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 sales tax, further providing for definitions, 
11for credit against tax and for local receivers of use tax; in 
12personal income tax, further providing for definitions, for 
13classes of income and for taxability of partners; providing 
14for tax treatment determined at partnership level and for tax 
15imposed at partnership level; further providing for income of 
16a Pennsylvania S corporation, for income taxes imposed by 
17other states, for general rule, for return of Pennsylvania S 
18corporation and for requirements concerning returns, notices, 
19records and statements; in corporate net income tax, further 
20providing for definitions, for imposition of tax and for 
21reports and payment of tax; and, in realty transfer tax, 
22further providing for definitions, for imposition and for 
23acquired company; further providing for coal waste removal 
24and ultraclean fuels tax credit; and, in inheritance tax, 
25further providing for exemption for poverty.

26The General Assembly of the Commonwealth of Pennsylvania
27hereby enacts as follows:

28Section 1. Sections 201(ddd) and 206 of the act of March 4,
291971 (P.L.6, No.2), known as the Tax Reform Code of 1971,

1amended or added December 23, 2003 (P.L.250, No.46), are amended
2to read:

3Section 201. Definitions.--The following words, terms and
4phrases when used in this Article II shall have the meaning
5ascribed to them in this section, except where the context
6clearly indicates a different meaning:

7* * *

8[(ddd) "Call center." The physical location in this
9Commonwealth:

10(1) where at least one hundred and fifty employes are
11employed to initiate or answer telephone calls;

12(2) where there are at least two hundred telephone lines;
13and

14(3) which utilizes an automated call distribution system for
15customer telephone calls in one or more of the following
16activities:

17(A) customer service and support;

18(B) technical assistance;

19(C) help desk service;

20(D) providing information;

21(E) conducting surveys;

22(F) revenue collections; or

23(G) receiving orders or reservations.

24For purposes of this clause, a physical location may include
25multiple buildings utilized by a taxpayer located within this
26Commonwealth.]

27Section 206. Credit Against Tax.--(a) A credit against the
28tax imposed by section 202 shall be granted with respect to
29tangible personal property or services purchased for use outside
30the Commonwealth equal to the tax paid to another state by

1reason of the imposition by such other state of a tax similar to
2the tax imposed by this article: Provided, however, That no such
3credit shall be granted unless such other state grants
4substantially similar tax relief by reason of the payment of tax
5under this article or under the Tax Act of 1963 for Education.

6[(b) A credit against the tax imposed by section 202 on
7telecommunications services shall be granted to a call center
8for gross receipts tax paid by a telephone company on the
9receipts derived from the sale of incoming and outgoing
10interstate telecommunications services to the call center under
11section 1101(a)(2). The following apply:

12(1) A telephone company, upon request, shall notify a call
13center of the amount of gross receipts tax paid by the telephone
14company on the receipts derived from the sale of incoming and
15outgoing interstate telecommunications services to the call
16center.

17(2) A call center that is eligible for the credit in this
18subsection may apply for a tax credit as set forth in this
19subsection.

20(3) By February 15, a taxpayer must submit an application to
21the department for gross receipts tax paid on the receipts
22derived from the sale of incoming and outgoing interstate
23telecommunications services incurred in the prior calendar year.

24(4) By April 15 of the calendar year following the close of
25the calendar year during which the gross receipts tax was
26incurred, the department shall notify the applicant of the
27amount of the applicant's tax credit approved by the department.

28(5) The total amount of tax credits provided for in this
29subsection and approved by the department shall not exceed
30thirty million dollars ($30,000,000) in any fiscal year. If the

1total amount of tax credits applied for by all applicants
2exceeds the amount allocated for those credits, then the credit
3to be received by each applicant shall be determined as follows:

4(i) Divide:

5(A) the tax credit applied for by the applicant; by

6(B) the total of all tax credits applied for by all
7applicants.

8(ii) Multiply:

9(A) the quotient under subparagraph (i); by

10(B) the amount allocated for all tax credits.]

11Section 1.1. Section 226 of the act is repealed:

12[Section 226. Local Receivers of Use Tax.--Beginning on and 
13after the effective date of this article, in every county, 
14except in counties of the first class, the county treasurer is 
15hereby authorized to receive use tax due and payable under the 
16provisions of this article from any person other than a 
17licensee. The receiving of such taxes shall be pursuant to rules 
18and regulations promulgated by the department and upon forms 
19furnished by the department. Each county treasurer shall remit 
20to the department all use taxes received under the authority of 
21this section minus the costs of administering this provision not 
22to exceed one per cent of the amount of use taxes received, 
23which amount shall be retained in lieu of any commission 
24otherwise allowable by law for the collection of such tax.]

25Section 2. Section 301(t) of the act, added August 31, 1971
26(P.L.362, No.93), is amended and the section is amended by
27adding subsections to read:

28Section 301. Definitions.--Any reference in this article to
29the Internal Revenue Code of 1986 shall mean the Internal
30Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. § 1 et seq.),

1as amended to January 1, 1997, unless the reference contains the
2phrase "as amended" and refers to no other date, in which case
3the reference shall be to the Internal Revenue Code of 1986 as
4it exists as of the time of application of this article. The
5following words, terms and phrases when used in this article
6shall have the meaning ascribed to them in this section except
7where the context clearly indicates a different meaning:

8* * *

9(d.2) "Corporate item" means an item, including income, gain
10or loss, deduction or credit determined at the Pennsylvania S
11corporation level, which is required to be taken into account
12for a Pennsylvania S corporation's taxable year.

13* * *

14(n.2) "Partnership item" means an item, including income,
15gain or loss, deduction or credit determined at the partnership
16level, which is required to be taken into account for a
17partnership's taxable year.

18* * *

19(o.4) "Publicly traded partnership" means an entity defined
20under section 7704 of the Internal Revenue Code of 1986 (Public
21Law 99-514, 26 U.S.C. § 7704) with equity securities registered
22with the Securities and Exchange Commission under section 12 of
23the Securities Exchange Act of 1934 (48 Stat. 881, 15 U.S.C. §
2478a).

25* * *

26(t) "State" means, except as provided under section 314(a),
27any state or commonwealth of the United States, the District of
28Columbia, the Commonwealth of Puerto Rico, any territory or
29possession of the United States and any foreign country.

30* * *

1Section 2.1. Section 303(a)(2) of the act, added August 31,
21971 (P.L.362, No.93), is amended and subsection (a)(3) is
3amended by adding a subparagraph to read:

4Section 303. Classes of Income.--(a) The classes of income
5referred to above are as follows:

6* * *

7(2) Net profits. The net income from the operation of a
8business, profession, or other activity, after provision for all
9costs and expenses incurred in the conduct thereof, determined
10either on a cash or accrual basis in accordance with accepted
11accounting principles and practices but without deduction of
12taxes based on income. For purposes of calculating net income 
13under this paragraph, to the extent a taxpayer properly deducts 
14an amount under section 195(b)(1)(A) of the Internal Revenue 
15Code of 1986 (26 U.S.C. § 195(b)(1)(A)), as amended, and the 
16regulations promulgated under section 195(b)(1)(A) of the 
17Internal Revenue Code of 1986, the taxpayer shall be permitted a 
18deduction in equal amount in the same taxable year.

19(3) Net gains or income from disposition of property. Net
20gains or net income, less net losses, derived from the sale,
21exchange or other disposition of property, including real
22property, tangible personal property, intangible personal
23property or obligations issued on or after the effective date of
24this amendatory act by the Commonwealth; any public authority,
25commission, board or other agency created by the Commonwealth;
26any political subdivision of the Commonwealth or any public
27authority created by any such political subdivision; or by the
28Federal Government as determined in accordance with accepted
29accounting principles and practices. For the purpose of this
30article:

1* * *

2(viii) The term "net gains or net income, less net losses"
3shall not include gain or loss from the exchange of property
4which is not recognized for Federal income tax purposes under
5section 1031 of the Internal Revenue Code of 1986 (26 U.S.C. §
61031), as amended, and the regulations promulgated under section
71031 of the Internal Revenue Code of 1986. For purposes of
8determining basis under subparagraph (i), section 1031(d) of the
9Internal Revenue Code of 1986 (26 U.S.C. § 1031(d)), as amended,
10and the regulations promulgated under section 1031 of the
11Internal Revenue Code of 1986 shall apply.

12* * *

13Section 3. Section 306 of the act, amended June 22, 2001
14(P.L.353, No.23), is amended to read:

15Section 306. Taxability of Partners.--[A] Except as provided 
16under section 306.2, a partnership as an entity shall not be
17subject to the tax imposed by this article, but the income or
18gain of a member of a partnership in respect of said partnership
19shall be subject to the tax and the tax shall be imposed on his
20share, whether or not distributed, of the income or gain
21received by the partnership for its taxable year ending within
22or with the member's taxable year.

23Section 4. The act is amended by adding sections to read:

24Section 306.1. Tax Treatment Determined at Partnership
25Level.--The classification or character of a partnership item
26shall be determined at the partnership level. This section shall
27not prohibit the department from adjusting a partner's return.

28Section 306.2. Tax Imposed at Partnership Level.--(a) A
29partnership underreporting reportable income by more than one
30million dollars ($1,000,000) shall be jointly liable with each

1partner for any part of a deficiency resulting from the
2treatment of a partnership item by a partner on that partner's
3return in a manner that is consistent with the treatment of that
4partnership item on the partnership return. If the tax is paid
5by the partner, the department may not collect the tax from the
6partnership. If the tax is paid by the partnership, the
7department may not collect the tax from a partner.

8(b) Subsection (a) shall apply to the following
9partnerships:

10(1) A partnership which has eleven or more individual
11partners.

12(2) A partnership which has at least one partner which is a
13corporation, limited liability company, partnership or trust.

14(3) A partnership which has only individual partners and
15which elects to be subject to this subsection. The election must
16be included on the partnership return to be filed with the
17department.

18(c) This section shall not apply to a publicly traded
19partnership.

20(d) Nothing under this section shall require one partner to
21be liable for the payment of a tax liability of another partner.

22(e) Appeals involving a deficiency assessed under this
23section may only be pursued by the partnership and a
24reassessment or settlement of tax liability shall be binding on
25the partners.

26Section 5. Section 307.8(a) of the act, amended May 7, 1997
27(P.L.85, No.7), is amended and the section is amended by adding
28a subsection to read:

29Section 307.8. Income of a Pennsylvania S Corporation.--(a)
30A Pennsylvania S corporation shall not be subject to the tax

1imposed by this article, except as provided under subsection 
2(f), but the shareholders of the Pennsylvania S corporation
3shall be subject to the tax imposed under this article as
4provided in this article.

5* * *

6(f) (1) A Pennsylvania S corporation underreporting
7reportable income by more than one million dollars ($1,000,000)
8shall be jointly liable with each shareholder for any part of a
9deficiency resulting from the treatment of a corporate item by
10any shareholder on the shareholder's return in a manner that is
11consistent with the treatment of the corporate item on the
12return of the Pennsylvania S corporation. If the tax is paid by
13the shareholder, it may not be be collected from the
14corporation.

15(2) Paragraph (1) shall apply to the following Pennsylvania
16S corporations:

17(i) A Pennsylvania S corporation which has eleven or more
18shareholders.

19(ii) A Pennsylvania S corporation which elects to be subject
20to this subsection. The election must be included on the
21Pennsylvania S corporation return to be filed with the
22department.

23(3) Nothing under this section shall require one shareholder
24to be liable for the payment of a tax liability of another
25shareholder.

26(4) Appeals involving the deficiency assessed under this
27section may be filed only by the Pennsylvania S corporation and
28a reassessment or settlement of tax liability shall be binding
29on the shareholders.

30Section 6. Section 314(a) of the act, amended December 23,

11983 (P.L.370, No.90), is amended to read:

2Section 314. Income Taxes Imposed by Other States.--(a) A
3resident taxpayer before allowance of any credit under section
4312 shall be allowed a credit against the tax otherwise due
5under this article for the amount of any income tax, wage tax or
6tax on or measured by gross or net earned or unearned income
7imposed on him or on a Pennsylvania S corporation in which he is
8a shareholder, to the extent of his pro rata share thereof
9determined in accordance with section 307.9, by another state
10with respect to income which is also subject to tax under this
11article. For purposes of this subsection and notwithstanding 
12section 301(t), the term "state" shall only include a state of 
13the United States, the District of Columbia, the Commonwealth of 
14Puerto Rico and any territory or possession of the United 
15States.

16* * *

17Section 7. Section 324 of the act, amended June 22, 2001
18(P.L.353, No.23), is amended to read:

19Section 324. General Rule.--(a) When a partnership, estate, 
20trust or Pennsylvania S corporation receives income from sources
21within this Commonwealth for any taxable year and any portion of
22the income is allocable to a nonresident partner, beneficiary,
23member or shareholder thereof, the partnership, estate, trust or
24Pennsylvania S corporation shall pay a withholding tax under
25this section at the time and in the manner prescribed by the
26department; however, notwithstanding any other provision of this
27article, all such withholding tax shall be paid over on or
28before the fifteenth day of the fourth month following the end
29of the taxable year.

30(b) This section shall not apply to any publicly traded

1partnership as defined under section 7704 of the Internal
2Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. § 7704) with
3equity securities registered with the Securities and Exchange
4Commission under section 12 of the Securities Exchange Act of
51934 (48 Stat. 881, 15 U.S.C. § 78a).

6Section 8. Section 330.1 of the act, amended or added
7December 23, 1983 (P.L.370, No.90) and July 13, 1987 (P.L.325,
8No.59), is amended to read:

9Section 330.1. Return of Pennsylvania S Corporation.--(a)
10Every Pennsylvania S corporation shall make a return for each
11taxable year, stating specifically all items of gross income and
12deductions, the names and addresses of all persons owning stock
13in the corporation at any time during the taxable year, the
14number of shares of stock owned by each shareholder at all times
15during the taxable year, the amount of money and other property
16distributed by the corporation during the taxable year to each
17shareholder, the date of each distribution, each shareholder's
18pro rata share of each item of the corporation for the taxable
19year and such other information as the department may require.

20(b) The return shall be filed on or before thirty days after
21the date when the corporation's Federal income tax return is
22due.

23(c) Every Pennsylvania S corporation shall also submit to
24the department a true copy of the income tax return filed with
25the Federal Government at the time the return required under
26subsection (a) is filed.

27(d) Each Pennsylvania S corporation required to file a
28return under subsection (a) for a taxable year shall, on or
29before the day on which the return for the taxable year was
30filed, furnish to each person who is a shareholder at any time

1during the taxable year a copy of one or both of the following
2showing their share of income and any other information as may
3be required by the department:

4(1) The Resident Schedule of Shareholder/Partner/Beneficiary
5Pass Through Income, Loss and Credits (Schedule RK-1) form.

6(2) The Nonresident Schedule of
7Shareholder/Partner/Beneficiary Pass Through Income, Loss and
8Credits (Schedule NRK-1) form.

9Section 9. Section 335 of the act, amended or added August 
1031, 1971 (P.L.362, No.93), December 23, 2003 (P.L.250, No.46)
11and July 2, 2012 (P.L.751, No.85), is amended to read:

12Section 335. Requirements Concerning Returns, Notices,
13Records and Statements.--(a) The department may prescribe by
14regulation for the keeping of records, the content and form of
15returns, declarations, statements and other documents and the
16filing of copies of Federal income tax returns and
17determinations. The department may require any person, by
18regulation or notice served upon such person, to make such
19returns, render such statements, or keep such records, as the
20department may deem sufficient to show whether or not such
21person is liable for tax under this article.

22(b) (1) When required by regulations prescribed by the
23department:

24(i) Any person required under the authority of this article
25to make a return, declaration, statement, or other document
26shall include in such return, declaration, statement or other
27document such identifying number as may be prescribed for
28securing proper identification of such person.

29(ii) Any person with respect to whom a return, declaration,
30statement, or other document is required under the authority of

1this article to make a return, declaration, statement, or other
2document with respect to another person, shall request from such
3other person, and shall include in any such return, declaration,
4statement, or other document, such identifying number as may be
5prescribed for securing proper identification of such other
6person.

7(2) For purposes of this section, the department is
8authorized to require such information as may be necessary to
9assign an identifying number to any person.

10(c) (1) Every partnership, estate or trust having a
11resident partner or a resident beneficiary or every partnership, 
12estate or trust having any income derived from sources within
13this Commonwealth shall make a return for the taxable year
14setting forth all items of income, loss and deduction, and such
15other pertinent information as the department may by regulations
16prescribe. Such return shall be filed on or before the fifteenth
17day of the fourth month following the close of each taxable
18year. For purposes of this subsection, "taxable year" means year
19or period which would be a taxable year of the partnership if it
20were subject to tax under this article.

21(2) Every partnership, estate or trust required to file a
22return under paragraph (1) shall also file with the department a
23true copy of the income tax return filed with the Federal
24Government at the time the return required under paragraph (1)
25is filed.

26(3) Every partnership, estate or trust required to file a
27return under paragraph (1) for any taxable year shall, on or
28before the day the return is filed, furnish to each partner or
29nominee for another person or to each beneficiary to whom the
30income or gains of the estate or trust is taxable, a copy of one

1or both of the following showing their share of income and any
2other information as may be required by the department:

3(i) The Resident Schedule of Shareholder/Partner/Beneficiary
4Pass Through Income, Loss and Credits (Schedule RK-1) form.

5(ii) The Nonresident Schedule of
6Shareholder/Partner/Beneficiary Pass Through Income, Loss and
7Credits (Schedule NRK-1) form.

8(4) Failure to file a timely return as required under
9paragraph (2) and failure to furnish a copy of the returns
10required under paragraph (3) shall result in a penalty of fifty
11dollars ($50) for each individual return or individual copy
12required.

13(d) The department may prescribe regulations requiring
14returns of information to be made and filed on or before
15February 28 of each year as to the payment or crediting in any
16calendar year of amounts of ten dollars ($10) or more to any
17taxpayer. Such returns may be required of any person, including
18lessees or mortgagors of real or personal property, fiduciaries,
19employers and all officers and employes of this Commonwealth, or
20of any municipal corporation or political subdivision of this
21Commonwealth having the control, receipt, custody, disposal or
22payment of interest, rents, salaries, wages, premiums,
23annuities, compensations, remunerations, emoluments or other
24fixed or determinable gains, profits or income, except interest
25coupons payable to bearer. A duplicate of the statement as to
26tax withheld on compensation required to be furnished by an
27employer to an employe, shall constitute the return of
28information required to be made under this section with respect
29to such compensation.

30(e) Any person who is required to make a form W-2G return to

1the Secretary of the Treasury of the United States in regard to
2taxable gambling or lottery winnings from sources within this
3Commonwealth shall file a copy of the form with the department
4by March 1 of each year or, if filed electronically, by March 31
5of each year.

6(f) The following apply:

7(1) Any person who:

8(i) makes payments of income from sources within this
9Commonwealth;

10(ii) makes payments of nonemploye compensation or payments
11under an oil and gas lease under subparagraph (i) to a resident
12or nonresident individual, an entity treated as a partnership
13for tax purposes or a single member limited liability company;
14and

15(iii) is required to make a form 1099-MISC return to the
16Secretary of the Treasury of the United States with respect to
17the payments shall file a copy of form 1099-MISC with the
18department and send a copy of form 1099-MISC to the payee by the
19Federal filing deadline each year.

20(2) If the payor is required to perform electronic filing
21for Pennsylvania employer withholding purposes, the form 1099-
22MISC shall be filed electronically with the department.

23(g) (1) Every estate, trust, Pennsylvania S Corporation or
24partnership, other than a publicly traded partnership, shall
25maintain at the end of the entity's taxable year an accurate
26list of partners, members, beneficiaries or shareholders. The
27list shall include the name, current address and tax
28identification number of all existing partners, members,
29beneficiaries or shareholders and of all partners, members,
30beneficiaries or shareholders, who were admitted or who withdrew

1during the taxable year, including the date of withdrawal and
2admittance.

3(2) If the entity under paragraph (1) does not maintain an
4accurate list as required, the tax, penalty and interest with
5respect to the entity shall be considered the tax, penalty and
6interest of the partnership, estate, trust or Pennsylvania S
7Corporation and of the general partner, tax matters partner,
8corporate officer or trustee.

9Section 10. Section 401(3)1 and 2(a)(17) of the act, amended
10September 9, 1971 (P.L.437, No.105), are amended, clause (3)1 is
11amended by adding a phrase, subclause 2(a) is amended by adding
12a paragraph, paragraphs (3)4(c)(1)(A) and 2(B) are amended by
13adding subparagraphs and the section is amended by adding
14clauses to read:

15Section 401. Definitions.--The following words, terms, and
16phrases, when used in this article, shall have the meaning
17ascribed to them in this section, except where the context
18clearly indicates a different meaning:

19* * *

20(3) "Taxable income." 1. * * *

21(t) (1) Except as provided in paragraph (2), (3) or (4) for
22taxable years beginning after December 31, 2014, and in addition
23to any authority the department has on the effective date of
24this paragraph to deny a deduction related to a fraudulent or
25sham transaction, no deduction shall be allowed for an
26intangible expense or cost, or an interest expense or cost,
27paid, accrued or incurred directly or indirectly in connection
28with one or more transactions with an affiliated entity. In
29calculating taxable income under this paragraph, when the
30taxpayer is engaged in one or more transactions with an

1affiliated entity that was subject to tax in this Commonwealth
2or another state or possession of the United States on a tax
3base that included the intangible expense or cost, or the
4interest expense or cost, paid, accrued or incurred by the
5taxpayer, the taxpayer shall receive a credit against tax due in
6this Commonwealth in an amount equal to the apportionment factor
7of the taxpayer in this Commonwealth multiplied by the greater
8of the following:

9(A) the tax liability of the affiliated entity with respect
10to the portion of its income representing the intangible expense
11or cost, or the interest expense or cost, paid, accrued or
12incurred by the taxpayer; or

13(B) the tax liability that would have been paid by the
14affiliated entity under subparagraph (A) if that tax liability
15had not been offset by a credit.

16The credit issued under this paragraph shall not exceed the
17taxpayer's liability in this Commonwealth attributable to the
18net income taxed as a result of the adjustment required by this
19paragraph.

20(2) The adjustment required by paragraph (1) shall not apply
21to a transaction that was directly related to a valid business
22purpose.

23(3) The adjustment required by paragraph (1) shall not apply
24to a transaction between a taxpayer and an affiliated entity
25domiciled in a foreign nation which has in force a comprehensive
26income tax treaty with the United States providing for the
27allocation of all categories of income subject to taxation, or
28the withholding of tax, on royalties, licenses, fees and
29interest for the prevention of double taxation of the respective
30nations' residents and the sharing of information.

1(4) The adjustment required by paragraph (1) shall not apply 
2to a transaction where an affiliated entity directly or 
3indirectly paid, accrued or incurred a payment to a person who 
4is not an affiliated entity, if the payment is paid, accrued or 
5incurred on the intangible expense or cost, or interest expense 
6or cost, and is equal to or less than the taxpayer's 
7proportional share of the transaction. The taxpayer's 
8proportional share shall be based on relative sales, assets, 
9liabilities or another reasonable method.

102. In case the entire business of any corporation, other
11than a corporation engaged in doing business as a regulated
12investment company as defined by the Internal Revenue Code of
131986, is not transacted within this Commonwealth, the tax
14imposed by this article shall be based upon such portion of the
15taxable income of such corporation for the fiscal or calendar
16year, as defined in subclause 1 hereof, and may be determined as
17follows:

18(a) Division of Income.

19* * *

20(16.1) Sales, other than sales under paragraphs (16) and
21(17), are in this State as follows:

22(A) The sale, lease, rental or other use of real property,
23if the real property is located in this State. If real property
24is located both in and outside this State, the sale is in this
25State based upon the percentage of total assessed value of the
26real property located in this State.

27(B) (I) The rental, lease or licensing of tangible personal
28property, if the customer first obtained possession of the
29tangible personal property in this State.

30(II) If the tangible personal property is subsequently taken

1out of this State, the taxpayer may use a reasonably determined
2estimate of usage in this State to determine the extent of sale
3in this State.

4(C) (I) The sale of service, if the service is delivered to
5a location in this State. If the service is delivered both to a
6location in and outside this State, the sale is in this State
7based upon the percentage of total value of the service
8delivered to a location in this State.

9(II) If the state or states of assignment under subparagraph
10(I) cannot be determined for a customer who is an individual
11that is not a sole proprietor, a service is deemed to be
12delivered at the customer's billing address.

13(III) If the state or states of assignment under
14subparagraph (I) cannot be determined for a customer, except for
15a customer under subparagraph (II), a service is deemed to be
16delivered at the location from which the services were ordered
17in the customer's regular course of operations. If the location
18from which the services were ordered in the customer's regular
19course of operations cannot be determined, a service is deemed
20to be delivered at the customer's billing address.

21(17) Sales, other than sales [of tangible personal property] 
22under paragraphs (16) and (16.1), are in this State if:

23(A) The income-producing activity is performed in this
24State; or

25(B) The income-producing activity is performed both in and
26outside this State and a greater proportion of the income-
27producing activity is performed in this State than in any other
28state, based on costs of performance.

29* * *

304. * * *

1(c) (1) The net loss deduction shall be the lesser of:

2(A) * * *

3(V) For taxable years beginning after December 31, 2013, the
4greater of twenty-five per cent of taxable income as determined
5under subclause 1 or, if applicable, subclause 2 or four million
6dollars ($4,000,000);

7(VI) For taxable years beginning after December 31, 2014,
8the greater of thirty per cent of taxable income as determined
9under subclause 1 or, if applicable, subclause 2 or five million
10dollars ($5,000,000); or

11* * *

12(2) * * *

13(B) The earliest net loss shall be carried over to the
14earliest taxable year to which it may be carried under this
15schedule. The total net loss deduction allowed in any taxable
16year shall not exceed:

17* * *

18(V) The greater of twenty-five per cent of taxable income as
19determined under subclause 1 or, if applicable, subclause 2 or
20four million dollars ($4,000,000) for taxable years beginning
21after December 31, 2013.

22(VI) The greater of thirty per cent of taxable income as
23determined under subclause 1 or, if applicable, subclause 2 or
24five million dollars ($5,000,000) for taxable years beginning
25after December 31, 2014.

26* * *

27(8) "Intangible expense or cost." Royalties, licenses or
28fees paid for the acquisition, use, maintenance, management,
29ownership, sale, exchange or other disposition of patents,
30patent applications, trade names, trademarks, service marks,

1copyrights, mask works or other similar expenses or costs.

2(9) "Interest expense or cost." A deduction allowed under
3section 163 of the Internal Revenue Code of 1986 (26 U.S.C. §
4163) to the extent that such deduction is directly related to an
5intangible expense or cost.

6(10) "Affiliated entity." A person with a relationship to 
7the taxpayer during all or any portion of the taxable year that 
8is any of the following:

9(i) a stockholder who is an individual, or a member of the 
10stockholder's family as set forth in section 318 of the Internal 
11Revenue Code of 1986 (26 U.S.C. § 318), if the stockholder and 
12the members of the stockholder's family own, directly, 
13indirectly, beneficially or constructively, in the aggregate, 
14more than fifty per cent of the value of the taxpayer's 
15outstanding stock;

16(ii) a stockholder, or a stockholder's partnership, limited 
17liability company, estate, trust or corporation, if the 
18stockholder and the stockholder's partnerships, limited 
19liability companies, estates, trusts and corporations own 
20directly, indirectly, beneficially or constructively, in the 
21aggregate, more than fifty per cent of the value of the 
22taxpayer's outstanding stock;

23(iii) a corporation, or a party related to the corporation 
24in a manner that would require an attribution of stock from the 
25corporation to the party or from the party to the corporation 
26under the attribution rules of the Internal Revenue Code of 
271986, if the taxpayer owns, directly, indirectly, beneficially 
28or constructively, more than fifty per cent of the value of the 
29corporation's outstanding stock. The attribution rules of 
30section 318 of the Internal Revenue Code of 1986 shall apply for
 

1purposes of determining whether the ownership requirements of 
2this definition have been met;

3(iv) a component member as defined in section 1563(b) of the
4Internal Revenue Code of 1986 (26 U.S.C. § 1563(b)); or

5(v) a person to or from whom there is attribution of stock
6ownership in accordance with section 1563(e) of the Internal
7Revenue Code of 1986.

8(11) "Valid business purpose." A purpose, other than the
9avoidance or reduction of taxation, which alone or in
10combination with other purposes constitute the primary
11motivation for a business activity or transaction. A transaction
12done at arm's length terms shall be presumed to be directly
13related to a valid business purpose.

14Section 11. Section 402(b) of the act, amended June 29, 2002
15(P.L.559, No.89), is amended to read:

16Section 402. Imposition of Tax.--* * *

17(b) The annual rate of tax on corporate net income imposed
18by subsection (a) for taxable years beginning for the calendar
19year or fiscal year on or after the dates set forth shall be as
20follows:

21Taxable Year	Tax Rate
22January 1, 1995[, and 23each taxable year 24thereafter] to  25December 31, 2014	9.99%
26January 1, 2015, to 27December 31, 2015	9.89%
28January 1, 2016, to 29December 31, 2016	9.69%
30January 1, 2017, to 20130SB1038PN1263 -22-     1December 31, 2017	9.49%
2January 1, 2018, to 3December 31, 2018	9.29%
4January 1, 2019, to 5December 31, 2019	8.96%
6January 1, 2020, to 7December 31, 2020	8.63%
8January 1, 2021, to 9December 31, 2021	8.3%
10January 1, 2022, to 11December 31, 2022	7.97%
12January 1, 2023, to 13December 31, 2023	7.64%
14January 1, 2024, to 15December 31, 2024	7.31%
16January 1, 2025, and 17each taxable year 18thereafter	6.99%

19* * *

20Section 12. Section 403(d) of the act, amended October 18,
212006 (P.L.1149, No.119), is amended to read:

22Section 403. Reports and Payment of Tax.--* * *

23(d) If the officers of any corporation shall neglect, or
24refuse to make any report as herein required, or shall knowingly
25make any false report, [the following percentages of the amount
26of the tax shall be added by the department to the tax
27determined to be due on the first one thousand dollars ($1,000)
28of tax ten per cent, on the next four thousand dollars ($4,000)
29five per cent, and on everything in excess of five thousand
30dollars ($5,000) one per cent, no such] a penalty of five
 

1hundred dollars ($500) plus an additional one per cent for every 
2dollar of tax determined to be due in excess of twenty-five 
3thousand dollars ($25,000) shall be added to the tax determined 
4to be due. No amounts added to the tax shall bear any interest
5whatsoever.

6* * *

7Section 12.1. The definitions of "document," "real estate"
8and "real estate company" in section 1101-C of the act, amended
9July 2, 1986 (P.L.318, No.77), are amended to read:

10Section 1101-C. Definitions.--The following words when used
11in this article shall have the meanings ascribed to them in this
12section:

13* * *

14"Document." Any deed, instrument or writing which conveys,
15transfers, devises, vests, confirms or evidences any transfer or
16devise of title to real estate in this Commonwealth, but does
17not include wills, mortgages, deeds of trust or other
18instruments of like character given as security for a debt and
19deeds of release thereof to the debtor, land contracts whereby
20the legal title does not pass to the grantee until the total
21consideration specified in the contract has been paid or any
22cancellation thereof unless the consideration is payable over a
23period of time exceeding thirty years or instruments which
24solely grant, vest or confirm a public utility easement.
25"Document" shall also include a declaration of acquisition
26required to be presented for recording under section 1102-C.5 of
27this article.

28* * *

29"Real estate."

30(1) Any lands, tenements or hereditaments [within this

1Commonwealth], including, without limitation, buildings,
2structures, fixtures, mines, minerals, oil, gas, quarries,
3spaces with or without upper or lower boundaries, trees and
4other improvements, immovables or interests which by custom,
5usage or law pass with a conveyance of land, but excluding
6permanently attached machinery and equipment in an industrial
7plant.

8(2) A condominium unit.

9(3) A tenant-stockholder's interest in a cooperative housing
10corporation, trust or association under a proprietary lease or
11occupancy agreement.

12"Real estate company." A corporation or association which
13[is] meets any of the following:

14(1) Is  primarily engaged in the business of holding,
15selling or leasing real estate ninety per cent or more of the
16ownership interest in which is held by thirty-five or fewer
17persons and which:

18[(1)] (i) derives sixty per cent or more of its annual gross
19receipts from the ownership or disposition of real estate; or

20[(2)] (ii) holds real estate, the value of which comprises
21[ninety] fifty per cent or more of the value of its entire
22tangible asset holdings exclusive of tangible assets which are
23freely transferable and actively traded on an established
24market.

25(2) Owns a direct or indirect interest in a real estate
26company. An indirect ownership interest is an interest in a
27corporation or association whose purpose is the ownership of a
28real estate company either by itself or as part of a tiered
29structure of corporations or associations.

30* * *

1Section 12.2. Section 1102-C of the act, amended July 2,
21986 (P.L.318, No.77), is amended to read:

3Section 1102-C. Imposition of Tax.--Every person who makes,
4executes, delivers, accepts or presents for recording any
5document or in whose behalf any document is made, executed,
6delivered, accepted or presented for recording, shall be subject
7to pay for and in respect to the transaction or any part
8thereof, or for or in respect of the vellum parchment or paper
9upon which such document is written or printed, a State tax at
10the rate of one per cent of the value of the real estate within 
11this Commonwealth represented by such document, which State tax
12shall be payable at the earlier of the time the document is
13presented for recording or within thirty days of acceptance of
14such document or within thirty days of becoming an acquired
15company.

16Section 12.3. Section 1102-C.5(a) of the act, amended July
172, 2012 (P.L.751, No.85), is amended to read:

18Section 1102-C.5. Acquired Company.--(a) A real estate
19company is an acquired company upon a change in the ownership
20interest in the company, however effected, if the change:

21(1) does not affect the continuity of the company; and

22(2) of itself or together with prior changes has the effect
23of transferring, directly or indirectly, ninety per cent or more
24of the total ownership interest in the company within a period
25of three years.

26(3) For the purposes of paragraph (2), a transfer occurs
27within a period of three years of another transfer or transfers
28if, during the period[:

29(i) the transferring party provides a legally binding
30commitment, enforceable at a future date, to execute the

1transfer;

2(ii) the terms of the transfer are fixed and not subject to
3negotiation; and

4(iii) the transferring party receives full consideration, in
5any form, in exchange for the transfer.], the transferring party 
6provides the transferee a legally binding commitment or option, 
7enforceable at a future date, to execute the transfer.

8* * *

9Section 12.4. Article XVIII-A of the act, added May 12, 1999
10(P.L.26, No.4), is repealed:

11[ARTICLE XVIII-A

12COAL WASTE REMOVAL AND ULTRACLEAN FUELS

13TAX CREDIT

14Section 1801-A. Short Title.--This article shall be known
15and may be cited as the "Coal Waste Removal and Ultraclean Fuels
16Act."

17Section 1802-A. 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:

21"Department" means the Department of Revenue of the
22Commonwealth.

23"Developer" means the owner-operator of a facility, as
24defined in this section, or the operator of the facility that
25has sold the facility in new condition to a third party from
26whom that operator has simultaneously leased back the facility
27for a minimum period of twelve years.

28"Facility" includes all plant and equipment purchased or
29constructed by or on behalf of the developer which is used
30within this Commonwealth by the developer to produce one or more

1qualified fuels.

2"Internal Revenue Code" means the Internal Revenue Code of
31986 (Public Law 99-514, 26 U.S.C. § 1 et seq.).

4"Qualified fuels" means those fuels produced from
5nontraditional coal culm and silt feedstocks as defined in
6section 29(c) of the Internal Revenue Code of 1986 (Public Law
799-514, 26 U.S.C. § 29(c)).

8"Qualifying property" means tangible personal property and
9other forms of tangible property which qualify for investment
10tax credit treatment and which meet all of the following
11requirements:

12(1) Be acquired through a purchase, as defined under section
13179(d)(2) of the Internal Revenue Code (26 U.S.C. § 179(d)(2)),
14or constructed by the developer for its own use.

15(2) Be depreciable under section 167 of the Internal Revenue
16Code (26 U.S.C. § 167).

17(3) Have a useful life of greater than or equal to four
18years.

19(4) Be located within this Commonwealth.

20(5) Be used by the developer in the production of qualified
21fuels.

22(6) Be acquired by purchase or constructed on or after
23January 1, 2000, and before January 1, 2013.

24(7) Not be the subject of any tax credit otherwise available
25to the developer under this act.

26"Tax credit base" means only the cost or other basis of
27qualifying property that is properly transferred to the
28facility's basis for depreciation for Federal income tax
29purposes between January 1, 2000, and December 31, 2012.

30Section 1803-A. Investment Tax Credits Program.--(a) A

1developer of a new facility for the production of one or more
2qualified fuels shall be allowed an investment tax credit
3against the taxes imposed under Articles II, IV and VI of this
4act. The amount of the credit shall be computed as a percentage
5applied to the cost or other basis for Federal income tax
6purposes of qualifying property.

7(b) (1) The investment tax credit shall be computed as
8fifteen per cent of the tax credit base.

9(2) The maximum investment tax credit available for
10application, whether claimed by one or more taxpayers, shall not
11exceed fifteen per cent of the capital cost of the facility.

12(3) Any amount of allowable investment tax credit not used
13in the tax year for which the credit was claimed can be carried
14forward by the claiming taxpayer to succeeding years until the
15full amount of allowable credit has been used.

16(c) (1) The developer, upon notice to the department as
17specified by the department, may sell or assign, in whole or in
18part, any investment tax credit afforded under this section to
19one or more taxpayers if no claim for allowance of such credit
20has been filed.

21(2) A taxpayer recipient by purchase or assignment of any
22portion of the developer's investment tax credit under paragraph
23(1) shall initially claim such credit, upon notice to the
24department of the derivative basis of the credit in compliance
25with procedures specified by the department, for the tax year in
26which the purchase or assignment is made, but in no event
27subsequent to the filing of an income tax return for the year
282012.

29(3) Any taxpayer who acquires any portion of the developer's
30investment tax credit by sale or assignment for value and

1without notice by the developer of any irregularity or
2invalidity shall not suffer any disallowance of the credit or
3the imposition of any adjustment or fraud penalty attributable
4to conduct by the developer.

5(d) (1) If prior to the expiration of any qualifying
6property's useful life, as used to calculate depreciation for
7Federal income tax purposes, the developer, upon mandatory
8notice to the department in compliance with procedures specified
9by the department, disposes of any qualifying property, in a
10transaction other than a sale-leaseback transaction, upon which
11the department has previously allowed an investment tax credit
12claimed by any taxpayer, a portion of all such credit shall be
13recaptured and added to the developer's tax liability for the
14tax year in which the qualifying property is disposed.

15(2) The portion of the investment tax credit previously
16allowed, which is subject to recapture from the developer, shall
17be equal to a fraction whose numerator is the number of years
18remaining to fully depreciate for Federal income tax purposes
19the qualifying property disposed and whose denominator is the
20total number of years over which the property otherwise would
21have been subject to depreciation by the developer.

22(3) In calculating the recapture percentage, the year of
23disposition of the qualifying property is considered a year of
24remaining depreciation.

25(e) The department shall verify the validity of any claim
26for allowance of any investment tax credit afforded under this
27section and, in the case of a fraudulent claim, may assess
28against the developer a penalty of one hundred and twenty-five
29per cent of the credit improperly claimed.

30(f) The tax credits authorized by this section shall not

1exceed eighteen million dollars ($18,000,000) in the aggregate
2during any year.

3Section 1804-A. Contract Required.--(a) In order for a
4developer to claim investment tax credits under this article,
5the developer must enter into a contract with the Commonwealth
6that provides as follows:

7(1) The term of the contract shall be twenty-five years,
8beginning with the first tax year in which the investment tax
9credits are claimed.

10(2) The developer shall make periodic payments to the
11Commonwealth, which payments may not exceed in the aggregate
12forty-six million eight hundred thousand dollars ($46,800,000)
13over the term of the contract.

14(3) The periodic payments shall occur every five years and
15each payment shall be nine million three hundred sixty thousand
16dollars ($9,360,000), except as provided in paragraphs (4), (5)
17and (6).

18(4) For the first five-year period, the amount specified in
19paragraph (3) shall be reduced by:

20(i) An amount equal to the business losses of the developer,
21if any, relating to the facility that are sustained in the first
22and second years of the contract, provided such amount does not
23exceed three million seven hundred forty-four thousand dollars
24($3,744,000) for both years.

25(ii) Allowable offsets identified in subsection (b),
26provided that such offsets do not exceed nine million three
27hundred sixty thousand dollars ($9,360,000).

28(5) For the remaining five-year periods, the amount
29specified in paragraph (3) shall be reduced by the amount of
30allowable offsets identified in subsection (b), provided that

1such offsets do not exceed nine million three hundred sixty
2thousand dollars ($9,360,000) during any five-year period.

3(6) To the extent the amount of allowable offsets during any
4five-year period exceeds nine million three hundred sixty
5thousand dollars ($9,360,000), the excess may be carried over
6and added to the allowable offsets taken in the following five-
7year period, provided that the excess is applied first.

8(b) For purposes of this section, "allowable offset"
9includes all of the following:

10(1) An amount equal to the corporate net income tax, capital
11stock and franchise tax and personal income tax related to the
12construction, ownership and operation of the facility.

13(2) An amount equal to all personal income tax withheld from
14the developer's employes.

15(3) An amount equal to all sales and use tax related to the
16operation and construction of the facility.

17(4) The amount paid by the developer of any new tax enacted
18by the Commonwealth following the effective date of this
19article.

20Section 1805-A. Requirements.--Tax credits authorized by
21this article shall not be granted unless the developer has
22obtained an investment tax credit from the Federal Government or
23an investment by a person other than an agency or
24instrumentality of the Commonwealth, or any combination thereof,
25in an amount equal to or greater than the tax credit granted by
26this article.]

27Section 13. Section 2112 of the act, amended or added August
284, 1991 (P.L.97, No.22), June 16, 1994 (P.L.279, No.48) and June
2930, 1995 (P.L.139, No.21), is repealed:

30[Section 2112. Exemption for Poverty.--(a) The General

1Assembly, in recognition of the powers contained in section 2(b)
2(ii) of Article VIII of the Constitution of Pennsylvania which
3provides therein for the establishing as a class or classes of
4subjects of taxation the property or privileges of persons who
5because of poverty are determined to be in need of special tax
6provisions or tax exemptions, hereby declares as its legislative
7intent and purpose to implement such powers under such
8Constitutional provision by establishing a tax exemption as
9hereinafter provided in this section.

10(b) The General Assembly, having determined that there are
11persons within this Commonwealth the value of whose incomes and
12estates are such that the imposition of an inheritance tax under
13this article would cause them hardship and economic burden and
14having further determined that poverty is a relative concept
15inextricably joined with the ability to maintain assets
16inherited upon the death of a spouse, deems it to be a matter of
17public policy to provide an exemption from taxation for
18transfers of property to or for the use of that class of persons
19hereinafter designated in order to relieve their hardship and
20economic burden.

21(c) Any claim for a tax exemption hereunder shall be
22determined in accordance with the following:

23(1) The transferee is the spouse of the decedent at the date
24of death of the decedent.

25(2) The value of the estate of the decedent does not exceed
26two hundred thousand dollars ($200,000) after reduction for
27actual liabilities of the decedent as evidenced by a written
28agreement.

29(3) The average of the joint exemption income of the
30decedent and the transferee for the three taxable years, as

1defined in Article III, immediately preceding the date of death
2of the decedent does not exceed forty thousand dollars
3($40,000).

4(d) Notwithstanding any other provision of this article,
5transfers of property to or for the use of any eligible
6transferee who meets the standards of eligibility established by
7this section as the test for poverty shall be deemed a separate
8class subject to taxation and, as such, shall be entitled to the
9benefit of the following exemptions from taxation on transfers
10of property as a credit against the tax imposed by this article:

11(1) For decedents dying on or after January 1, 1992, and
12before January 1, 1993, the lesser of:

13(i) Two per cent of the taxable value of the property of the
14decedent transferred to or for the use of the transferee.

15(ii) Two per cent of one hundred thousand dollars ($100,000)
16of the taxable value of the property of the decedent transferred
17to or for the use of the transferee.

18(2) For decedents dying on or after January 1, 1993, and
19before January 1, 1994, the lesser of:

20(i) Four per cent of the taxable value of the property of
21the decedent transferred to or for the use of the transferee.

22(ii) Four per cent of one hundred thousand dollars
23($100,000) of the taxable value of the property of the decedent
24transferred to or for the use of the transferee.

25(3) For decedents dying on or after January 1, 1994, and
26before January 1, 1995, the lesser of:

27(i) Six per cent of the taxable value of the property of the
28decedent transferred to or for the use of the transferee.

29(ii) Six per cent of one hundred thousand dollars ($100,000)
30of the taxable value of the property of the decedent transferred

1to or for the use of the transferee.

2(e) For nonresident decedents, the credit provided in this
3section shall bear the same ratio as that of the decedent's
4estate in this Commonwealth bears to the decedent's total estate
5without regard to situs.

6(f) The credit provided in this section shall not be greater
7than the tax imposed.

8(g) This section shall not apply to the estates of decedents
9dying on or after January 1, 1995.]

10Section 14. The following shall apply:

11(1) A tax credit may not be granted under section 206(b)
12of the act after June 30, 2013.

13(2) The amendment or addition of the following
14provisions of the act shall apply to tax years beginning
15after December 31, 2013:

16(i) Section 301(d.2), (n.2), (o.4) and (t).

17(ii) Section 303(a)(2).

18(iii) Section 306.

19(iv) Section 306.1.

20(v) Section 306.2.

21(vi) Section 307.8(a) and (f).

22(vii) Section 314(a).

23(viii) Section 324.

24(ix) Section 330.1.

25(x) Section 335.

26(xi) Section 401(3)2(a)(16.1) and (17).

27(xii) Section 403(d).

28(3) The addition of section 303(a)(3)(viii) shall apply
29to tax years beginning after December 31, 2015.

30Section 15. This act shall take effect as follows:

1(1) The following shall take effect January 1, 2014, or
2immediately, whichever is later:

3(i) The amendment of the definitions of "document," 
4"real estate" and "real estate company" in section 1101-C 
5of the act.

6(ii) The amendment of sections 1102-C and 
71102-C.5(a) of the act.

8(2) The addition of section 401(8), (9), (10) and (11)
9of the act shall take effect January 1, 2015.

10(3) The remainder of this act shall take effect
11immediately.