AN ACT

 

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," in inheritance tax, further providing for
11definitions and for exclusions.

12The General Assembly of the Commonwealth of Pennsylvania
13hereby enacts as follows:

14Section 1. Section 2102 of the act of March 4, 1971 (P.L.6,
15No.2), known as the Tax Reform Code of 1971, is amended by
16adding a definition to read:

17Section 2102. Definitions.--The following words, terms and
18phrases, when used in this article, shall have the meanings
19ascribed to them in this section, except where the context
20clearly indicates a different meaning:

1* * *

2"Small business." An enterprise that has:

3(1) not more than fifty employes;

4(2) a net book value of assets totaling less than five
5million dollars ($5,000,000) at the beginning or end of the most
6recent calendar year; and

7(3) has been operated by a person with an ownership interest
8of at least seventy-five per cent of the business for a minimum
9of five years.

10* * *

11Section 2. Section 2111 of the act is amended by adding a
12subsection to read:

13Section 2111. Transfers Not Subject to Tax.--* * *

14(t) A transfer of a small business and its <-assets, including
15real estate, <-property is exempt from inheritance tax provided
16that the small business is being transferred to one or more
17members of the same family and the family member maintains the
18operation of the small business for a minimum of seven years.<-,
19provided that:

20(1) Any property which is no longer devoted to use in the
21operation of a small business within seven years beyond the
22transferor's date of death shall be subject to:

23(i) inheritance tax due the Commonwealth under section 2107,
24in the amount that would have been paid or payable on the basis
25of valuation authorized under section 2121 for nonexempt
26transfers of property; and

27(ii) interest on the inheritance tax due accruing as of the
28transferor's date of death, at the rate established in section
292143.

30(2) Any tax imposed under section 2107 shall be:

1(i) a lien in favor of the Commonwealth upon the property no
2longer being devoted to use in the operation of a small
3business, collectible in the manner provided for by law for the
4collection of delinquent real estate taxes; and

5(ii) the personal obligation of the owner of the property at
6the time of the change of use.

7(3) An owner of property devoted to use in the operation of
8a small business under this subsection shall certify to the
9department on an annual basis that the property qualifies for
10this exemption and shall notify the department within thirty
11days of any transaction or occurrence causing the property to
12fail to qualify for the exemption. Each year the department
13shall inform all owners of their obligation to provide an annual
14certification under this subclause. The certification and
15notification shall be completed in the form and manner as
16provided by the department.

17Section 3. The addition of section 2111(t) of the act shall
18apply to the estates of decedents who die on or after the
19effective date of this section.

20Section 4. This act shall take effect immediately.