PRINTER'S NO. 1632
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No.
1146
Session of
2015
INTRODUCED BY KAVULICH, READSHAW, SCHREIBER, THOMAS, McNEILL,
ROZZI, DERMODY, HANNA, MARKOSEK, FRANKEL, YOUNGBLOOD, STURLA,
DRISCOLL, GOODMAN, COHEN, BROWNLEE, DAVIDSON, DONATUCCI,
PASHINSKI, O'BRIEN, KINSEY, DEAN, SCHWEYER, WATERS, KIM,
M. DALEY, CALTAGIRONE, SCHLOSSBERG, FABRIZIO, DAVIS, BARRAR,
MURT, MACKENZIE, FARINA, GIBBONS, GILLEN AND ROEBUCK,
MAY 28, 2015
REFERRED TO COMMITTEE ON FINANCE, MAY 28, 2015
AN ACT
Amending the act of March 4, 1971 (P.L.6, No.2), entitled "An
act relating to tax reform and State taxation by codifying
and enumerating certain subjects of taxation and imposing
taxes thereon; providing procedures for the payment,
collection, administration and enforcement thereof; providing
for tax credits in certain cases; conferring powers and
imposing duties upon the Department of Revenue, certain
employers, fiduciaries, individuals, persons, corporations
and other entities; prescribing crimes, offenses and
penalties," providing for a manufacturing tax credit; and
prohibiting agreements under and repealing the Promoting
Employment Across Pennsylvania Act.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. The act of March 4, 1971 (P.L.6, No.2), known as
the Tax Reform Code of 1971, is amended by adding an article to
read:
ARTICLE XVIII-G
MANUFACTURING TAX CREDIT
Section 1801-G. Definitions.
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The following words and phrases when used in this article
shall have the meanings given to them in this section unless the
context clearly indicates otherwise:
"Annual taxable payroll." The total amount of wages paid by
an employer for the base year or year one, as applicable, from
which personal income tax under Article III is withheld.
"Base year." The four calendar quarters preceding the start
date.
"Department." The Department of Community and Economic
Development of the Commonwealth.
"Manufacturing tax credit." A tax credit for which the
department has issued a certificate under this article.
"New job." A full-time job created in year one which has an
average wage at least equal to the county average wage where the
job is located and which includes employer-provided health
benefits.
"Pass-through entity." A partnership as defined in section
301 (n.0) or a Pennsylvania S Corporation as defined in section
301 (n.1).
Qualified tax liability." A taxpayer's tax liability under
Article III, IV, VI, VII, VIII, IX, XI or XV.
"Start date." The first day of the calendar quarter in which
an application is submitted to the department unless the
applicant requests and the department agrees to a later start
date.
"Taxpayer." An entity that is engaged in the mechanical,
physical or chemical transformation of materials, substances or
components into new products that are creations of new items of
tangible personal property for sale.
"Wages." Remuneration paid by an employer to an individual
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with respect to the individual's employment.
"Year one." The four calendar quarters immediately following
the start date.
Section 1802-G. Eligibility.
In order to be eligible to receive a manufacturing tax
credit, a taxpayer must demonstrate to the department the
following:
(1) The ability of the taxpayer to create an increase in
the taxpayer's annual taxable payroll in year one by at least
$1,000,000 above the amount in the base year solely through
the creation of new jobs and to maintain the increase for a
period of at least five years from the start date.
(2) The ability to maintain new jobs for a period of at
least five years from the start date.
(3) The intent to maintain existing operations in this
Commonwealth for a period of at least five years from the
start date.
Section 1803-G. Procedure.
(a) Application.--A taxpayer applying to claim a
manufacturing tax credit must complete and submit to the
department a manufacturing tax credit application on a form and
in a manner as determined by the department.
(b) Creation of new jobs.--In order to receive a
manufacturing tax credit, the taxpayer must agree to create in
year one new jobs that increase the taxpayer's annual taxable
payroll above the base year annual taxable payroll by
$1,000,000. The taxpayer must agree to retain the new jobs and
increase in payroll for at least five years from the start date.
(c) Approval.--If the department approves the taxpayer's
application, the department and the taxpayer shall execute a
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commitment letter containing the following:
(1) A description of the new jobs created.
(2) The number of new jobs to be created.
(3) The amount of private capital investment in the
creation of new jobs.
(4) The increase in year one of the annual taxable
payroll for new jobs above the base year amount of annual
taxable payroll.
(5) The maximum manufacturing tax credit amount the
taxpayer may claim.
(6) A signed statement that the taxpayer intends to
maintain existing operations in this Commonwealth for at
least five years from the start date.
(7) Any other information as the department deems
appropriate.
(d) Commitment letter.--After a commitment letter has been
signed by both the Commonwealth and the taxpayer, the taxpayer
must increase the annual taxable payroll in year one by at least
$1,000,000 above the base year amount from the creation of new
jobs up to the amount specified in the commitment letter. If the
taxpayer does not increase the annual taxable payroll as
provided under this subsection, the commitment letter shall be
revoked and deemed to be null and void.
Section 1804-G. Manufacturing tax credit.
(a) Maximum amount.--The department may award a
manufacturing tax credit of up to 5% of the taxpayer's increase
in annual taxable payroll, if the annual taxable payroll
increases in year one by at least $1,000,000 above the base year
amount from the creation of new jobs up to the amount specified
in the commitment letter.
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(b) Determination.--The annual taxable payroll in year one
for a new job shall be the sum of the amount of annual taxable
payroll in year one for the new jobs created above the taxable
payroll in the base year.
(c) Certificate.--After verification by the department that
the taxpayer has increased the annual taxable payroll in year
one by at least $1,000,000 above the base year amount from the
creation of new jobs up to the amount specified and any other
conditions required by the department and specified in the
commitment letter, the taxpayer shall receive a manufacturing
tax credit certificate and filing information.
(d) Applicable taxes.--A taxpayer may apply the
manufacturing tax credit to 100% of the taxpayer's qualified tax
liability.
(e) Term.--A taxpayer may claim the manufacturing tax credit
for a period determined by the department, not to exceed the
earlier of:
(1) five years from the date the taxpayer receives the
manufacturing tax credit certificate; or
(2) six years from the start date.
(f) Availability.--A manufacturing tax credit shall be made
available by the department on a first-come, first-served basis.
(g) Limitation.--Each fiscal year, $5,000,000 in
manufacturing tax credits shall be made available to the
department and may be awarded by the department in accordance
with this article. In any fiscal year, the department may
reissue, assign or award prior fiscal year manufacturing tax
credits which have been recaptured under section 1808-G(a) or
(b) and may award prior fiscal year manufacturing tax credits
not previously issued.
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Section 1805-G. Limitations.
The following apply to manufacturing tax credits:
(1) If the taxpayer cannot use the entire amount of the
manufacturing tax credit for the taxable year in which the
manufacturing tax credit is first approved, the excess may be
carried over to succeeding taxable years and used as a credit
against the qualified tax liability of the taxpayer for the
taxable years. Each time the manufacturing tax credit is
carried over to a succeeding taxable year, the manufacturing
tax credit shall be reduced by the amount of the
manufacturing tax credit used as a credit during the
immediately preceding taxable year. The manufacturing tax
credit may be carried over and applied to succeeding taxable
years for no more than three taxable years following the
first taxable year for which the taxpayer was entitled to
claim the credit.
(2) A manufacturing tax credit approved by the
department in a taxable year first shall be applied against
the taxpayer's qualified tax liability for the current
taxable year as of the date on which the credit was approved
before the manufacturing tax credit can be applied against
any tax liability under paragraph (1).
(3) A taxpayer shall not be entitled to carry back or
obtain a refund of all or any portion of an unused
manufacturing tax credit granted to the taxpayer under this
article.
Section 1806-G. Sale or assignment.
(a) Application.--A taxpayer, upon application to and
approval by the department, may sell or assign, in whole or in
part, a manufacturing tax credit granted to the taxpayer. The
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following shall apply:
(1) The department and the Department of Revenue shall
jointly issue guidelines for the approval of applications
under this paragraph.
(2) Before an application is approved, the Department of
Revenue must make a finding that the applicant has filed all
required State tax reports and returns for all applicable
taxable years and paid any balance of State tax due as
determined at settlement, assessment or determination by the
Department of Revenue.
(3) Notwithstanding any other provision of law, the
Department of Revenue must settle, assess or determine the
tax of an applicant under this paragraph within 90 days of
the filing of each required final return or report in
accordance with section 806.1(a)(5) of the act of April 9,
1929 (P.L.343, No.176), known as The Fiscal Code.
(b) Use by purchaser or assignee.--The purchaser or assignee
of all or a portion of a manufacturing tax credit under
subsection (a) must immediately claim the credit in the taxable
year in which the purchase or assignment is made.
(1) The amount of the manufacturing tax credit that a
purchaser or assignee may use against any one qualified tax
liability may not exceed 50% of the qualified tax liability
for the taxable year.
(2) The purchaser or assignee may not carry forward,
carry back or obtain a refund of or sell or assign the
manufacturing tax credit.
(3) The purchaser or assignee shall notify the
Department of Revenue of the seller or assignor of the
manufacturing tax credit in compliance with procedures
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specified by the Department of Revenue.
Section 1807-G. Pass-through entity.
(a) General rule.--If a pass-through entity has any unused
tax credits under section 1805-G, the entity may elect in
writing, according to procedures established by the Department
of Revenue, to transfer all or a portion of the credit to
shareholders, members or partners in proportion or the share of
the entity's distributive income to which the shareholder,
member or partner is entitled.
(b) Limitation.--A pass-through entity and a shareholder,
member or partner of a pass-through entity may not claim the
credit under subsection (a) for the same new job.
(c) Application.--A shareholder, member or partner of a
pass-through entity to whom a credit is transferred under
subsection (a) shall immediately claim the credit in the taxable
year in which the transfer is made. The shareholder, member or
partner may not carry forward, carry back, obtain a refund of or
sell or assign the credit.
Section 1808-G. Penalties.
(a) Failure to maintain operations.--A taxpayer which
receives a manufacturing tax credit and fails to maintain
existing operations related to the manufacturing tax credits in
this Commonwealth for a period of at least five years from the
start date must refund to the Commonwealth the total amount of
manufacturing tax credits granted. The Department of Revenue may
issue an assessment, including interest, additions and
penalties, for the total amount of each manufacturing tax credit
to be refunded to the Commonwealth.
(b) Failure to maintain jobs.--A taxpayer which receives a
manufacturing tax credit and fails to maintain new jobs along
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with the increase in taxable payroll for a period of at least
five years from the start date must refund to the Commonwealth
the total amount of manufacturing tax credits granted. The
Department of Revenue may issue an assessment, including
interest, additions and penalties, for the total amount of
manufacturing tax credits to be refunded to the Commonwealth.
(c) Waiver.--The department may waive the penalties under
subsections (a) and (b) if it is determined that a company's
existing operations were not maintained or the new jobs and
increase to payroll were not created because of circumstances
beyond the company's control. Circumstances shall include
natural disasters, unforeseen industry trends or a loss of a
major supplier or market.
Section 1807-G. Guidelines.
The department shall develop and publish guidelines necessary
to implement this article.
Section 2. Notwithstanding section 314 of the act of October
25, 2012 (P.L.1664, No.206), known as the Promoting Employment
Across Pennsylvania Act, no agreement under the Promoting
Employment Across Pennsylvania Act may be entered into after
June 30, 2015.
Section 3. Repeals are as follows:
(1) The General Assembly declares that the repeal under
paragraph (2) is necessary to effectuate the addition of
Article XVIII-G of the act.
(2) The act of October 25, 2012 (P.L.1664, No.206),
known as the Promoting Employment Across Pennsylvania Act, is
repealed.
Section 4. This act shall take effect as follows:
(1) This section and section 2 of this act shall take
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effect immediately.
(2) Section 3 of this act shall take effect July 1,
2015, or immediately, whichever is later.
(3) The remainder of this act shall take effect in 90
days.
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