1Amending the act of March 4, 1971 (P.L.6, No.2), entitled "An
2act relating to tax reform and State taxation by codifying
3and enumerating certain subjects of taxation and imposing
4taxes thereon; providing procedures for the payment,
5collection, administration and enforcement thereof; providing
6for tax credits in certain cases; conferring powers and
7imposing duties upon the Department of Revenue, certain
8employers, fiduciaries, individuals, persons, corporations
9and other entities; prescribing crimes, offenses and
10penalties," providing for alternative payment; in capital
11stock and franchise tax, further providing for imposition of
12tax and for expiration; and providing for alternative minimum
13tax.

14The General Assembly of the Commonwealth of Pennsylvania
15hereby enacts as follows:

16Section 1. The act of March 4, 1971 (P.L.6, No.2), known as
17the Tax Reform Code of 1971, is amended by adding a section to
18read:

19Section 403.3. Alternative Payment.--Any taxpayer whose tax
20liability for a tax year is less than $100 shall be liable for
21the tax imposed under Article VI-A. For purposes of determining
22the application of this section, a taxpayer shall not include
23any reduction for net loss otherwise permitted under section

1401(3)4(c) in calculating tax liability.

2Section 2. Sections 602(h) and 607 of the act, amended
3October 9, 2009 (P.L.451, No.48), are amended to read:

4Section 602. Imposition of Tax.--* * *

5(h) The rate of tax for purposes of the capital stock and
6franchise tax for taxable years beginning within the dates set
7forth shall be as follows:

8Taxable Year	Regular Rate	Surtax	Total Rate
9January 1, 1971, to 10December 31, 1986	10 mills	0	10 mills
11January 1, 1987, to 12December 31, 1987	9 mills	0	9 mills
13January 1, 1988, to 14December 31, 1990	9.5 mills	0	9.5 mills
15January 1, 1991, to 16December 31, 1991	11 mills	2 mills	13 mills
17January 1, 1992, to 18December 31, 1997	11 mills	1.75 mills	12.75 mills
19January 1, 1998, to 20December 31, 1998	11 mills	.99 mills	11.99 mills
21January 1, 1999, to 22December 31, 1999	10.99 mills	0	10.99 mills
23January 1, 2000, to 24December 31, 2000	8.99 mills	0	8.99 mills
25January 1, 2001, to 26December 31, 2001	7.49 mills	0	7.49 mills
27January 1, 2002, to 28December 31, 2003	7.24 mills	0	7.24 mills
29January 1, 2004, to 30December 31, 2004	6.99 mills	0	6.99 mills
20130SB0234PN0372 -2-
1January 1, 2005, to 2December 31, 2005	5.99 mills	0	5.99 mills
3January 1, 2006, to 4December 31, 2006	4.89 mills	0	4.89 mills
5January 1, 2007, to 6December 31, 2007	3.89 mills	0	3.89 mills
7[January 1, 2008, to 8December 31, 2011	2.89 mills	0	2.89 mills
9January 1, 2012, to 10December 31, 2012	1.89 mills	0	1.89 mills
11January 1, 2013, to 12December 31, 2013	.89 mills	0	.89 mills]
13January 1, 2008, to 14December 31, 2014	2.89 mills	0	2.89 mills
15January 1, 2015, to 16December 31, 2016	1.89 mills	0	1.89 mills
17January 1, 2017, to 18December 31, 2018	.89 mills	0	.89 mills

19Section 607. Expiration.--This article shall expire for
20taxable years beginning after December 31, [2013] 2018.

21Section 3. The act is amended by adding an article to read:

22Article VI-A

23Alternative Minimum Tax

24Section 601-A. Definitions.

25The following words and phrases when used in this article
26shall have the meanings given to them in this section unless the
27context clearly indicates otherwise:

28"Average net income."

29(1) The sum of the net income or loss for each of the
30current and immediately preceding four years, divided by

1five. If the entity has not been in existence for a period of
2five years, the average net income shall be the average net
3income for the number of years that the entity has actually
4been in existence.

5(2) In computing average net income, losses shall be
6entered as computed, but the average net income shall not be
7less than zero.

8(3) The net income or loss of the entity for any taxable
9year shall be the amount set forth as income per books on the
10income tax return filed by the entity with the Federal
11Government for the taxable year, or if no return is made, as
12it would have been set forth had the return been made,
13subject to correction for fraud, evasion or error.

14(4) In the case of any entity which has an investment in
15another corporation, the net income or loss shall be computed
16on an unconsolidated basis exclusive of the net income or
17loss of the other corporation without regard to how the
18corporation is treated for Federal income tax purposes.

19(5) In the case of a limited liability company or
20business trust that is not taxable as a corporation for
21Federal income tax purposes, the net income or loss of the
22limited liability company or business trust for any given
23year shall be reduced by the amount of distributions made by
24the limited liability company or business trust to any member
25of the limited liability company or business trust who is
26deemed to be materially participating in the activities
27conducted by the limited liability company or business trust
28for purposes of section 469 of the Internal Revenue Code of
291986 (Public Law 99-514, 26 U.S.C. § 469).

30(6) In the case of a limited liability company or

1business trust that for Federal income tax purposes is a
2disregarded entity of a natural person, the net income or
3loss of the limited liability company or business trust for
4any given year shall be reduced by the amount of
5distributions made by the limited liability company or
6business trust to a natural person. For this purpose,
7distributions which are made to a member of a limited
8liability company or business trust within 30 days of the end
9of a given year may be treated as having been made in the
10preceding year and not in the year in which such distribution
11is actually made.

12"Capital stock." The capital stock, certificates,
13memberships and all other interests in a domestic or foreign
14entity.

15"Capital stock value." The amount computed pursuant to the
16following formula:

17the product of one-half times the sum of the average net
18income capitalized at the rate of 9.5% plus 75% of net worth,
19the algebraic equivalent of which is .5 X (average net
20income/.095 + (.75)(net worth)).

21"Corporation."

22(1) Any of the following:

23(i) A corporation.

24(ii) A joint-stock association.

25(iii) A business trust, limited liability company or
26other entity which for Federal income tax purposes is
27classified as a corporation.

28(2) The term does not include:

29(i) A business trust which qualifies as a real
30estate investment trust under section 856 of the Internal

1Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. § 856)
2or which is a qualified real estate investment trust
3subsidiary under section 856(i) of the Internal Revenue
4Code of 1986 (26 U.S.C. § 856(i)).

5(ii) A business trust which qualifies as a regulated
6investment company under section 851 of the Internal
7Revenue Code of 1986 (26 U.S.C. § 851) and which is
8registered with the United States Securities and Exchange
9Commission under the Investment Company Act of 1940 or a
10related business trust which confines its activities in
11this Commonwealth to the maintenance, administration and
12management of intangible investments and activities of
13regulated investment companies.

14(iii) A corporation, trust or other entity which is
15an exempt organization as defined by section 501 of the
16Internal Revenue Code of 1986 (26 U.S.C. § 501).

17(iv) A corporation, trust or other entity organized
18as not-for-profit under the laws of this Commonwealth or
19the laws of any other state which meet one of the
20following:

21(A) would qualify as an exempt organization as
22defined by section 501 of the Internal Revenue Code
23of 1986 (26 U.S.C. § 501);

24(B) would qualify as a homeowners association as
25defined by section 528(c) of the Internal Revenue
26Code of 1986 (26 U.S.C. § 528(c));

27(C) is a membership organization subject to the
28Federal limitations on deductions from taxable income
29under section 277 of the Internal Revenue Code of
301986 (26 U.S.C. § 277) but only if no pecuniary gain

1or profit inures to any member or related entity from
2the membership organization; or

3(D) is a nonstock commodity or nonstock stock
4exchange.

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

6"Domestic entity." A corporation organized under the laws of
7the Commonwealth.

8"Foreign entity." A corporation organized by or under the
9laws of any jurisdiction other than the Commonwealth which
10exercises, whether in its own name or through any individual,
11association, business trust, corporation, joint venture, limited
12liability company, limited partnership, partnership or other
13entity, any of the following privileges:

14(1) Doing business in this Commonwealth.

15(2) Carrying on activities in this Commonwealth,
16including solicitation.

17(3) Having capital or property employed or used in this
18Commonwealth.

19(4) Owning property in this Commonwealth.

20"Holding company." Any corporation:

21(1) at least 90% of the gross income of which for the
22taxable year is derived from dividends, interest, gains from
23the sale, exchange or other disposition of stock or
24securities and the rendition of management and administrative
25services to subsidiary corporations; and

26(2) at least 60% of the actual value of the total assets
27of which consists of stock securities or indebtedness of
28subsidiary corporations.

29"Net worth." As follows:

30(1) Net worth shall be the sum of the entity's issued

1and outstanding capital stock, surplus and undivided profits
2as per books set forth for the close of the tax year on the
3income tax return filed by the entity with the Federal
4Government, or if no the return is made, as would have been
5set forth had the return been made, subject to any correction
6for fraud, evasion or error. In the case of any entity which
7has investments in other corporations, the net worth shall be
8the consolidated net worth of the entity computed in
9accordance with generally accepted accounting principles. In
10the case of a limited liability company or a business trust,
11net worth for any tax year shall be the entity's assets minus
12its liabilities as of the close of such tax year. Net worth
13shall in no case be less than zero.

14(2) If net worth as arrived at under paragraph (1) for
15the current tax year is greater than twice or less than one-
16half of the net worth which would have been calculated under
17paragraph (1) as of the first day of the current tax year,
18then net worth for the current tax year shall be the average
19of these two amounts.

20"Processing." The following activities when engaged in as a
21business enterprise:

22(1) The filtering or heating of honey, the cooking or
23freezing of fruits, vegetables, mushrooms, fish, seafood,
24meats or poultry, when the person engaged in the business
25packages the property in sealed containers for wholesale
26distribution.

27(2) The processing of fruits or vegetables by cleaning,
28cutting, coring, peeling or chopping and treating to
29preserve, sterilize or purify and substantially extend the
30useful shelf life of the fruits or vegetables, when the

1person engaged in the activity packages the property in
2sealed containers for wholesale distribution.

3(3) The scouring, carbonizing, cording, combing,
4throwing, twisting or winding of natural or synthetic fibers,
5or the spinning, bleaching, dyeing, printing or finishing of
6yarns or fabrics, when the activities are performed prior to
7sale to the ultimate consumer.

8(4) The electroplating, galvanizing, enameling,
9anodizing, coloring, finishing, impregnating or heat treating
10of metals or plastics for sale or in the process of
11manufacturing.

12(5) The blanking, shearing, leveling, slitting or
13burning of metals for sale to or use by a manufacturer or
14processor.

15(6) The rolling, drawing or extruding of ferrous and
16nonferrous metals.

17(7) The fabrication for sale of ornamental or structural
18metal or metal stairs, staircases, gratings, fire escapes or
19railings. The term does not include fabrication work done at
20the construction site.

21(8) The preparation of animal feed or poultry feed for
22sale.

23(9) The production, processing and bottling of
24nonalcoholic beverages for wholesale distribution.

25(10) The slaughtering and dressing of animals for meat
26to be sold or to be used in preparing meat products for sale,
27and the preparation of meat products, including lard, tallow,
28grease, cooking and inedible oils for wholesale distribution.

29(11) The operation of a saw mill or planing mill for the
30production of lumber or lumber products for sale. The

1operation of a saw mill or planing mill begins with the
2unloading by the operator of the saw mill or planing mill of
3logs, timber, pulpwood or other forms of wood material to be
4used in the saw mill or planing mill.

5(12) The milling for sale of flour or meal from grains.

6(13) The aging, stripping, conditioning, crushing and
7blending of tobacco leaves for use as cigar filler or as
8components of smokeless tobacco products for sale to
9manufacturers of tobacco products.

10(14) The publishing of books, newspapers, magazines or
11other periodicals, printing and broadcasting radio and
12television programs by licensed commercial or educational
13stations.

14(15) The processing of used lubricating oils.

15(16) The blending, rectification or production by
16distillation or otherwise of alcohol or alcoholic liquors,
17except the distillation of alcohol from byproducts of
18winemaking for the sole purpose of fortifying wine.

19(17) The salvaging, recycling or reclaiming of used
20materials to be recycled into a manufacturing process.

21(18) The development or substantial modification of
22computer programs or software for sale to unrelated persons
23for their direct and independent use.

24(19) The cleaning and roasting and the blending,
25grinding or packaging for sale of coffee from green coffee
26beans or the production of coffee extract.

27(20) The refining, blasting, exploring, mining and
28quarrying for or otherwise extracting limestone, sand, gravel
29or slag from the earth or from waste or stock piles or from
30pits or banks and the cleaning, crushing, grinding,

1pulverizing, sizing or screening of limestone, sand, gravel
2or slag, including blast furnace slag.

3(21) The preparation of dry or liquid fertilizer for
4sale.

5(22) The production, processing and packaging of ice for
6wholesale distribution.

7"Research and development." The activities relating to the
8discovery of new and the refinement of known substances,
9products, processes, theories and ideas. The term does not
10include activities directed primarily to the accumulation or
11analysis of commercial, financial or mercantile data.

12"Student loan assets." The term includes the following
13assets:

14(1) Student loan notes.

15(2) Federal, State or private subsidies or guarantees of
16student loans.

17(3) Instruments that represent a guarantee of debt,
18certificates or other securities issued by an entity created
19for the securitization of student loans or by a trustee on
20its behalf.

21(4) Contract rights to acquire or dispose of student
22loans and interest rate-swap agreements related to student
23loans.

24(5) Interests in or debt obligations of other student
25loan securitization trusts or entities.

26(6) Cash or cash equivalents representing reserve funds
27or payments on or with respect to student loan notes, the
28securities issued by an entity created for the securitization
29of student loans or the other student loan-related assets.
30Solely for purposes of this definition, "cash or cash

1equivalents" shall include direct obligations of the United
2States Department of the Treasury, obligations of Federal
3agencies, which obligations represent the full faith and
4credit of the United States, investment grade debt
5obligations or commercial paper, deposit accounts, Federal
6funds and banker's acceptances, prefunded municipal
7obligations, money market instruments and money market funds.

8"Subsidiary corporation." Any corporation, a majority of the
9total issued and outstanding shares of voting stock of which are
10owned by the taxpayer corporation directly or through one or
11more intervening subsidiary corporations.

12Section 601.1-A. Reporting requirements.

13It shall be the duty of every domestic and foreign entity to
14make for each taxable year, as defined in section 401(5), a
15written report verified in accordance with the requirements of
16the department on a form or forms to be prescribed and furnished
17by it setting forth the information required. The time for
18filing reports may be extended. The procedure if the department
19is not satisfied with the reports for the entity and the
20penalties for failing to file reports and pay taxes shall be as
21prescribed by law.

22Section 602-A. Imposition of tax.

23(a) General rule.--

24(1) Except as provided in paragraph (2), every domestic
25entity from which a report is required under section 601-A
26shall be subject to, and pay to the department annually, a
27tax which is the amount computed by multiplying each dollar
28of the capital stock value by the appropriate rate of tax
29under subsection (f).

30(2) Any domestic entity or company subject to the tax

1imposed under this subsection may elect to compute and pay
2its tax in accordance with subsection (b).

3(3) (i) Except as provided under subparagraph (ii),
4this section shall not apply to the taxation of the
5capital stock of entities organized for manufacturing,
6processing, research or development purposes, which is
7invested in and actually and exclusively employed in
8carrying on manufacturing, processing, research or
9development within this Commonwealth, except as those
10entities enjoy and exercise the right of eminent domain.

11(ii) Every entity organized for the purpose of
12manufacturing, processing, research or development except
13as those entities enjoy and exercise the right of eminent
14domain shall pay the State tax the amount computed by
15multiplying each dollar of the capital stock value by the
16appropriate rate of tax under subsection (f) upon the
17proportion of its capital stock, if any, as may be
18invested in any property or business not strictly
19incident or appurtenant to the manufacturing, processing,
20research or development business, in addition to the
21local taxes assessed upon its property in the district
22where located.

23(iii) The purpose of this paragraph is to relieve
24from State taxation only so much of the capital stock as
25is invested purely in the manufacturing, processing,
26research or development plant and business.

27(4) This section shall not apply to the taxation of so
28much of the capital stock value attributable to student loan
29assets owned or held by an entity created for the
30securitization of student loans or by a trustee on its

1behalf.

2(b) Entities.--The following shall apply:

3(1) (i) Every foreign entity from which a report is
4required under section 601.1-A shall be subject to and
5pay to the department annually a franchise tax which is
6the amount computed by multiplying each dollar of the
7capital stock value by the appropriate rate of tax under
8subsection (f) upon a taxable value to be determined
9under subparagraph (ii).

10(ii) The taxable value shall be determined by
11employing the relevant apportionment factors under
12Article IV. The manufacturing, processing, research and
13development exemptions contained under subsection (a)
14shall apply to foreign corporations. In determining the
15relevant apportionment factors, the numerator of the
16property or payroll factors shall not include any
17property or payroll attributable to manufacturing,
18processing, research or development activities in this
19Commonwealth; and any property or payroll attributable to
20manufacturing, processing, research or development
21activities outside this Commonwealth shall also be
22excluded from the numerator of the property or payroll
23factors.

24(2) The provisions of this section shall not apply to
25the taxation of the capital stock value attributable to
26student loan assets owned or held by an entity created for
27the securitization of student loans or by a trustee on its
28behalf.

29(3) Any foreign corporation, joint-stock association,
30limited partnership or company subject to the tax imposed

1under this section may elect to compute and pay its tax under
2subsection (a), except that any foreign corporation, joint-
3stock association, limited partnership or company electing to
4compute and pay its tax under subsection (a) shall be treated
5as if it were a domestic corporation for the purpose of
6determining which of its assets are exempt from taxation and
7for the purpose of determining the proportion of the value of
8its capital stock which is subject to taxation.

9(4) The provisions of this article shall apply to the
10taxation of entities organized for manufacturing, processing,
11research or development purposes, but shall not apply as
12these entities enjoy and exercise the right of eminent
13domain.

14(c) Duties.--

15(1) Except as provided under paragraph (2), it shall be
16the duty of the treasurer or other officers having charge of
17any domestic or foreign entity, upon which a tax is imposed
18under this section, to transmit the amount of tax to the
19department within the time prescribed by law.

20(2) (i) For the purposes of this article interest in
21limited partnerships or joint-stock associations shall be
22deemed to be capital stock, and taxable accordingly.

23(ii) Entities liable to a tax under this section
24shall not be required to pay any further tax on the
25mortgages, bonds and other securities owned by them and
26in which the whole body of stockholders or members, as
27such, have the entire equitable interest in remainder.
28Entities owning or holding the securities as trustees,
29executors, administrators, guardians, or in any other
30manner than for the whole body of stockholders or members

1thereof as sole equitable owners in remainder, shall
2return and pay the tax imposed by this article upon all
3securities owned or held by them, as in the case of
4individuals.

5(d) Holding companies.--Any holding company subject to the
6capital stock tax or the franchise tax imposed under this
7section may elect to compute the capital stock or franchise tax
8by applying the rate of tax provided under subsection (f) to 10%
9of the capital stock value. If exercised, this election shall be
10in lieu of any other apportionment or allocation to which the
11company would otherwise be entitled.

12(e) Proration.--If a domestic or foreign entity is required
13to file a report under section 601.1-A on other than an annual
14basis, the tax imposed under this section shall be prorated to
15reflect the portion of a taxable year for which the report is
16filed by multiplying the tax liability by a fraction equal to
17the number of days in the taxable year divided by 365 days.

18(f) Rate.--The rate of tax for purposes of the capital stock
19and franchise tax shall be five mills for all tax years
20beginning after January 1, 2014.

21Section 602.1-A. Family farm corporation exemption.

22(a) Exemption.--Section 602-A shall not apply to family farm
23corporations.

24(b) Family farm corporation.--The following shall apply:

25(1) A family farm corporation is a Pennsylvania
26corporation that meets all of the following:

27(i) at least 75% of the assets of the corporation
28are devoted to the business of agriculture.

29(ii) At least 75% of all of the stock of the
30corporation must be owned by members of the same family.

1(1.1) The business of agriculture under paragraph (1)
2shall not include:

3(i) recreational activities, such as hunting,
4fishing, camping, skiing, show competition or racing;

5(ii) the raising, breeding or training of game
6animals or game birds, fish, cats, dogs or pets, or
7animals intended for use in sporting or recreational
8activities;

9(iii) fur farming;

10(iv) stockyard and slaughterhouse operations; or

11(v) manufacturing or processing operations of any
12kind.

13(2) Members of the same family shall mean an individual,
14the individual's brothers and sisters, the brothers and
15sisters of the individual's parents and grandparents, the
16ancestors and lineal descendents of any of the members listed
17under this paragraph and a spouse of any of the members
18listed under this paragraph. Individuals related by the half
19blood or by legal adoption shall be treated as if they were
20related by the whole blood.

21(3) Assets devoted to the business of agriculture shall
22include leasing to members of the same family of assets which
23are directly and principally used for agricultural purposes.

24Section 602.2-A. (Reserved).

25Section 602.3-A. Interest in unincorporated entities.

26(a) General rule.--Except as provided under subsection (b),
27for purposes of this article, a corporation's interest in an
28entity which is not a corporation shall be considered a direct
29ownership interest in the assets of the entity rather than an
30intangible interest.

1(b) Exception.--Subsection (a) shall not apply to a
2corporation's interest in an entity described in paragraph
3(2)(i) and (ii) of the definition of "corporation."

4Section 603-A. Procedure, enforcement and penalties.

5Parts III, IV, V, VI and VII of Article IV are incorporated
6by reference into this article insofar as they are applicable to
7the tax imposed under this article.

8Section 604-A. Deposit of proceeds.

9The proceeds resulting from the tax imposed under this
10article shall be transferred to the PA Works Fund.

11Section 605-A. Applicability.

12The tax imposed under this article shall apply to taxable
13years beginning after December 31, 2016.

14Section 4. This act shall take effect in 60 days.