Fraudulent claims and conveyances to obtain

benefits.

Section 911.  Petition for redetermination.

Section 912.  Review by Board of Finance and Revenue.

Section 913.  Appeal.

Chapter 11.  Limitations on School District Taxation

Section 1101.  Authority to levy taxes and effect of future

Constitutional amendment.

Section 1102.  Transitional taxes.

Section 1103.  Consideration of State appropriations or

reimbursements.

Section 1104.  Taxes for cities and school districts of the

first class.

Chapter 12.  Indebtedness

Section 1201.  Expiration of authority to issue debt.

Section 1202.  Notices and reporting by school districts of debt

outstanding.

Chapter 13.  Funding Provisions

Section 1301.  Definitions.

Section 1302.  Education Stabilization Fund.

Section 1303.  Standard disbursements to school districts from

Education Stabilization Fund.

Chapter 15.  Miscellaneous Provisions

Section 1501.  Transitional provision.

Section 1502.  Construction.

Section 1503.  Severability.

Section 1504.  Repeals.

Section 1505.  Applicability.

Section 1506.  Effective date.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

CHAPTER 1

PRELIMINARY PROVISIONS

Section 101.  Short title.

This act shall be known and may be cited as the Property Tax

Independence Act.

Section 102.  Definitions.

The following words and phrases when used in this act shall

have the meanings given to them in this section unless the

context clearly indicates otherwise:

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

"Education Stabilization Fund."  The Education Stabilization

Fund established in section 1302.

"Fiscal year."  The fiscal year of the Commonwealth beginning

on July 1 and ending on June 30 of the immediately following

calendar year.

"Governing body."  The board of school directors of a school

district, except that the term shall mean the city council of a

city of the first class for purposes of the levy and collection

of any tax in a school district of the first class.

"Internal Revenue Code of 1986."  The Internal Revenue Code

of 1986 (Public Law 99-514, 26 U.S.C. § 166).

"Local Tax Enabling Act."  The act of December 31, 1965

(P.L.1257, No.511), known as The Local Tax Enabling Act,

"Public School Code of 1949."  The act of March 10, 1949

(P.L.30, No.14), known as the Public School Code of 1949.

"School district."  A school district of the first class,

first class A, second class, third class or fourth class,

including any independent school district. For purposes of the

levy, assessment and collection of any tax in a school district

of the first class, the term shall include the City Council.

"School per capita tax."  The tax authorized pursuant to

section 679 of the act of March 10, 1949 (P.L.30, No.14), known

as the Public School Code of 1949,

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

"Tax Reform Code of 1971."  The act of March 4, 1971 (P.L.6,

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

CHAPTER 3

PERSONAL INCOME TAX

SUBCHAPTER A

SCHOOL DISTRICT INCOME TAX

Section 301.  Scope.

This chapter authorizes school districts to levy, assess and

collect a personal income tax as a means of abolishing property

taxation by the school district.

Section 302.  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:

"Association."  A partnership, limited partnership or other

unincorporated group of two or more persons.

"Business."  An enterprise, activity, profession or other

undertaking of an unincorporated nature conducted for profit or

ordinarily conducted for profit whether by a person, association

or other entity.

"Compensation."  The classes of income included within the

definition of "compensation" set forth in section 301 of the act

of March 4, 1971 (P.L.6, No.2), known as the Tax Reform Code of

1971, and upon which are imposed a personal income tax by the

Commonwealth.

"Corporation."  A corporation or joint stock association

organized under the laws of the United States or the

Commonwealth of Pennsylvania or any other state, territory,

foreign country or dependency.

"Current year."  The calendar year or fiscal year for which a

tax is levied.

"Domicile."

(1)  The place where a person lives and has the person's

permanent home and to which the person has the intention of

returning whenever the person is absent. Actual residence is

not necessarily domicile because domicile is the fixed place

of abode which, in the intention of the taxpayer, is

permanent rather than transitory.

(2)  Domicile is the voluntarily fixed place of

habitation of a person, not for a mere special or limited

purpose, but with the present intention of making a permanent

home, until some event occurs to induce the person to adopt

some other permanent home.

(3)  In the case of a business or association, the

domicile is any place where the business or association is

conducting or engaging in a business for profit within a

school district.

"Employer."  A person, association, corporation, governmental

unit or other entity employing one or more persons, other than

domestic servants, for compensation.

"Nonresident."  A person, association or other entity

domiciled outside a school district.

"Person" or "individual."  A natural person.

"Personal income."  The classes of income enumerated in

section 303 of the act of March 4, 1971 (P.L.6, No.2), known as

the Tax Reform Code of 1971, and on which is imposed a personal

income tax by the Commonwealth.

"Political subdivision."  A school district.

"Preceding year."  The calendar year or fiscal year before a

current year.

"Resident."  A person, association, corporation or other

entity:

(1)  living in or maintaining a permanent or fixed place

of abode in a school district; or

(2)  conducting or engaging in a business for profit

within a school district.

"Succeeding year."  The calendar year or fiscal year

following a current year.

"Tax officer."  The person, public employee or private agency

designated by a governing body to collect and administer a tax

imposed under this chapter, and the treasurer of a school

district of the first class A.

"Taxpayer."  A person, association or other entity required

under this chapter to file a tax return or to pay a tax.

Section 303.  Preemption.

No act of the General Assembly shall vacate or preempt any

resolution passed or adopted under the authority of this

chapter, or any other act, providing authority for the

imposition of a tax by a school district, unless the act of the

General Assembly expressly vacates or preempts the authority to

pass or adopt the resolutions.

Section 304.  Personal income tax authorization.

(a)  School districts.--Except as prohibited under Chapter

11, each school district shall have the power and may, by

resolution, levy, assess and collect or provide for the levying,

assessment and collection of a tax for general revenue purposes

at a rate as it shall determine on personal income of the

residents of the school district. A school district may only

levy or increase the rate of personal income tax when that

school district complies with the provisions of subsection (b).

(b)  Adoption of referendum.--

(1)  In order to levy a personal income tax under this

chapter, a governing body shall use the procedures set forth

in paragraphs (2), (3), (4), (5), (6) and (7).

(2)  (i)  Subject to the notice and public hearing

requirements of paragraph (7), a governing body may levy

the personal income tax under this chapter only by

obtaining the approval of the electorate of the affected

school district in a public referendum at only the

municipal election preceding the fiscal year when the

personal income tax will be initially imposed or the rate

increased.

(ii)  The referendum question must state the initial

rate of the proposed personal income tax, the reason for

the tax and the amount of proposed budgeted revenue

growth, if any, in the first fiscal year following

adoption of the referendum.

(iii)  The question shall be in clear language that

is readily understandable by a layperson. For the purpose

of illustration, a referendum question may be framed as

follows:

Do you favor the imposition of a personal income tax

of X%?

(iv)  A nonlegal interpretative statement must

accompany the question in accordance with section 201.1

of the act of June 3, 1937 (P.L.1333, No.320), known as

the Pennsylvania Election Code, that includes the

following: the initial rate of the personal income tax

imposed under this chapter, the estimated revenues to be

derived from the initial rate of the personal income tax

imposed under this chapter.

(3)  In the event a school district is located in more

than one county, petitions under this section shall be filed

with the election officials of the county in which the

administrative offices of the school district are located.

(4)  The election officials who receive a petition shall

perform all administrative functions in reviewing and

certifying the validity of the petition and conduct all

necessary communications with the school district.

(5)  (i)  If the election officials of the county who

receive the petition certify that it is sufficient under

this section and determine that a question should be

placed on the ballot, the decision shall be communicated

to election officials in any other county in which the

school district is also located.

(ii)  Election officials in the other county or

counties shall cooperate with election officials of the

county that receives the petition to ensure that an

identical question is placed on the ballot at the same

election throughout the entire school district.

(6)  Election officials from each county involved shall

independently certify the results from their county to the

governing body.

(7)  (i)  In order to levy the tax under this section,

the governing body shall adopt a resolution which shall

refer to this chapter prior to placing a question on the

ballot.

(ii)  Prior to adopting a resolution imposing the tax

authorized by this section, the governing body shall give

public notice of its intent to adopt the resolution in

the manner provided by The Local Tax Enabling Act and

shall conduct at least two public hearings regarding the

proposed adoption of the resolution. One public hearing

shall be conducted during normal business hours and one

public hearing shall be conducted during evening hours or

on a weekend.

Section 305.  Continuity of tax.

Every tax levied under this chapter shall continue in force

on a calendar or fiscal year basis, as the case may be, without

annual reenactment unless the rate of the tax is subsequently

changed.

Section 306.  Exemption of low-income persons.

(a)  Low-income exemption.--Each school district shall exempt

any person who qualifies under the provisions of section 304 of

the Tax Reform Code of 1971 from payment of any or all of the

tax imposed under section 304.

(b)  Procedures.--Each school district shall adopt procedures

for the processing of claims for these exemptions.

Section 307.  Collection of personal income tax.

The tax officer shall collect all personal income tax imposed

by a school district.

Section 308.  Limitation on assessment.

No assessment may be made of any personal income tax imposed

under this chapter more than five years after the date on which

the tax should have been paid except where a fraudulent return

or no return has been filed.

Section 309.  Distress and sale of personal property of

taxpayer.

(a)  General rule.--In case of the neglect or refusal of any

person, association or corporation to make payment of the amount

of any personal income tax due after two months from the date of

the tax notice, the tax officer shall levy the amount of the

tax, penalty, interest and costs thereon, not exceeding costs

and charges allowed constables for similar services by distress

and sale of the goods and chattels of the delinquent taxpayer,

wherever located, after giving at least ten days' public notice

of the sale by one advertisement in a newspaper of general

circulation published in the county.

(b)  Effect on return.--No failure to demand or collect any

taxes by distress and sale of goods and chattels shall

invalidate any return made, lien filed for nonpayment of taxes

or any tax sale for the collection of taxes.

Section 310.  Collection of delinquent taxes from employers.

(a)  General rule.--The tax officer shall demand, receive and

collect from all employers employing persons owing delinquent

personal income taxes or having in possession unpaid

compensation belonging to any person or persons owing delinquent

personal income taxes on the presentation of a written notice

and demand certifying that the information contained in the

notice and demand is true and correct and containing the name of

the taxpayer and the amount of tax due.

(b)  Response to notice.--On the presentation of the written

notice and demand, the employer shall deduct from the

compensation of the employees then owing, or thereafter due, a

sum sufficient to pay the amount of the delinquent personal

income taxes, interest, penalty and costs shown on the written

notice or demand, and shall pay the same to the tax officer by

which the delinquent tax was levied within 60 days after the

notice was given.

(c)  Limitation on deduction.--No more than 10% of the

compensation of the delinquent taxpayer may be deducted at any

one time for delinquent personal income taxes, penalty, interest

and costs.

(d)  Deduction for costs.--The employer shall be entitled to

deduct from the moneys collected from each employee the costs

incurred from the extra bookkeeping necessary to record the

transactions, not exceeding 2% of the amount collected and paid

over to the tax officer.

(e)  Forfeiture.--If the employer fails to deduct the amount

of such taxes or to pay the same over to the tax officer, less

the amount deducted under subsection (d), within the time

required by this section, the employer shall forfeit and pay the

amount of the tax for those taxpayers whose taxes are not

withheld and paid over, or that are withheld and not paid over

together with a penalty of 10%, to be recovered by a civil

action to be instituted by the tax officer, as debts of like

amount are now by law recoverable, except that the person shall

not have the benefit of any exemption law or stay of execution.

(f)  Collection rights preserved.--Nothing in this section

shall be deemed to affect or impair the right of any school

district or the tax officer to pursue and collect delinquent

taxes validly imposed prior to the effective date of this

section.

Section 311.  Collection of delinquent taxes from Commonwealth.

(a)  General rule.--On presentation of a written notice and

demand under oath to the State Treasurer or any other fiscal

officer of the Commonwealth, or its boards, authorities,

agencies or commissions, the treasurer or officer shall deduct

from the compensation then owing a sum sufficient to pay the

amount of the delinquent personal income taxes, interest,

penalty and costs shown on the written notice. The same shall be

paid to the tax officer within 60 days after the notice is

given.

(b)  Limitation on deduction.--No more than 10% of the

compensation of the delinquent taxpayer may be deducted at any

one time for delinquent personal income taxes, interest, penalty

and costs.

(c)  Collection rights preserved.--Nothing in this section

shall be deemed to affect or impair the right of a school

district or the tax officer to pursue and collect delinquent

taxes validly imposed prior to the effective date of this

section.

Section 312.  Notice to taxpayer.

The department shall, at least 15 days prior to the

presentation of a written notice and demand under section 310 or

311, notify the taxpayer owing the delinquent tax by registered

mail that a written notice and demand shall be presented to the

taxpayer's employer unless the tax is paid. The return receipt

card for registered mail shall be marked delivered to addressee

only, and the cost of notification by registered mail shall be

included in the costs for collecting taxes.

Section 313.  Collection of taxes by suit.

(a)  Power to collect.--

(1)  Each school district and the tax officer shall have

power to collect unpaid taxes from taxpayers and employers

owing such taxes by a civil action or other appropriate

remedy.

(2)  On judgment, execution may be issued without any

stay or benefit of any exemption law.

(3)  The power to collect unpaid taxes under the

provisions of this section shall not be affected by the fact

that such taxes have been entered as liens in the office of

the prothonotary or the fact that the property against which

they were levied has been returned to the county

commissioners for taxes for prior years.

(b)  Limitation of actions.--A suit brought to recover the

taxes under subsection (a) shall be instituted within three

years after the tax is due or within three years after a

declaration or return has been filed, whichever date is later,

except in the following cases:

(1)  If no declaration or return was filed by any person

although a declaration or return was required to be filed

under provisions of the ordinance, there shall be no

limitation.

(2)  If an examination of the declaration or return filed

by any person, or of other evidence relating to the

declaration or return in the possession of the tax officer,

reveals a fraudulent evasion of taxes, there shall be no

limitation.

(3)  If there is a substantial understatement of tax

liability of 25% or more and no fraud, suit shall be

instituted within six years.

(4)  If a person has deducted taxes under the provisions

of the resolution and has failed to pay the amounts so

deducted to the tax officer, or if a person has willfully

failed or omitted to make the deductions required by this

section, there shall be no limitation.

(c)  Regulations.--The tax officer, by regulation, shall

establish the procedures for collecting the personal income tax

and paying the full amount collected over to the school district

on a quarterly basis.

Section 314.  Interest and penalties.

(a)  General rule.--If for any reason the tax is not paid

when due, interest at the annual rate of 6% on the amount of the

tax, and an additional penalty of .5% of the amount of the

unpaid tax for each month or fraction thereof during which the

tax remains unpaid, shall be added and collected. Where suit is

brought for the recovery of such tax, the person liable therefor

shall, in addition, be liable for the costs of collection and

the interest and penalties herein imposed.

(b)  One-time waiver of interest authorized.--

(1)  Notwithstanding the provisions of subsection (a),

the school district may, by resolution, establish a one-time

period during which interest or interest and penalties that

would otherwise be imposed for the nonreporting or

underreporting of personal income tax liabilities or for the

nonpayment of personal income taxes previously imposed and

due shall be waived in total or in part if the taxpayer

voluntarily files delinquent returns and pays the taxes in

full during the period so established.

(2)  Each school district may adopt regulations to

implement the provisions of this subsection.

(c)  Proceedings.--The provisions of subsection (b) shall not

affect or terminate any petitions, investigations, prosecutions

or other proceedings pending on the effective date of this

section, or prevent the commencement or further prosecution of

any proceedings by the proper authorities for violations of this

act. No proceedings shall, however, be commenced on the basis of

delinquent returns filed pursuant to subsection (b) if the

returns are determined to be substantially true and correct and

the taxes are paid in full within the prescribed time.

Section 315.  Fines and penalties for violation of resolutions.

(a)  Conduct prohibited.--

(1)  Any person who fails, neglects or refuses to make

any declaration or return required by the resolution, any

employer who fails, neglects or refuses to register or to pay

the tax deducted from its employees, or fails, neglects or

refuses to deduct or withhold the tax from its employees, any

person who refuses to permit the officer or any agent

designated by that officer to examine the person's books,

records and papers, and any person who knowingly makes any

incomplete, false or fraudulent return, or attempts to do

anything whatsoever to avoid the full disclosure of the

amount of the person's personal income in order to avoid the

payment of the whole or any part of the tax imposed by the

resolution, shall, upon conviction thereof, in any county in

which the school district imposing the tax is located, be

sentenced to pay a fine of not more than $500 for each

offense and costs and, in default of payment of the fines and

costs, to be imprisoned for a period not exceeding 30 days.

(2)  Any person who divulges any information which is

confidential under the provisions of the resolution shall,

upon conviction thereof, be sentenced to pay a fine of not

more than $500 for each offense and costs and, in default of

payment of said fines and costs, to be imprisoned for a

period not exceeding 30 days.

(b)  Cumulative penalties.--The penalties imposed under this

section shall be in addition to any other penalty imposed by any

other section of the resolution.

(c)  Defense unavailable.--The failure of any person to

receive or procure forms required for making the declaration or

returns by the resolution shall not excuse the person from

making the declaration or return.

Section 316.  Collection at source.

(a)  Duty of employers to register.--Every employer having an

office, factory, workshop, branch, warehouse or other place of

business within the school district imposing a tax on personal

income who employs one or more persons, other than domestic

servants, for a salary, wage, commission or other compensation,

who has not previously registered shall, within 15 days after

becoming an employer, register with the tax officer his name and

address and such other information as the tax officer may

require.

(b)  Duty to deduct tax.--

(1)  Every employer having an office, factory, workshop,

branch, warehouse or other place of business within the

school district imposing a tax on personal income who employs

one or more persons, other than domestic servants, for a

salary, wage, commission or other compensation, shall deduct

at the time of payment thereof, the tax imposed pursuant to

this chapter due to his employee or employees, and shall, on

or before April 30 of the current year, July 31 of the

current year, October 31 of the current year and January 31

of the succeeding year, file a return and pay to the tax

officer the amount of taxes deducted during the preceding

three-month periods ending March 31 of the current year, June

30 of the current year, September 30 of the current year and

December 31 of the current year, respectively.

(2)  Unless otherwise agreed upon between the tax officer

and employer, the return shall show the name and Social

Security number of each employee, the compensation of the

employee during the preceding three-month period, the tax

deducted from the compensation, the school district imposing

the tax upon the employee, the total compensation of all

employees during the preceding three-month period and the

total tax deducted from the compensation and paid with the

return.

(3)  Any employer that for two of the preceding four

quarterly periods has failed to deduct the proper tax, or any

part thereof, or has failed to pay over the proper amount of

tax to the school district, may be required by the officer to

file the employer's return and pay the tax monthly. In such

cases, payments of tax shall be made to the tax officer on or

before the last day of the month succeeding the month for

which the tax was withheld.

(c)  Duty to file annual return.--On or before February 28 of

the succeeding year, every employer shall file with the tax

officer:

(1)  An annual return showing the total amount of

compensation paid, the total amount of tax deducted and the

total amount of tax paid to the tax officer for the period

beginning January 1 of the current year and ending December

31 of the current year.

(2)  A return withholding statement for each employee

employed during all or any part of the period beginning

January 1 of the current year and ending December 31 of the

current year, setting forth the employee's name, address and

Social Security number, the amount of earned income paid to

the employee during the period, the amount of tax deducted,

the school district imposing the tax upon the employees and

the amount of tax paid to the tax officer. Every employer

shall furnish two copies of the individual return to the

employee for whom it is filed.

(d)  Discontinued businesses.--Every employer who

discontinues business prior to December 31 of the current year

shall, within 30 days after the discontinuance of business, file

the returns and withholding statements required by this section

and pay the tax due.

(e)  Liability of employers.--Every employer who willfully or

negligently fails or omits to make the deductions required by

this section shall be liable for payment of the taxes which he

was required to withhold to the extent that such taxes have not

been recovered from the employee.

(f)  Liability of employees.--The failure or omission of any

employer to make the deductions required by this section shall

not relieve any employee from the payment of the tax or from

complying with the requirements of the ordinance or resolution

relating to the filing of declarations and returns.

SUBCHAPTER B

EDUCATION TAX

Section 321.  Education tax.

(a)  General rule.--In addition to the tax collected under

section 302 of the Tax Reform Code of 1971, the Commonwealth

shall impose the tax set forth in subsection (c) in the same

manner as the tax under the Tax Reform Code of 1971.

(b)  Imposition of tax.--

(1)  Every resident individual, estate or trust shall be

subject to, and shall pay for the privilege of receiving each

of the classes of income enumerated in section 303 of the Tax

Reform Code of 1971, a tax upon each dollar of income

received by that resident during that resident's taxable year

at the rate of .94%.

(2)  Every nonresident individual, estate or trust shall

be subject to, and shall pay for the privilege of receiving

each of the classes of income enumerated in section 303 of

the Tax Reform Code of 1971 from sources within this

Commonwealth, a tax upon each dollar of income received by

that nonresident during that nonresident's taxable year at

the rate of .94%.

(c)  Deposit in Education Stabilization Fund.--All moneys

collected under this section shall be deposited in the Education

Stabilization Fund.

(d)  Combination of tax forms.--The department shall

incorporate the taxpayer reporting requirement for the

implementation of this section into the forms utilized by the

department under Article III of the Tax Reform Code of 1971.

(e)  Definitions.--The words and phrases used in this section

shall have the same meaning given to them in Article III of the

Tax Reform Code of 1971.

CHAPTER 5

EARNED INCOME TAX

Section 501.  Scope.

This chapter authorizes school districts to levy, assess and

collect an earned income tax.

Section 502.  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:

"Association."  A partnership, limited partnership or other

unincorporated group of two or more persons.

"Business."  An enterprise, activity, profession or other

undertaking of an unincorporated nature conducted for profit or

ordinarily conducted for profit whether by a person, association

or other entity.

"Corporation."  A corporation or joint stock association

organized under the laws of the United States, this Commonwealth

or any other state, territory, foreign country or dependency.

"Current year."  The calendar year or fiscal year for which a

tax is levied.

"Department."  The Department of Community and Economic

Development of the Commonwealth.

"Domicile."

(1)  The place where a person lives and has the person's

permanent home and to which the person has the intention of

returning whenever the person is absent. Actual residence is

not necessarily domicile because domicile is the fixed place

of abode which, in the intention of the taxpayer, is

permanent rather than transitory.

(2)  Domicile is the voluntarily fixed place of

habitation of a person, not for a mere special or limited

purpose, but with the present intention of making a permanent

home, until some event occurs to induce the person to adopt

some other permanent home.

(3)  In the case of a business or association, the

domicile is any place where the business or association is

conducting or engaging in a business for profit within a

school district.

"Earned income."

(1)  Compensation as determined under section 303 of the

act of March 4, 1971 (P.L.6, No.2), known as the Tax Reform

Code of 1971, and regulations in 61 Pa. Code Pt. I Subpt. B

Art. V (relating to personal income tax).

(2)  Employee business expenses are allowable deductions

as determined under Article III of the Tax Reform Code of

1971.

(3)  The amount of any housing allowance provided to a

member of the clergy shall not be taxable as earned income.

"Employer."  A person, association, corporation, governmental

unit or other entity employing one or more persons, other than

domestic servants for compensation.

"Nonresident."  A person, association or other entity

domiciled outside a school district.

"Person" or "individual."  A natural person.

"Political subdivision."  A school district.

"Preceding year."  The calendar year or fiscal year before a

current year.

"Resident."  A person, association, corporation or other

entity:

(1)  living in or maintaining a permanent or fixed place

of abode in a school district; or

(2)  conducting or engaging in a business for profit

within a school district.

"Succeeding year."  The calendar year or fiscal year

following a current year.

"Tax officer."  The person, public employee or private agency

designated by a governing body to collect and administer a tax

imposed under this chapter, and the treasurer of a school

district of the first class A.

"Taxpayer."  A person, association or other entity required

under this chapter to file a tax return or to pay a tax.

Section 503.  Preemption.

No act of the General Assembly shall vacate or preempt any

resolution passed or adopted under the authority of this chapter

or any other act providing authority for the imposition of a tax

by a school district, unless the act of the General Assembly

expressly vacates or preempts the authority to pass or adopt

such resolutions.

Section 504.  Earned income tax authorization.

(a)  School districts.--Except as prohibited under Chapter

11, each school district shall have the power and may, by

resolution, levy, assess and collect or provide for the levying,

assessment and collection of a tax for general revenue purposes

at a rate as it shall determine on earned income of the

residents of the school district. A school district may only

impose and increase the rate of earned income tax when that

school district complies with the provisions of subsection (b).

(b)  Adoption of referendum.--

(1)  In order to levy an earned income tax under this

chapter, a governing body shall use the procedures set forth

in paragraphs (2), (3), (4), (5), (6) and (7).

(2)  (i)  Subject to the notice and public hearing

requirements of paragraph (7), a governing body may levy

the earned income tax under this chapter only by

obtaining the approval of the electorate of the affected

school district in a public referendum at only the

municipal election preceding the fiscal year when the

earned income tax will be initially imposed or the rate

increased.

(ii)  The referendum question must state the initial

rate of the proposed earned income tax, the reason for

the tax and the amount of proposed budgeted revenue

growth, if any, in the first fiscal year following

adoption of the referendum.

(iii)  The question shall be in clear language that

is readily understandable by a layperson. For the purpose

of illustration, a referendum question may be framed as

follows:

Do you favor the imposition of an earned income and

net profits tax of X%?

(iv)  A nonlegal interpretative statement must

accompany the question in accordance with section 201.1

of the act of June 3, 1937 (P.L.1333, No.320), known as

the Pennsylvania Election Code, that includes the

following: the initial rate of the earned income tax

imposed under this chapter and the estimated revenues to

be derived from the initial rate of the earned income tax

imposed under this chapter.

(3)  In the event a school district is located in more

than one county, petitions under this section shall be filed

with the election officials of the county in which the

administrative offices of the school district are located.

(4)  The election officials who receive a petition shall

perform all administrative functions in reviewing and

certifying the validity of the petition and conduct all

necessary communications with the school district.

(5)  (i)  If the election officials of the county who

receive the petition certify that it is sufficient under

this section and determine that a question should be

placed on the ballot, the decision shall be communicated

to election officials in any other county in which the

school district is also located.

(ii)  Election officials in the other county or

counties shall cooperate with election officials of the

county receiving the petition to ensure that an identical

question is placed on the ballot at the same election

throughout the entire school district.

(6)  Election officials from each county involved shall

independently certify the results from their county to the

governing body.

(7)  (i)  In order to levy the tax under this section,

the governing body shall adopt a resolution which refers

to this chapter prior to placing a question on the

ballot.

(ii)  Prior to adopting a resolution imposing the tax

authorized by this section, the governing body shall give

public notice of its intent to adopt the resolution in

the manner provided by The Local Tax Enabling Act and

shall conduct at least two public hearings regarding the

proposed adoption of the resolution. One public hearing

shall be conducted during normal business hours and one

public hearing shall be conducted during evening hours or

on a weekend.

Section 505.  Continuity of tax.

Every tax levied under this chapter shall continue in force

on a calendar or fiscal year basis, as the case may be, without

annual reenactment unless the rate of the tax is subsequently

changed.

Section 506.  Exemption of low-income persons.

(a)  General rule.--Each school district shall exempt any

person whose total income from all sources is less than $10,000

per year from the earned income tax, or any portion thereof.

(b)  Procedures.--Each school district shall adopt procedures

for the processing of claims for these exemptions.

Section 507.  Collection of earned income tax.

The tax officer shall collect all earned income tax imposed

by a school district.

Section 508.  Limitation on assessment.

No assessment may be made of any earned income tax imposed

under this chapter more than five years after the date on which

the tax should have been paid except where a fraudulent return

or no return has been filed.

Section 509.  Distress and sale of property of taxpayer.

(a)  General rule.--In case of the neglect or refusal of any

person, association or corporation to make payment of the amount

of any earned income tax due after two months from the date of

the tax notice, the tax officer shall levy the amount of the

tax, penalty, interest and costs thereon, not exceeding costs

and charges allowed constables for similar services by distress

and sale of the goods and chattels of the delinquent taxpayer,

wherever located, after giving at least ten days' public notice

of such sale by one advertisement in a newspaper of general

circulation published in the county.

(b)  Effect on return.--No failure to demand or collect any

taxes by distress and sale of goods and chattels shall

invalidate any return made, lien filed for nonpayment of taxes

or any tax sale for the collection of taxes.

Section 510.  Collection of delinquent taxes from employers.

(a)  General rule.--The tax officer shall demand, receive and

collect from all employers employing persons owing delinquent

earned income taxes or having in possession unpaid earned income

belonging to any person or persons owing delinquent earned

income taxes on the presentation of a written notice and demand

certifying that the information contained in the notice and

demand is true and correct and containing the name of the

taxpayer and the amount of tax due.

(b)  Response to notice.--On the presentation of the written

notice and demand, the employer shall deduct from the earned

income of the employees then owing, or thereafter due, a sum

sufficient to pay the amount of the delinquent earned income

taxes, interest, penalty and costs shown on the written notice

or demand, and shall pay the same to the tax officer by which

the delinquent tax was levied within 60 days after the notice

was given.

(c)  Limitation on deduction.--No more than 10% of the

compensation of the delinquent taxpayer may be deducted at any

one time for delinquent earned income taxes, penalty, interest

and costs.

(d)  Deduction for costs.--The employer shall be entitled to

deduct from the moneys collected from each employee the costs

incurred from the extra bookkeeping necessary to record the

transactions, not exceeding 2% of the amount collected and paid

over to the tax officer.

(e)  Forfeiture.--If the employer fails to deduct the amount

of such taxes or to pay the same over to the tax officer, less

the amount deducted under subsection (d), within the time

required by this section, the employer shall forfeit and pay the

amount of the tax for those taxpayers whose taxes are not

withheld and paid over, or that are withheld and not paid over

together with a penalty of 10%, to be recovered by a civil

action instituted by the tax officer, as debts of like amount

are now by law recoverable, except that the person shall not

have the benefit of any exemption law or stay of execution.

(f)  Collection rights preserved.--Nothing in this section

shall be deemed to affect or impair the right of any school

district or the tax officer to pursue and collect delinquent

taxes validly imposed prior to the effective date of this

section.

Section 511.  Collection of delinquent taxes from Commonwealth.

(a)  General rule.--On presentation of a written notice and

demand under oath to the State Treasurer or any other fiscal

officer of the Commonwealth, or its boards, authorities,

agencies or commissions, the treasurer or officer shall deduct

from the compensation then owing a sum sufficient to pay the

amount of the delinquent earned income taxes, interest, penalty

and costs shown on the written notice. The same shall be paid to

the tax officer within 60 days after the notice is given.

(b)  Limitation on deduction.--No more than 10% of the

compensation of the delinquent taxpayer may be deducted at any

one time for delinquent earned income taxes, interest, penalty

and costs.

(c)  Collection rights preserved.--Nothing in this section

shall be deemed to affect or impair the right of a school

district or the tax officer to pursue and collect delinquent

taxes validly imposed prior to the effective date of this

section.

Section 512.  Notice to taxpayer.

The tax officer shall, at least 15 days prior to the

presentation of a written notice and demand under section 510 or

511, notify the taxpayer owing the delinquent tax by registered

mail that a written notice and demand shall be presented to the

taxpayer's employer unless such tax is paid. The return receipt

card for registered mail shall be marked delivered to addressee

only, and the cost of notification by registered mail shall be

included in the costs for collecting taxes.

Section 513.  Collection of taxes by suit.

(a)  Power to collect.--

(1)  Each school district and the tax officer shall have

power to collect unpaid taxes from taxpayers and employers

owing such taxes by a civil action or other appropriate

remedy.

(2)  On judgment, execution may be issued without any

stay or benefit of any exemption law.

(3)  The power to collect unpaid taxes under the

provisions of this section shall not be affected by the fact

that such taxes have been entered as liens in the office of

the prothonotary or the fact that the property against which

they were levied has been returned to the county

commissioners for taxes for prior years.

(b)  Limitation of actions.--A suit brought to recover the

taxes under subsection (a) shall be instituted within three

years after the tax is due or within three years after a

declaration or return has been filed, whichever date is later,

except in the following cases:

(1)  If no declaration or return was filed by any person,

although a declaration or return was required to be filed

under provisions of the ordinance, there shall be no

limitation.

(2)  If an examination of the declaration or return filed

by any person, or of other evidence relating to the

declaration or return in the possession of the tax officer,

reveals a fraudulent evasion of taxes, there shall be no

limitation.

(3)  If there is a substantial understatement of tax

liability of 25% or more and no fraud, suit shall be

instituted within six years.

(4)  If a person has deducted taxes under the provisions

of the resolution and has failed to pay the amounts so

deducted to the tax officer, or if any person has willfully

failed or omitted to make the deductions required by this

section, there shall be no limitation.

(c)  Procedures.--The tax officer shall establish the

procedures for collecting the earned income tax and paying the

full amount collected over to the school district on a quarterly

basis.

Section 514.  Interest and penalties.

(a)  General rule.--If for any reason the tax is not paid

when due, interest at the annual rate of 6% on the amount of the

tax, and an additional penalty of .5% of the amount of the

unpaid tax for each month or fraction thereof during which the

tax remains unpaid, shall be added and collected. Where suit is

brought for the recovery of such tax, the person liable therefor

shall, in addition, be liable for the costs of collection and

the interest and penalties herein imposed.

(b)  One-time waiver of interest authorized.--

(1)  Notwithstanding the provisions of subsection (a),

the school district may, by resolution, establish a one-time

period during which interest or interest and penalties that

would otherwise be imposed for the nonreporting or

underreporting of earned income tax liabilities or for the

nonpayment of earned income taxes previously imposed and due

shall be waived in total or in part if the taxpayer

voluntarily files delinquent returns and pays the taxes in

full during the period so established.

(2)  Each school district may adopt regulations to

implement the provisions of this subsection.

(c)  Proceedings.--The provisions of subsection (b) shall not

affect or terminate any petitions, investigations, prosecutions

or other proceedings pending on the effective date of this

section, or prevent the commencement or further prosecution of

any proceedings by the proper authorities for violations of this

act. No proceedings shall, however, be commenced on the basis of

delinquent returns filed pursuant to subsection (b) if the

returns are determined to be substantially true and correct and

the taxes are paid in full within the prescribed time.

Section 515.  Fines and penalties for violation of resolutions.

(a)  Conduct prohibited.--

(1)  Any person who fails, neglects or refuses to make

any declaration or return required by the resolution, any

employer who fails, neglects or refuses to register or to pay

the tax deducted from its employees, or fails, neglects or

refuses to deduct or withhold the tax from its employees, any

person who refuses to permit the officer or any agent

designated by that officer to examine the person's books,

records and papers, and any person who knowingly makes any

incomplete, false or fraudulent return, or attempts to do

anything whatsoever to avoid the full disclosure of the

amount of the person's earned income in order to avoid the

payment of the whole or any part of the tax imposed by the

resolution, shall, upon conviction thereof, in any county in

which the school district imposing the tax is located be

sentenced to pay a fine of not more than $500 for each

offense and costs and, in default of payment of the fines and

costs, to be imprisoned for a period not exceeding 30 days.

(2)  Any person who divulges any information which is

confidential under the provisions of the resolution shall,

upon conviction thereof, be sentenced to pay a fine of not

more than $500 for each offense and costs and, in default of

payment of said fines and costs, to be imprisoned for a

period not exceeding 30 days.

(b)  Cumulative penalties.--The penalties imposed under this

section shall be in addition to any other penalty imposed by any

other section of the resolution.

(c)  Defense unavailable.--The failure of any person to

receive or procure forms required for making the declaration or

returns required by the resolution shall not excuse the person

from making the declaration or return.

Section 516.  Collection at source.

(a)  Duty of employers to register.--Every employer having an

office, factory, workshop, branch, warehouse or other place of

business within the school district imposing a tax on earned

income within the taxing district who employs one or more

persons, other than domestic servants, for a salary, wage,

commission or other compensation, who has not previously

registered shall, within 15 days after becoming an employer,

register with the tax officer his name and address and such

other information as the tax officer may require.

(b)  Duty to deduct tax.--

(1)  Every employer having an office, factory, workshop,

branch, warehouse or other place of business within the

school district imposing a tax on earned income who employs

one or more persons, other than domestic servants, for a

salary, wage, commission or other compensation, shall deduct

at the time of payment thereof, the tax imposed pursuant to

this chapter on the earned income due to his employee or

employees, and shall, on or before April 30 of the current

year, July 31 of the current year, October 31 of the current

year and January 31 of the succeeding year, file a return and

pay to the tax officer the amount of taxes deducted during

the preceding three-month periods ending March 31 of the

current year, June 30 of the current year, September 30 of

the current year and December 31 of the current year,

respectively.

(2)  Unless otherwise agreed upon between the tax officer

and employer, the return shall show the name and Social

Security number of each employee, the earned income of the

employee during the preceding three-month period, the tax

deducted from the compensation, the school district imposing

the tax upon the employee, the total earned income of all

employees during the preceding three-month period and the

total tax deducted from the compensation and paid with the

return.

(3)  Any employer that for two of the preceding four

quarterly periods has failed to deduct the proper tax, or any

part thereof, or has failed to pay over the proper amount of

tax to the school district, may be required by the tax

officer to file his return and pay the tax monthly. In such

cases, payments of tax shall be made to the tax officer on or

before the last day of the month succeeding the month for

which the tax was withheld.

(c)  Duty to file annual return.--On or before February 28 of

the succeeding year, every employer shall file with the tax

officer:

(1)  An annual return showing the total amount of earned

income paid, the total amount of tax deducted and the total

amount of tax paid to the tax officer for the period

beginning January 1 of the current year and ending December

31 of the current year.

(2)  A return withholding statement for each employee

employed during all or any part of the period beginning

January 1 of the current year and ending December 31 of the

current year, setting forth the employee's name, address and

Social Security number, the amount of earned income paid to

the employee during the period, the amount of tax deducted,

the school district imposing the tax upon the employees and

the amount of tax paid to the tax officer. Every employer

shall furnish two copies of the individual return to the

employee for whom it is filed.

(d)  Discontinued businesses.--Every employer who

discontinues business prior to December 31 of the current year

shall, within 30 days after the discontinuance of business, file

the returns and withholding statements required by this section

and pay the tax due.

(e)  Liability of employers.--Every employer who willfully or

negligently fails or omits to make the deductions required by

this section shall be liable for payment of the taxes which he

was required to withhold to the extent that such taxes have not

been recovered from the employee.

(f)  Liability of employees.--The failure or omission of any

employer to make the deductions required by this section shall

not relieve any employee from the payment of the tax or from

complying with the requirements of the ordinance or resolution

relating to the filing of declarations and returns.

CHAPTER 7

SALES AND USE TAX FOR THE

STABILIZATION OF EDUCATION FUNDING

SUBCHAPTER A

PRELIMINARY PROVISIONS

Section 701.  Scope.

The tax provided for under this chapter shall be known as the

Sales and Use Tax for the Stabilization of Education Funding,

which shall be a replacement for the sales and use tax

authorized under Article II of the Tax Reform Code of 1971 and

that is repealed by this act.

Section 701.1.  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:

(a)  "Soft drinks."

(1)  All nonalcoholic beverages, whether carbonated or

not, such as soda water, ginger ale, Coca Cola, lime cola,

Pepsi Cola, Dr Pepper, fruit juice when plain or carbonated

water, flavoring or syrup is added, carbonated water,

orangeade, lemonade, root beer or any and all preparations,

commonly referred to as soft drinks, of whatsoever kind, and

are further described as including any and all beverages,

commonly referred to as soft drinks, which are made with or

without the use of any syrup.

(2)  The term does not include natural fruit or vegetable

juices or their concentrates, or noncarbonated fruit juice

drinks containing not less than 25% by volume of natural

fruit juices or of fruit juice which has been reconstituted

to its original state, or natural concentrated fruit or

vegetable juices reconstituted to their original state,

whether any of the natural juices are frozen or unfrozen,

sweetened or unsweetened, seasoned with salt or spice or

unseasoned. The term also does not include coffee, coffee

substitutes, tea, cocoa, natural fluid milk or noncarbonated

drinks made from milk derivatives.

(b)  "Maintaining a place of business in this Commonwealth."

(1)  Having, maintaining or using within this

Commonwealth, either directly or through a subsidiary,

representative or an agent, an office, distribution house,

sales house, warehouse, service enterprise or other place of

business; or any agent of general or restricted authority, or

representative, irrespective of whether the place of

business, representative or agent is located in this

Commonwealth, permanently or temporarily, or whether the

person or subsidiary maintaining the place of business,

representative or agent is authorized to do business within

this Commonwealth.

(2)  Engaging in any activity as a business within this

Commonwealth by any person, either directly or through a

subsidiary, representative or an agent, in connection with

the lease, sale or delivery of tangible personal property or

the performance of services thereon for use, storage or

consumption or in connection with the sale or delivery for

use of the services described in subclauses (11) through (18)

of clause (k) of this section, including, but not limited to,

having, maintaining or using any office, distribution house,

sales house, warehouse or other place of business, any stock

of goods or any solicitor, canvasser, salesman,

representative or agent under its authority, at its direction

or with its permission, regardless of whether the person or

subsidiary is authorized to do business in this Commonwealth.

(3)  Regularly or substantially soliciting orders within

this Commonwealth in connection with the lease, sale or

delivery of tangible personal property to or the performance

thereon of services or in connection with the sale or

delivery of the services described in subclauses (11) through

(18) of clause (k) of this section for residents of this

Commonwealth by means of catalogs or other advertising,

whether the orders are accepted within or without this

Commonwealth.

(3.1)  Entering this Commonwealth by any person to

provide assembly, service or repair of tangible personal

property, either directly or through a subsidiary,

representative or an agent.