AN ACT

 

1Providing for the Manufacturing Innovation Account Program, for
2application, for evaluation of application, for approval of
3application, for Manufacturing Innovation Account, for
4deduction, for tax treatment of withdrawals, for filing
5requirements, for duties of the Department of Community and
6Economic Development, for exclusions and for applicability.

7The General Assembly of the Commonwealth of Pennsylvania
8hereby enacts as follows:

9Section 1. Short title.

10This act shall be known and may be cited as the Manufacturing
11Innovation Account Act.

12Section 2. Definitions.

13The following words and phrases when used in this act shall
14have the meanings given to them in this section unless the
15context clearly indicates otherwise:

16"Account." A Manufacturing Innovation Account established
17under section 7.

18"Applicant." A small manufacturer that has applied for

1approval for participation in the program.

2"Department." The Department of Community and Economic
3Development of the Commonwealth.

4"Eligible expenditure." The term includes:

5(1) the purchase of machinery or equipment provided the
6machinery or equipment is used for manufacturing in this
7Commonwealth;

8(2) the purchase or improvement of a manufacturing
9facility provided the facility is located in this
10Commonwealth and used for manufacturing by the small
11manufacturer; or

12(3) a cost or tuition fee for the training of the small
13manufacturer's employees provided the training is directly
14related to the job duties of the employees.

15"Pass-through entity." Any of the following:

16(1) a partnership as defined in section 301(n.0) of the
17Tax Reform Code;

18(2) a single-member limited liability company treated as
19a disregarded entity for Federal income tax purposes; or

20(3) a Pennsylvania S corporation as defined in section
21301(n.1) of the Tax Reform Code.

22"Program." The Manufacturing Innovation Account Program
23established under section 3.

24"Small manufacturer." An entity, including a pass-through
25entity, that:

26(1) is authorized to do business in this Commonwealth;

27(2) is subject to taxes imposed under Article III or IV
28of the Tax Reform Code;

29(3) is classified by the North American Industry
30Classification System as sector 31-33 regarding

1manufacturing;

2(4) has 50 or fewer employees at the time of application
3under section 4; or

4(5) is current with taxes or other amounts payable to
5the Federal Government, the Commonwealth or a political
6subdivision.

7"Statement of policy." As defined in 1 Pa. Code § 1.4
8(relating to definitions).

9"Tax Reform Code." The act of March 4, 1971 (P.L.6, No.2),
10known as the Tax Reform Code of 1971.

11Section 3. Manufacturing Innovation Account Program.

12There is established within the department a program to be
13known as the Manufacturing Innovation Account Program. The
14program shall promote the economic competitiveness of this
15Commonwealth by improving the ability of small manufacturers to
16acquire or improve machinery or manufacturing facilities or to
17provide employee training.

18Section 4. Application.

19A small manufacturer may submit an application to the
20department requesting approval for participation in the program.
21The application must be on a form required by the department and
22must include the name, address, State tax identification number
23of the applicant and any other information required by the
24department.

25Section 5. Evaluation of application.

26The department shall evaluate and prioritize applications
27consistent with the statement of policy published by the
28department under section 11(a).

29Section 6. Approval of application.

30(a) Approval.--The department may approve an application if

1it determines that the applicant is qualified based on the
2statement of policy published by the department under section
311(a).

4(b) Limitations.--

5(1) During the first year after the effective date of
6this act, no more than 30 small manufacturers may be approved
7under this act.

8(2) During the second year after the effective date of
9this act, no more than 40 small manufacturers may be approved
10under this act.

11(3) During the third year after the effective date of
12this act and thereafter, no more than 50 small manufacturers
13may be approved under this act.

14(c) Replacement.--If a small manufacturer ceases to
15participate in the program, the department may approve another
16qualified applicant for participation in the program subject to
17the limitations in subsection (b).

18Section 7. Manufacturing Innovation Account.

19(a) Establishment.--A small manufacturer that is approved by
20the department for participation in the program shall establish
21a Manufacturing Innovation Account in a bank doing business in
22this Commonwealth. Funds in the account may be invested;
23however, returns, interest and principal may not be commingled
24with other property.

25(b) Annual contribution limit.--A small manufacturer may not
26contribute more than $100,000 to its account per taxable year.

27(c) Lifetime contribution limit.--A small manufacturer may
28not contribute more than $500,000 to its account over the
29lifetime of the account.

30(d) Expiration of accounts.--An account expires six years

1after its establishment.

2Section 8. Deduction.

3An amount paid by a small manufacturer as a contribution into
4an account is deductible from taxable income under Article III
5or IV of the Tax Reform Code. The deduction may not result in
6taxable income being less than zero.

7Section 9. Tax treatment of withdrawals.

8(a) Amount used for an eligible expense.--An amount
9withdrawn from an account by a small manufacturer that is used
10for an eligible expense is not subject to tax under Article III
11or IV of the Tax Reform Code.

12(b) Amount not used for an eligible expense.--

13(1) The following must be added to the small
14manufacturer's taxable income under Article III or IV of the
15Tax Reform Code:

16(i) an amount withdrawn from an account that is not
17used for an eligible expense;

18(ii) an amount remaining in the account upon its
19expiration; and

20(iii) an amount remaining in the account upon the
21small manufacturer's disqualification from the program
22under section 12.

23(2) A small manufacturer shall pay an additional penalty
24of 10% of the amount subject to paragraph (1).

25Section 10. Filing requirements.

26(a) Annual accounting.--A small manufacturer participating
27in the program shall submit to the department, in a format
28prescribed by the department in consultation with the Department
29of Revenue, an annual accounting of the deposits, returns,
30interest and withdrawals related to the small manufacturer's

1account. The accounting must:

2(1) specify the purposes for which the withdrawals were
3made; and

4(2) include the necessary supporting documentation to
5establish whether the withdrawal is for an eligible expense.

6(b) Letter rulings.--The following apply:

7(1) Prior to a withdrawal of funds from an account, a
8small manufacturer may request that the department review a
9planned expenditure and issue a letter ruling on whether the
10expenditure would be an eligible expense. When necessary and
11appropriate, the department may indicate that sufficient
12facts have not been furnished and detail certain assumptions.

13(2) Within 30 days of receiving a request under
14paragraph (1), the department shall, in writing, advise the
15small manufacturer whether or not the expenditure would be an
16eligible expense.

17(3) A letter ruling issued under this subsection is
18advisory in nature and not subject to appeal.

19(4) A small manufacturer may rely on a letter ruling
20issued to the small manufacturer under this subsection that
21is based upon the facts supplied and provided the small
22manufacturer is acting in good faith.

23Section 11. Duties of the department.

24(a) Statement of policy.--The department shall publish a
25statement of policy that administers the program and describes
26criteria for evaluating and prioritizing qualified applicants.
27At a minimum, the statement of policy shall consider the
28following:

29(1) the overall value to be added to this Commonwealth's
30economy as the result of the small manufacturer's

1participation in the program, including considerations of the
2size and scope of the small manufacturer's supply chain
3within this Commonwealth;

4(2) the number and compensation of jobs likely to be
5created by the applicant with the benefit of participation in
6the program; and

7(3) the prospects for the continued viability of the
8applicant.

9(b) Public disclosure.--The department shall publish and
10maintain an up-to-date list of small manufacturers approved for
11participation in the program on its publicly available Internet
12website.

13Section 12. Exclusions.

14If a small business becomes delinquent in the payment of a
15tax or other amount to the Federal Government, the Commonwealth
16or another political subdivision, the small business becomes
17ineligible for continued participation in the program.

18Section 13. Applicability.

19Sections 7, 8 and 9 are applicable for tax years beginning
20after December 31, 2013.

21Section 30. Effective date.

22This act shall take effect immediately.